What is Canada's digital services tax — and why does Trump dislike it so much?

Rhianna Schmunk · CBC News

· Posted: Jun 27, 2025 4:04 PM EDT | Last Updated: 1 hr ago

In the past fewer weeks and months, U.S. President Donald Trump has fixed a fig of rationales for escalating the commercialized quality betwixt Canada and the United States. On Friday, helium zeroed successful connected Canada's integer services tax — a caller levy expected to cost the largest American tech giants billions of dollars successful the coming years aft it kicks successful connected Monday.

International commercialized lawyer William Pellerin was lone shocked the U.S. president didn't bring it up sooner.

"It's really rather astonishing that it took them this agelong to marque a large stink astir this issue," Pellerin, who works for McMillan LLP, told CBC News Network connected Friday.

"If the U.S. was going to instrumentality a tally astatine this and truly has had a beef with Canada connected this contented for a truly agelong time, they truly had nary prime but to escalate that contented astatine the past infinitesimal now."

Here's what you request to cognize astir the tax, which has been a thorn successful the broadside of the Canada-U.S. narration for years.

What is the integer services tax?

Canada's integer services tax (DST) affects mega companies that offer digital services — like online advertizing oregon buying — and gain much than $20 cardinal successful gross from Canadian sources. Giant companies similar Amazon, Apple, Airbnb, Google, Meta and Uber volition beryllium taxed 3 per cent connected the wealth they marque from Canadian users and customers.

The levy has been successful spot since past year, but the archetypal payments are owed starting Monday. It's retroactive to 2022, truthful companies will extremity up with a $2-billion US measure owed by the extremity of July. 

Why is Canada creating the tax?

Revenue is 1 large benefit. The Parliamentary Budget Office estimated past twelvemonth that the taxation would bring successful much than $7 cardinal implicit 5 years. 

The Liberals archetypal promised the taxation during the national predetermination successful 2019 nether erstwhile premier curate Justin Trudeau, but it was delayed for years due to the fact that a fig of different nations wanted to enactment unneurotic connected one, overarching integer taxation program that could beryllium applied successful aggregate countries.

As the delays dragged on, Canada went up with its ain taxation plan. 

Aside from revenue, Ottawa has pitched the DST as a mode to bring the taxation codification up to day and seizure revenues earned successful Canada by firms located abroad.

What is the U.S. stance connected the tax?

The United States has been hostile to the taxation from the opening due to the fact that it mostly affects American tech giants. Officials person argued the taxation discriminates against American companies and Congress, notoriously divided betwixt Democrats and Republicans, recovered a infinitesimal of communal crushed successful criticizing Canada's plan. 

The Computer & Communications Industry Association has estimated U.S. companies could wage arsenic overmuch arsenic $1 billion a twelvemonth successful taxation if the measurement remains connected the books.

A fig of manufacture experts — from lawyers to cross-border groups and commerce associations — have warned for years that the taxation would strain the narration betwixt Canada and the U.S., with 1 going truthful acold arsenic to foretell successful 2023 that the taxation unsocial would beryllium to blasted for a commercialized war.

WATCH | Trump says he's ending talks with Canada implicit DST: 

Why won't Canada hold the taxation until the commercialized warfare cools down?

Canadian and U.S. concern groups, organizations representing U.S. tech giants and American lawmakers all signed letters successful caller weeks calling for the taxation to beryllium eliminated oregon paused. But Finance Minister François-Philippe Champagne said the authorities was passed by Parliament, and Canada would be "going ahead" with the tax.

Pellerin, the planetary commercialized lawyer, said helium suspects the national authorities volition debar changing its program due to the fact that it's taken a strategy of avoiding knee-jerk reactions to Trump's dialog tactics.

"The Trump administration is not known for negotiating quietly successful the backmost rooms oregon successful the hallways of powerfulness … truthful I don't deliberation this is unexpected," helium said.

How could the U.S. retaliate?

Trump says he's pulling backmost from the bilateral commercialized discussions due to the fact that Canada plans to determination up with its DST connected Monday, a determination helium described online arsenic "a nonstop and blatant onslaught connected our country." The determination enactment the 30-day deadline to scope an statement successful the commercialized quality into doubt.

The Biden medication besides opposed the tax, but tried to resoluteness the contented differently: It asked Canada for quality colony consultations nether the Canada-United States-Mexico-Agreement (CUSMA) past August.

That consultation play ended successful November without the Biden medication taking the lawsuit to the adjacent step, but determination is nary clip bounds connected erstwhile the U.S. could prime that program backmost up — so the CUSMA route is inactive disposable to the existent medication if Trump wanted to determination distant from his existent tactic.

Do different countries person akin taxes?

Yes. France, Italy, Spain and the United Kingdom each person taxation regimes successful place, to sanction a few.