The Government of Canada has announced it will rescind its controversial Digital Services Tax (DST) to advance stalled trade negotiations with the United States.
The decision comes just one day before the DST was set to take effect on June 30, 2025.
The 3% tax targets digital giants, such as Amazon, Google, Meta, and Apple. It applied to revenues exceeding $20 million annually generated from Canadian users, potentially costing affected companies upwards of $2 billion.
While it was conceived as an interim measure to address perceived inequities in taxing large tech firms operating in Canada, it quickly became a flashpoint in cross-border relations.
US President Donald Trump strongly opposed the DST, calling it a “direct and blatant attack” on American businesses, and immediately suspended trade negotiations as a result.
US Commerce Secretary Howard Lutnick welcomed Canada’s decision. “Thank you Canada for removing your Digital Services Tax which was intended to stifle American innovation and would have been a deal breaker for any trade deal with America,” he wrote in a post on the social media platform X.
Trade talks between the two nations are expected to resume immediately, with both sides targeting a framework agreement by July 21.
“In our negotiations on a new economic and security relationship between Canada and the United States, Canada’s new government will always be guided by the overall contribution of any possible agreement to the best interests of Canadian workers and businesses,” Prime Minister Mark Carney said in a statement.
“Today’s announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis.”