Should Canada target Big Tech in trade war negotiations with the U.S.?

Calgary Herald

30-04-2025

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Canada passed its own Digital Services Tax (DST) last year, rather than wait for an international agreement to establish common taxation standards that had been in the works. The DST aims to force big tech companies to pay their fair share of taxes and imposes a three per cent levy on digital services revenue over $20 million retroactive to 2022. Canada's move prompted an outcry from the U.S., which threatened retaliatory tariffs on 'discriminatory' taxes on American companies.
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Canada's DST seemed destined for the chopping block earlier this year as Ottawa sought to stave off Trump's tariff threats, with Trump singling out Canada and France for implementing digital services taxes in a February executive order.
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'These non-reciprocal taxes cost America's firms over US$2 billion per year. America has no such thing, and only America should be allowed to tax American firms,' the order proclaimed.
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But the calculus may have now changed.
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With the trade war in full swing, Ottawa is unlikely to back down on its DST plans for the first payments supposed to take effect this summer, said Michael Geist, the University of Ottawa's Canada research chair in internet and e-commerce law.
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'Policies designed to ensure that tech companies pay their fair share have been raised for years — and will now no doubt continue to be raised,' he said.
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Not only could increasing taxation of big tech be added to Canada's trade negotiation arsenal, but concerns about the lack of U.S. reliability raises bigger questions about big tech's role here, Karanicolas said.
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'The time for naiveté is over. (The U.S.) could pull the rug out from under us if they chose to,' he said, pointing to Canada's reliance on U.S.-owned digital infrastructure, from cloud computing to enterprise software, as well as the dominance of U.S.-owned digital media platforms which could influence Canadian public opinion.
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That might have seemed far-fetched when dealing with a close ally, but America's new hostile stance means the possibility can't be discounted.
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'We've seen now the willingness of the U.S. government to abuse the powerful position that American tech platforms have,' he said, pointing to allegations that the Trump administration pressured Ukraine to sign over its critical minerals by threatening the country's access to internet satellite provider Starlink. Meanwhile, Meta has said that it is prepared to ask the Trump administration to safeguard the U.S. tech sector against tough-on-tech rules from jurisdictions such as the EU.
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Preventative policies could come in the form of better rules that safeguard Canadian ownership over vital digital industries, such as national ownership requirements for social media companies, to supporting decentralized social media like Mastodon and BlueSky to dilute the power of big tech platforms, Karanicolas said.
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Federal regulations prohibit American broadcasters or telecoms firms from buying out Canadian ones. Yet Canada has allowed American companies to 'completely dominate' information ecosystems relied on by Canadians.
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'We should be thinking about these as critical national interests that we need to maintain Canadian sovereignty over,' he said.
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Canada should make it as easy as possible for Canadians to switch to technological alternatives, according to Keldon Bester, executive director of the Canadian Anti-Monopoly Project (CAMP). And where there are no alternatives, robust competition and privacy rules, such as the EU's DMA, can help ensure that dominant tech firms play by Canadian rules and keep them accountable to public oversight, he said.
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But actions targeting U.S. tech firms run the risk of triggering retaliation from the White House and could further strain Canada-U.S. ties.
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'We have found out that it doesn't matter what you do, you will be subject to the whims of the (Trump) administration,' Bester said. Stricter rules from Ottawa doesn't mean that Canada is placing a bullseye on any country or set of companies, but sending a message that Canada is a sovereign nation.
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'You don't get a free pass just because you push us around,' he said.
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Chios Carmody, a professor and director of the Canada-United States Law Institute at the University of Western Ontario said earlier this year that Ottawa must stand firm on the DST and not 'cave in to U.S. demands.'
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At the same time, he cautioned that big tech isn't 'necessarily a foe' and has a role to play in building a strong Canadian tech industry.
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Whatever action Ottawa decides should prioritize Canada's economic and national security interests, Karanicolas said.
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'We can't cower in fear due to the threat of retaliation. Any steps that we take shouldn't just be targeted towards American platforms. But taking these steps … to try to impose better accountability and transparency … is something that's in Canada's interest.'
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