June 30 (UPI) — Ottawa announced late Sunday that it was rescinding a tax on technology firms generating revenue from Canadians just hours before it was to take effect, in an effort to move forward trade negotiations with the United States.
Ottawa’s Department of Finance announced in a statement that because they were scrapping the Digital Services Tax, Prime Minister Mark Carney and U.S. President Donald Trump have agreed to resume trade negotiations with the goal of signing a deal by July 21.
“Rescinding the digital services tax will allow the negotiations of a new economic and security relationship with the United States to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians,” Minister of Finance and National Revenue Francois-Philippe Champagne said.
Announced in 2020, the Digital Services Tax sought to ensure domestic and foreign companies profiting off Canadians online were paying taxes on that revenue. According to Ottawa, it levied a 3% tax on revenue earned from certain digital services that rely on the engagement data and content of Canadian users as well as certain sales of Canadian user data.
Companies to be affected were online market place and advertising services as well as social media companies, including Google, Apple, Amazon and Meta.
The tax was to take effect Monday, amid ongoing trade negotiations between Canada and the United States.
However, Trump on Friday unilaterally called the talks off after being informed American technology companies would be hit with the 3% tax, which he described as “a direct and blatant attack on our Country.”
“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,” Trump said on his Truth Social platform, while stating he will inform Ottawa within seven days of “the Tariff that they will be paying to do business with the United States of America.”
Trump has yet to comment on the latest announcement.
To rescind the tax, it will require legislative approval, so in the meantime Ottawa said it will halt collection.
Relations between the United States and Canada have deteriorated under the second Trump administration due to Trump’s trade war.
Trump has imposed a 25% tariff on all Canadian imports not subjected to the Canada-United States-Mexico Agreement, as well as a 10% tariff on energy products, a 25% tariff on all cars and trucks built north of the border and a 50% tariff on aluminum and steel imports.
Canada has responded with a slew of tariffs of its own, including a 25% levy on certain goods from the United States.
Prime Minister Mark Carney, whose Liberal Party won a minority government in Parliament in late April, campaigned on standing up against Trump, while referring to the Ottawa-Washington relationship as having been changed and the U.S. tariffs as a “betrayal.”
Amid the tariff fight, Carney has sought to strengthen other relationships while lessening Canada’s trade and security dependence on the United States.
Earlier this month, Canada and the European Union agreed to deepen their security and defense relationship as they launch negotiations across multiple areas, from digital policy to climate.