The federal government announced late Sunday evening it is rescinding the digital services tax, days after U.S. President Donald Trump demanded it gone and cut off Canada-U.S. trade negotiations.
In a press release, the federal government said it would rescind the tax “in anticipation of a mutually beneficial comprehensive trade arrangement with the United States.”
“Prime Minister Carney and President Trump have agreed that parties will resume negotiations with a view towards agreeing on a deal by July 21, 2025,” the press release added.
Finance Canada said the tax collection, set to begin Monday will be halted and Finance Minister François-Philippe Champagne “will soon bring forward legislation to rescind the Digital Services Tax Act.”
U.S. President Donald Trump says he’s pulling back from the bilateral trade discussions because Canada plans to move ahead with its digital services tax. The CBC’s Sam Samson discusses how much the tax will cost American companies.
In a statement posted on social media late Sunday evening, Champagne said “Canada is engaged in complex negotiations on a new economic and security partnership with the U.S.”
“Rescinding the DST will allow the negotiations to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians,” Champagne added.
CBC News has reached out to the White House for comment.
On Friday, Trump said he was ending all U.S. trade discussions with Canada because of the digital services tax, which would have had U.S. companies like Amazon, Google, Meta, Uber and Airbnb pay three per cent on revenues from Canadian users.
The policy would have applied retroactively, leaving U.S. companies with a $2-billion US bill due at the end of the month.
These global digital firms are often able to skirt paying taxes in the countries where they operate, and the last Liberal government pitched the DST as a way to bring the tax code up to date and capture revenues earned in Canada by firms located abroad.
In the Oval Office on Friday afternoon, Trump said the U.S. has “such power over Canada,” and that he was upset the country is following a taxation strategy similar to Europe’s.
“It’s not going to work out well for Canada. They were foolish to do it,” he said of imposing the DST, which was passed into law last year with a delayed application.
Trump also complained about Canada’s supply management system on Friday.
“We have just been informed that Canada, a very difficult Country to TRADE with, including the fact that they have charged our Farmers as much as 400% Tariffs, for years, on Dairy Products, has just announced that they are putting a Digital Services Tax on our American Technology Companies, which is a direct and blatant attack on our Country,” Trump said in a social media post.
Those high tariffs on U.S. dairy only apply if exports exceed set quotas.
Below the quotas, the U.S. dairy products enter tariff-free because of the Canada-United States-Mexico Agreement, according to the U.S. Department of Agriculture, which also said almost all agricultural products traded between the two countries are free of tariffs.
