DIGITAL SERVICES TAX REPEAL CLEARS PATH FOR NEGOTIATIONS
Canada announced its decision to officially withdraw its Digital Services Tax (DST) following a brief suspension of trade negotiations with the United States. On June 29, 2025, Canada’s Finance Minister François-Philippe Champagne confirmed that the June 30 collection would be halted, and legislation to repeal the Digital Services Tax Act would soon be introduced.
“In our negotiations on a new economic and security relationship between Canada and the United States, Canada’s new government will always be guided by the overall contribution of any possible agreement to the best interests of Canadian workers and businesses. Today’s announcement will support a resumption of negotiations toward the July 21, 2025, timeline set out at this month’s G7 Leaders’ Summit in Kananaskis.”
The Rt. Honourable Mark Carney, Prime Minister of Canada | Press Release
The decision comes on the heels of the White House pausing trade negotiations on June 27 following a public statement from the White House citing objections to the DST. The USA-Canada bilateral trade discussions aim to develop a new economic and security agreement.
UNITED STATES CONFIRMS RETURN TO TRADE TALKS
Both governments have confirmed their intention to resume formal negotiations. Canadian Prime Minister Mark Carney and President Trump have agreed to target July 21, 2025, a date set during the G7 Leaders’ Summit in Kananaskis, for reaching a new bilateral framework.
“Thank you Canada for removing your Digital Services Tax which…would have been a deal breaker for any trade deal with America.”
Howard Lutnick, U.S. Secretary of Commerce | Social Media
The reversal relieves near-term trade risks for key industries reliant on Canadian imports, including automotive, manufacturing, and pharmaceuticals. No new tariffs were imposed during the trade talks suspension.
DIGITAL SERVICES TAX OVERVIEW
The DST would have imposed a 3% tax on Canadian digital services, impacting U.S.-based online retailers, social media platforms, and other similar entities. The DST would have been calculated based on revenue earned from:
- Online marketplace services
- Online advertising services
- Social media platforms
- Certain sales or licensing of Canadian user data
The tax would have applied retroactively to revenue earned from January 1, 2022, and onward.
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