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Freeland optimistic on digital sales tax dispute with US
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Minister of Finance Chrystia Freeland says he is optimistic about the prospect of avoiding US retaliation over the implementation of the Ottawa resolution digital sales tax and that she cannot accept that Canada is in an inferior position to other allies when it comes to taxing US digital giants.
The federal government authorized the DSTeffective as of last Friday. The tax was first introduced in 2020 and imposes a three per cent levy on companies that provide digital services to Canadians and will be applied retroactively on revenue dating back to 2022. News of the implementation of the DST was first reported by the Wall Street Journal.
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U.S. Trade Representative Katherine Tai and members of the U.S. Congress have previously threatened trade retaliation if Canada went ahead with the tax.
But Freeland said Thursday that Canada is in talks with its American counterparts to avoid that.
“Canada has also been and continues to be engaged in bilateral conversations with the United States about a win-win outcome for both our countries,” Freeland said during a briefing with reporters. “We believe the way to achieve that is to negotiate in good faith, to negotiate creatively with our multilateral partners and with the United States, and also to be strong.”
Freeland said other U.S. allies such as the United Kingdom, France and Italy have already imposed their own DSTs and have not been subjected to trade retaliation, and stressed that Canada was being put in an unfair position.
“They are collecting revenue from international tech giants, and that is revenue they are using to invest in their people,” Freeland said. “I cannot accept that Canada is being discriminated against.”
These three countries, however, are not part of the Canada-United States-Mexico Agreement. (CUSMA)and the US argued that the DST violates the terms of that trade pact.
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Business groups in Canada have warned that the dispute could alienate Canada from its most important trading partner and negatively impact Canadian consumers.
“The government must reverse its unilateral decision that is at odds with our allies and instead work with our trading partners on an international solution that best serves Canadians,” Robin Guy, vice-president of government relations at the Canadian Chamber of Commerce, said in a statement Thursday.
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Canada had previously delayed its implementation of the DST in the hope that a multinational agreement on the tax could be reached with other OECD countries. The two-pillar agreement has yet to be ratified.
“We have been very clear with the U.S., with our multilateral partners, about where Canada stands and where Canada would need to go in the absence of a multilateral agreement,” Freeland said.
• Email: jgowling@postmedia.com
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