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Yahoo
02-07-2025
- Business
- Yahoo
Why the digital services tax had to die for the Canada-U.S. trade deal to live
WASHINGTON, D.C. — Ottawa could almost taste the tax revenues. For nearly five years, Canada has been planning a digital services tax (DST) that would generate billions in revenue by taxing large tech firms on their Canadian digital revenues. Just hours before the first DST payments were due on Monday, however, Prime Minister Mark Carney's government called the whole thing off. Carney's move late Sunday was a capitulation to the White House — and he had little choice after President Donald Trump abruptly cancelled trade negotiations on Friday over the DST, calling it 'a direct and blatant attack on our country.' Faced with 25 per cent tariffs on most Canadian exports to the U.S. and 50 per cent tariffs on its steel and aluminum, Canada needed to keep the trade talks alive. So Carney did what had to be done, stating that the move 'will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month's G7 Leaders' Summit in Kananaskis.' The Liberals introduced the DST in 2020 — a three per cent tax on big tech companies with Canadian digital revenues above $20 million per year — as a stopgap, with the real goal of pushing for a multilateral, OECD-led overhaul of the international tax system to curb multinational tax avoidance. Several countries, including France, the United Kingdom, Italy and Spain, had begun implementing DSTs in 2019 and 2020, raising alarm bells for large U.S. tech firms and advocacy groups. The Computer & Communications Industry Association (CCIA), a U.S.-based trade association representing technology and communications companies, was one that pushed back, calling the DSTs discriminatory. The taxes 'hit U.S. companies but are designed to exempt local companies, putting U.S. firms at a competitive disadvantage in the market,' said Jonathan McHale, VP of digital trade at CCIA. President Joe Biden supported an OECD approach to reforming the international tax system — and its moratorium halting the rollout of unilateral DSTs, adopted by the OECD/G20 Inclusive Framework in late 2021. Canada waited in hopes of there being an international tax reform, but by July 11, 2023, when the OECD agreed to another year-long extension on the moratorium, Prime Minister Justin Trudeau's government decided it had waited long enough. It pushed ahead unilaterally to pass the Digital Services Tax Act last summer, despite warnings from U.S. diplomats and risk experts that it could spark a trade war. While Canada's approach was meant to tax both foreign and domestic firms, McHale said that's simply how countries go about saying they are not formally targeting American companies. He referred to 'disguised techno-trade' and proportionality, noting that 'on the surface, (the DST) looks neutral, but the impact is essentially focused on a particular foreign country.' Canada's DST, he said, would've mostly impacted U.S. tech firms. But there was opposition to it at home, too, he noted, because the tax would have hurt would-be startups trying to establish themselves in the Canadian market. 'There were lots of Canadian companies that were vocal in their opposition to this, the Canadian Chamber of Commerce chief among them,' he said, noting that they didn't want it to upset their strong startup culture and digital economy. Biden's team pushed back last year when the tax was passed, arguing repeatedly for a multilateral solution, and then-U.S. Ambassador to Canada David Cohen labelled it 'discriminatory.' Trump, in turn, had more leverage and threatened the cessation of trade talks and even higher tariffs, but many saw this coming. 'If you don't push back against Canada's (DST), isn't that a green light for other countries to move ahead?' asked McHale. Opposition to DSTs has been a 'longstanding bipartisan issue' in the U.S., he noted. It can't hurt. Besides, it was necessary to get back to the negotiating table. After Canada rescinded the tax, Trump and Carney agreed to resume trade talks with an eye toward reaching a deal by July 21. 'Canada's preference has always been a multilateral agreement related to digital services taxation,' Carney's statement said, reminding folks that the DST was only ever meant to be a short-term solution. His government also remains 'engaged in discussions with the U.S. and other countries to find a workable solution on international taxation that achieves our common objectives,' a Department of Finance official told National Post. The Canada Revenue Agency issued a statement on Monday confirming the tax was suspended and noting that reimbursements will be made to companies that already paid 'if legislation is tabled in Parliament and receives royal assent.' The White House, meanwhile, viewed the decision to drop the DST as positive. Trump officials also hope the move will encourage other countries to eliminate similar taxes to avoid U.S. retaliation. Canada's DST 'would've been the most burdensome tax for U.S. companies — topping the list of revenues extracted from U.S. firms,' McHale said. But DSTs are still in effect in several countries that have strong trade links with the U.S., including the U.K., Spain and France, and they should expect similar pushback from Washington. 'The U.S. government has been pretty clear that they oppose the policy … so it stands to reason that it would push back against these others as well,' McHale said. France and Spain are still working to secure a favourable trade agreement with the U.S.. Although the U.K. managed to forge a deal last month, the Trump administration has publicly stated that getting Britain to rescind its DST remains a top priority. In the meantime, while Ottawa may be left thirsty for big tech revenues, U.S.-Canada trade relations are finally getting a much-needed drink. National Post Our website is the place for the latest breaking news, exclusive scoops, longreads and provocative commentary. Please bookmark and sign up for our politics newsletter, First Reading, here.
National Observer
02-07-2025
- Politics
- National Observer
On Carney's agenda, climate is nowhere and everywhere
Throughout Mark Carney's whirlwind first months on the job, two words have remained conspicuously absent from the prime minister's messaging: 'climate change.' That's been a major disappointment for many in the climate community, who expected a more vocal advocacy from the former UN special envoy on climate action and finance. 'The G7 Leaders' Summit was a test of Canada's climate leadership, and Prime Minister Carney failed,' wrote Caroline Brouillette, executive director of Climate Action Network Canada, in an emblematic statement following the Kananaskis summit. Brouillete was responding to the G7's avoidance of climate change, including in a joint communique on the rising danger of wildfires. 'It's a serious omission, and that's being very polite,' wildfire expert Mike Flannigan told Canada's National Observer at the time. So what happened? Where's the guy who dedicated two entire chapters of his book, Values, to the climate crisis? Why is the same person who used his platform as governor of the Bank of England to warn the world's financial elites about the risk of stranded assets and carbon bubbles now flirting with new pipelines under C-5 and invoking oil-industry jargon like 'decarbonized oil'? Is it just his language that's changed, or has the new job pushed climate change off his radar? All policy is climate policy Not everyone in the climate community feels betrayed — at least, not yet. The new prime minister doesn't lecture on climate like the old one. Does that mean he's forgotten about the climate crisis? 'It feels like we're still in a wait-and-see moment,' says Dale Beugin, executive vice president at the Canadian Climate Institute. 'I get the priority to go after nation-building projects. I get the priority to move on some of these big economic issues. Because that's where the moment is right now. I think that's pretty defensible. The trick will be to make sure that they can deliver on those shorter-term economic imperatives, while not losing the climate ones.' Another word for 'shorter-term economic imperatives,' in today's Ottawa parlance, is 'Bill C-5.' As most of Canada is aware, Carney rushed that bill into law in record time entirely in the name of responding to the economic crisis posed by Trump's tariffs. And in order to get the votes needed to pass Bill C-5, Carney and his senior officials have had to find common cause with traditional adversaries — from prairie premiers like Danielle Smith to the federal Conservatives sitting opposite in the House of Commons. 'He's clearly balancing a number of delicate issues, including Alberta's concerns,' allows Rachel Samson, vice president of research at the Institute for Research on Public Policy. For Samson, the fact that Carney isn't lecturing Canadians about climate change the way his predecessor did doesn't mean he's stopped thinking about it. 'He's spent a lot of his career thinking about climate change and action on climate change. And fundamentally, I think the way that we're going to get action on climate change done is not by having big policy announcements and big claims of targets. It's going to be about embedding it into everything.' By 'everything,' Samson means things like housing (where modular home building and green financing have the potential for a massive impact on Canada's emissions), defense spending (which Carney has said will include huge sums for critical mineral supply chains needed for clean energy), and wildfire protection (named by Carney as a top priority at the G7 he just hosted in Kananaskis – albeit without any mention of climate change.) 'To say climate change is only one thing, I think misses the broader context that it's really going to encompass every policy issue,' Samson says. 'So I don't personally have a problem with it being embedded within the conversation of other policy priorities.' Samson allows that tradeoffs are inevitable, and that Canadians may have to brace themselves for a new pipeline or two. ' It seems like he will have to compromise on certain things and that may involve an oil pipeline; it may involve more LNG projects and, and so that certainly will disappoint people who are looking to reduce fossil fuel production,' she says. But Samson remains 'cautiously optimistic' that Carney's overall focus is still fixed on the energy transition. 'If some fossil fuel production is a way to get to that – is a way to raise the revenue and get the buy-in to accomplish those things and build out the infrastructure – with that long term goal in mind, I think I can get behind it.' But those with a long memory may recall that is precisely the reasoning Justin Trudeau provided for expanding the Trans Mountain pipeline. 'The TMX project is a significant investment in Canadians and in Canada's future that will … fund the clean energy solutions that Canada needs to stay competitive on the global stage,' Trudeau said in announcing the purchase in 2019. So the question under Carney becomes: when, exactly, does he mean what he says? Pipeline promises The reason Carney was able to rush Bill C-5 through the House of Commons so quickly was that he secured Conservative support. And one major reason Conservatives supported it was that they hoped it would usher in a new wave of 'conventional energy' pipelines. If Carney had explicitly promised to exclude fossil fuel from the legislation — if he'd framed it as being designed to accelerate Canada's energy transition — the process would likely have been far slower. Conservatives were certainly delighted by Tim Hodgson, a fellow banker and the new minister of energy and natural resources, when he visited Calgary in May to speak with the oil patch. During that visit, Hodgson, who has previously sat on the board of oil sands producer MEG energy, promised federal support for new oil and gas pipelines, though he didn't get into specifics. 'It's very encouraging. This is exactly what we need,' Rich Kruger, CEO of Suncor (one of the biggest producers in the oil sands) told the Calgary Herald after Hodgson's talk. But will Carney actually deliver the pipelines he and Hodgson have been dangling in front of the oil patch? 'I've been paying really close attention to what he's said about certain topics, like 'nation-building,'' says Chris Severson-Baker, the executive director of the Pembina Institute, an environmental think tank based in Alberta. 'What is he actually saying about an oil pipeline, versus the words that others are putting in his mouth?' 'When talking about so-called 'conventional energy,'' — the industry term for fossil fuels — 'I've noticed that he's very careful to say that the scheme would have to make sense, or only a sensible project would be considered,' Severson-Baker says. He also had a very different takeaway from Tim Hodgson's May visit to Calgary. 'Hodgson came in and said to a bunch of oil and gas executives exactly what they wanted to hear,' he said. It wasn't that Hodgson was trying to deceive his audience; rather, Severson-Baker described him as 'a brand new [natural resources]NR-Can minister who hasn't been briefed by his own department yet. I don't actually have a lot of confidence that he knows what he's talking about when he made those statements.' Meanwhile, the things Carney has said must be weighed against the things he hasn't. On Bill C-5 and elsewhere, the prime minister has floated climate-friendly projects like a national energy grid, a huge offshore wind-power project in Nova Scotia, and high-speed rail connecting Windsor to Quebec. Shortly before the G7 summit, he published the list of priorities he wanted to discuss (the host leader gets to set the agenda). In addition to wildfires, Carney named 'energy security' as a top concern – but nowhere did 'conventional energy' get mentioned; instead, he named 'critical mineral supply chains,' an unambiguous reference to clean energy. That emphasis extends to Carney's recent commitment in Brussels to massively increase Canada's defense spending, to five per cent of the national GDP — some $150 billion per year —– by 2035. In subsequent news conferences, Carney was quick to point out that a third of that spending would go to securing critical minerals and associated infrastructure, like ports and electricity grids. He may not have mentioned climate change, but he didn't express any support for fossil fuels, either. That leaves a lot of room for everyone to hear what they want. The PMO didn't respond to a request for comment on this story, though the ministry of environment and climate change did provide a statement: 'Climate action remains a core priority of this government and a defining pillar of Canada's economic future. As we build the strongest economy in the G7, we know climate action is central to our plan for a strong, secure, and competitive country.' That sounds more like something Carney's predecessor would say than Carney himself. But the sentiment may not be too far off. As Rachel Samson put it, advancing climate policy – however that looks, or sounds, 'isn't about a moral highground or anything. It's just smart policy.'
The Province
02-07-2025
- Business
- The Province
Why the digital services tax had to die for the Canada-U.S. trade deal to live
Carney's move late Sunday was a capitulation to the White House — and he had little choice Canadian Prime Minister Mark Carney and U.S. President Donald Trump depart following a group photo in front of the Canadian Rockies at the Kananaskis Country Golf Course during the G7 Leaders' Summit on June 16, 2025 in Kananaskis, Alberta. WASHINGTON, D.C. — Ottawa could almost taste the tax revenues. This advertisement has not loaded yet, but your article continues below. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY Subscribe now to read the latest news in your city and across Canada. Exclusive articles by top sports columnists Patrick Johnston, Ben Kuzma, J.J. Abrams and others. Plus, Canucks Report, Sports and Headline News newsletters and events. Unlimited online access to The Province and 15 news sites with one account. The Province ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles and comics, including the New York Times Crossword. Support local journalism. SUBSCRIBE TO UNLOCK MORE ARTICLES Subscribe now to read the latest news in your city and across Canada. Exclusive articles by top sports columnists Patrick Johnston, Ben Kuzma, J.J. Abrams and others. Plus, Canucks Report, Sports and Headline News newsletters and events. Unlimited online access to The Province and 15 news sites with one account. The Province ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles and comics, including the New York Times Crossword. Support local journalism. REGISTER / SIGN IN TO UNLOCK MORE ARTICLES Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account. Share your thoughts and join the conversation in the comments. Enjoy additional articles per month. Get email updates from your favourite authors. THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK. Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors For nearly five years, Canada has been planning a digital services tax (DST) that would generate billions in revenue by taxing large tech firms on their Canadian digital revenues. Just hours before the first DST payments were due on Monday, however, Prime Minister Mark Carney's government called the whole thing off. Carney's move late Sunday was a capitulation to the White House — and he had little choice after President Donald Trump abruptly cancelled trade negotiations on Friday over the DST, calling it 'a direct and blatant attack on our country.' Faced with 25 per cent tariffs on most Canadian exports to the U.S. and 50 per cent tariffs on its steel and aluminum, Canada needed to keep the trade talks alive. So Carney did what had to be done, stating that the move 'will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month's G7 Leaders' Summit in Kananaskis.' Essential reading for hockey fans who eat, sleep, Canucks, repeat. By signing up you consent to receive the above newsletter from Postmedia Network Inc. Please try again This advertisement has not loaded yet, but your article continues below. The Liberals introduced the DST in 2020 — a three per cent tax on big tech companies with Canadian digital revenues above $20 million per year — as a stopgap, with the real goal of pushing for a multilateral, OECD-led overhaul of the international tax system to curb multinational tax avoidance. Several countries, including France, the United Kingdom, Italy and Spain, had begun implementing DSTs in 2019 and 2020, raising alarm bells for large U.S. tech firms and advocacy groups. The Computer & Communications Industry Association (CCIA), a U.S.-based trade association representing technology and communications companies, was one that pushed back, calling the DSTs discriminatory. The taxes 'hit U.S. companies but are designed to exempt local companies, putting U.S. firms at a competitive disadvantage in the market,' said Jonathan McHale, VP of digital trade at CCIA. This advertisement has not loaded yet, but your article continues below. President Joe Biden supported an OECD approach to reforming the international tax system — and its moratorium halting the rollout of unilateral DSTs, adopted by the OECD/G20 Inclusive Framework in late 2021. Canada waited in hopes of there being an international tax reform, but by July 11, 2023, when the OECD agreed to another year-long extension on the moratorium, Prime Minister Justin Trudeau's government decided it had waited long enough. It pushed ahead unilaterally to pass the Digital Services Tax Act last summer, despite warnings from U.S. diplomats and risk experts that it could spark a trade war. While Canada's approach was meant to tax both foreign and domestic firms, McHale said that's simply how countries go about saying they are not formally targeting American companies. He referred to 'disguised techno-trade' and proportionality, noting that 'on the surface, (the DST) looks neutral, but the impact is essentially focused on a particular foreign country.' Canada's DST, he said, would've mostly impacted U.S. tech firms. This advertisement has not loaded yet, but your article continues below. But there was opposition to it at home, too, he noted, because the tax would have hurt would-be startups trying to establish themselves in the Canadian market. 'There were lots of Canadian companies that were vocal in their opposition to this, the Canadian Chamber of Commerce chief among them,' he said, noting that they didn't want it to upset their strong startup culture and digital economy. Biden's team pushed back last year when the tax was passed, arguing repeatedly for a multilateral solution, and then-U.S. Ambassador to Canada David Cohen labelled it 'discriminatory.' Trump, in turn, had more leverage and threatened the cessation of trade talks and even higher tariffs, but many saw this coming. 'If you don't push back against Canada's (DST), isn't that a green light for other countries to move ahead?' asked McHale. Opposition to DSTs has been a 'longstanding bipartisan issue' in the U.S., he noted. This advertisement has not loaded yet, but your article continues below. It can't hurt. Besides, it was necessary to get back to the negotiating table. After Canada rescinded the tax, Trump and Carney agreed to resume trade talks with an eye toward reaching a deal by July 21. 'Canada's preference has always been a multilateral agreement related to digital services taxation,' Carney's statement said, reminding folks that the DST was only ever meant to be a short-term solution. His government also remains 'engaged in discussions with the U.S. and other countries to find a workable solution on international taxation that achieves our common objectives,' a Department of Finance official told National Post. The Canada Revenue Agency issued a statement on Monday confirming the tax was suspended and noting that reimbursements will be made to companies that already paid 'if legislation is tabled in Parliament and receives royal assent.' This advertisement has not loaded yet, but your article continues below. The White House, meanwhile, viewed the decision to drop the DST as positive. Trump officials also hope the move will encourage other countries to eliminate similar taxes to avoid U.S. retaliation. Canada's DST 'would've been the most burdensome tax for U.S. companies — topping the list of revenues extracted from U.S. firms,' McHale said. But DSTs are still in effect in several countries that have strong trade links with the U.S., including the U.K., Spain and France, and they should expect similar pushback from Washington. 'The U.S. government has been pretty clear that they oppose the policy … so it stands to reason that it would push back against these others as well,' McHale said. France and Spain are still working to secure a favourable trade agreement with the U.S.. Although the U.K. managed to forge a deal last month, the Trump administration has publicly stated that getting Britain to rescind its DST remains a top priority. In the meantime, while Ottawa may be left thirsty for big tech revenues, U.S.-Canada trade relations are finally getting a much-needed drink. National Post Our website is the place for the latest breaking news, exclusive scoops, longreads and provocative commentary. Please bookmark and sign up for our politics newsletter, First Reading, here. Vancouver Canucks Vancouver Canucks Vancouver Canucks News News
Canada Standard
02-07-2025
- Business
- Canada Standard
Canada-US trade talks resume after Carney rescinds tech tax
TORONTO, Canada: Canadian Prime Minister Mark Carney announced late on June 29 that trade negotiations with the U.S. have recommenced after Canada decided to abandon its proposed tax on American technology companies. U.S. President Donald Trump had previously halted discussions, criticizing Canada's intention to implement the tax as "a direct and blatant attack on our country." In response to the evolving trade situation, the Canadian government stated that it would withdraw the Digital Services Tax "in anticipation" of reaching a trade agreement. This tax was set to take effect on June 30. Following a phone call between Carney and Trump, Carney's office confirmed that both leaders agreed to resume negotiations. In a statement, Carney emphasized that "today's announcement will support a resumption of negotiations toward the July 21, 2025, timeline set forth during this month's G7 Leaders' Summit in Kananaskis." Carney had previously visited Trump at the White House in May, maintaining a polite but assertive demeanor. When Trump attended the G7 summit in Alberta, Carney noted that both countries had established a 30-day deadline for trade discussions. In a social media post, Trump indicated that Canada had reaffirmed its plan to move forward with the digital services tax, which would affect both Canadian and international companies interacting with users in Canada. This tax would impose a three percent charge on revenue from Canadian users on companies such as Amazon, Google, Meta, Uber, and Airbnb. It would apply retroactively, resulting in a potential US$2 billion bill for U.S. firms by the month's end. Daniel Béland, a political science professor at McGill University in Montreal, described Carney's decision to retract the tax as a "clear victory" for Trump. He suggested that while this move could have been necessary for the trade negotiations, Carney's actions were a direct concession to appease Trump, which ultimately benefited both the White House and major tech companies. Discussions between Canada and the U.S. have also included the potential easing of substantial tariffs imposed by Trump. He has enacted 50 percent tariffs on steel and aluminum, as well as 25 percent tariffs on automobiles, alongside a 10 percent tax on imports from numerous countries, with the possibility of increasing rates on July 9 after a 90-day negotiating period.
Canada News.Net
02-07-2025
- Business
- Canada News.Net
Talks with US back on track after Canada drops tech tax plan
TORONTO, Canada: Canadian Prime Minister Mark Carney announced late on June 29 that trade negotiations with the U.S. have recommenced after Canada decided to abandon its proposed tax on American technology companies. U.S. President Donald Trump had previously halted discussions, criticizing Canada's intention to implement the tax as "a direct and blatant attack on our country." In response to the evolving trade situation, the Canadian government stated that it would withdraw the Digital Services Tax "in anticipation" of reaching a trade agreement. This tax was set to take effect on June 30. Following a phone call between Carney and Trump, Carney's office confirmed that both leaders agreed to resume negotiations. In a statement, Carney emphasized that "today's announcement will support a resumption of negotiations toward the July 21, 2025, timeline set forth during this month's G7 Leaders' Summit in Kananaskis." Carney had previously visited Trump at the White House in May, maintaining a polite but assertive demeanor. When Trump attended the G7 summit in Alberta, Carney noted that both countries had established a 30-day deadline for trade discussions. In a social media post, Trump indicated that Canada had reaffirmed its plan to move forward with the digital services tax, which would affect both Canadian and international companies interacting with users in Canada. This tax would impose a three percent charge on revenue from Canadian users on companies such as Amazon, Google, Meta, Uber, and Airbnb. It would apply retroactively, resulting in a potential US$2 billion bill for U.S. firms by the month's end. Daniel Béland, a political science professor at McGill University in Montreal, described Carney's decision to retract the tax as a "clear victory" for Trump. He suggested that while this move could have been necessary for the trade negotiations, Carney's actions were a direct concession to appease Trump, which ultimately benefited both the White House and major tech companies. Discussions between Canada and the U.S. have also included the potential easing of substantial tariffs imposed by Trump. He has enacted 50 percent tariffs on steel and aluminum, as well as 25 percent tariffs on automobiles, alongside a 10 percent tax on imports from numerous countries, with the possibility of increasing rates on July 9 after a 90-day negotiating period. Canada and Mexico are also facing tariffs of up to 25 percent initiated by Trump under the pretext of combating fentanyl smuggling. However, some products remain protected under the 2020 U.S.-Mexico-Canada Agreement established during Trump's first term.
