Washington – The Canadian government has adopted an Order in Council that formally enacted a burdensome and discriminatory digital services tax (DST). This comes after Canada’s Parliament passed Bill C-59, a bill that brought the DST into law. The recent Order in Council reflects a technical procedure that formally enacts the DST, which was previously made law but not yet activated. With further clarifying details still pending (e.g., with respect to retroactivity) companies are waiting to see what this will mean in terms of when and how they must adhere to this discriminatory tax.
The Computer & Communications Industry Association joined 10 other trade associations in June in sending a letter urging the Biden Administration to vigorously respond to Canada’s enactment of a DST and called for U.S. action after the DST was passed into law.
A CCIA Research Center study found that the DST will likely impose direct losses of up to $2.3 billion annually for U.S. companies and could result in thousands of full-time U.S. job losses. CCIA has previously raised concerns with Canada’s DST, including through comments to Finance Canada and a letter in December 2023.
The following can be attributed to CCIA Vice President of Digital Trade Jonathan McHale:
“Despite repeated calls for urgent action against Canada’s digital services tax, so far, we have yet to see a robust response from the U.S. government. This recent Order in Council should serve as the final straw for the United States, as the tax will siphon away revenue from U.S. services providers that would otherwise go towards the U.S. tax base.
“Although Canada’s DST is now in force, key implementation details remain subject to further regulatory action. The lack of such detail, and the opaque process by which the law was brought into force have cultivated confusion and uncertainty. One thing is clear: this DST is no longer hypothetical—it is in force and requires swift response, as companies appear to now be on the hook for this discriminatory tax.
“The Canadian DST’s very design disproportionately affects U.S. companies, which in turn threatens thousands of U.S. jobs and hinders the operations of U.S. firms in a key market. We have heard repeated assurances that USTR is reviewing the tools available to it—that review must now turn into action. Waiting any longer exacerbates the harm and confusion experienced by U.S. suppliers and their employees and emboldens other countries that will see this as tacit approval for this sort of discriminatory behavior.”