US opposes Canada's new tax that could cost Apple billions
The US Trade Representative has expressed opposition to Canada's proposed Digital Services Tax (DST), which could potentially cost tech giants like Apple and Google billions. The US argues that this tax unfairly targets American technology firms and is advocating for its postponement. The Canadian government first introduced the DST proposal in 2021, following a G20 statement endorsing international digital service tax reform.
Canada's DST targets global tech profits
The proposed DST aims to tax profits generated by global technology companies from services such as online marketplaces, advertising, social media, and user data sales. To be subject to this tax under Canadian law, a tech firm must generate annual revenue exceeding $750 million, with at least $20 million directly attributable to Canadian users. The US contends that this interim DST unfairly discriminates against US-based companies like Apple, Microsoft, Google, Amazon, and Meta.
US warns of potential trade tariffs
The Joe Biden administration has warned that the proposed interim tax structure could potentially breach the North American Free Trade Agreement's rules. The US has requested trade dispute settlement consultations with Canada over this issue. If an agreement isn't reached within 75 days of these consultations, US Trade Representative Katherine Tai may seek a settlement panel under the US-Mexico-Canada Agreement (USMCA), which could potentially lead to retaliatory US tariffs on Canadian imports.
US has history of opposing unilateral DSTs
The US has previously threatened tariffs against seven countries that have implemented digital service tax legislation, including Austria, Britain, France, Italy, India, Spain, and Turkey. However, these threats are currently on hold pending global negotiations on a universally applied DST agreement. Tai stated that the US "opposes unilateral digital service taxes that discriminate against US companies," and pledged to support ongoing OECD/G20 global tax negotiations aimed at addressing the challenges posed by DSTs.
