U.S. Requests Trade Consultations with Canada Over Digital Services Tax

By David Lawder
Published on [Date]

WASHINGTON (Reuters) – The U.S. has requested trade dispute settlement consultations with Canada regarding its new digital services tax, which the Biden administration describes as “discriminatory” and inconsistent with Canada’s obligations under the North American trade deal.

In a statement, the U.S. Trade Representative’s office indicated it aims to work with Canada to resolve concerns about the tax enacted in June. If a resolution is not achieved within 75 days, the U.S. may request a dispute settlement panel under the U.S.-Mexico-Canada Agreement (USMCA).

This request marks the initial step in the USMCA’s dispute resolution process, potentially leading to retaliatory tariffs on Canadian imports.

A Canadian official, who spoke anonymously due to the sensitivity of the issue, stated that the U.S. move was not unexpected and part of ongoing discussions between the two nations.

The U.S. government has consistently opposed Canada’s digital services tax, with no immediate comments available from Canadian Finance Minister Chrystia Freeland or Trade Minister Mary Ng.

Previously, the U.S. was prepared to impose retaliatory duties on seven countries with similar digital services taxes, including Austria, Britain, and France. However, these measures have been suspended while global negotiations about taxation rights on large multinational companies remain underway.

USTR’s stance is that unilateral digital services taxes are discriminatory against U.S. technology firms like Google, Apple, Amazon, and Meta.

U.S. Trade Representative Katherine Tai stated, “The United States opposes unilateral digital service taxes that discriminate against U.S. companies. USTR is taking action today to address Canada’s discriminatory policies.”

Tai also mentioned ongoing support for the Department of the Treasury in OECD/G20 global tax negotiations to find a comprehensive solution to digital services tax challenges.