With the June 30 deadline looming, Ottawa faces mounting calls from Canadian and U.S. business groups to halt its new digital services tax, which targets large tech companies with a significant retroactive payment. The legislation, which will impose a three per cent levy on revenues from Canadian users, is set to affect major players like Amazon, Google, Meta, Uber, and Airbnb.
Organizations on both sides of the border—including the Canadian Chamber of Commerce and U.S. industry associations—warn that the tax could trigger retaliatory actions from the United States. A recent open letter from business groups cautioned that U.S. legislation could increase taxes on Canadian holdings in American assets, potentially impacting pension funds, retirement savings, and investments held by everyday Canadians, from teachers to municipal workers.
The digital services tax is scheduled to take effect just weeks ahead of a critical deadline for Canada and the U.S. to negotiate a new trade agreement. Trade tensions are already high following recent tariffs, and business leaders argue that enforcing the retroactive payment could further complicate negotiations. David Pierce, vice-president of government relations at the Canadian Chamber of Commerce, described the move as “extremely inflammatory,” warning it could escalate the ongoing trade dispute.
The tax applies to companies with global revenues above €750 million and Canadian digital services revenues exceeding $20 million. It is expected to generate $7.2 billion over five years, with the first payment retroactive to 2022. U.S. companies are expected to bear the brunt of the tax, accounting for roughly 90 per cent of the projected revenue.
Despite the backlash, the office of Finance Minister François-Philippe Champagne has not indicated whether a pause or revision is under consideration. The digital services tax was first promised in 2019 but delayed as Canada awaited a global agreement on digital taxation. With progress at the OECD stalled, Canada moved forward unilaterally, joining countries like France and the UK in implementing such a measure.
Industry groups and U.S. lawmakers continue to press for a pause, arguing that the retroactive element is an “egregious overreach” and could have lasting negative impacts on both economies.
