Washington: The United States said Friday that it has requested dispute settlement talks with Canada over a recently introduced digital services tax.
Enacted by an order in late June, the three percent tax applies to large or multinational companies such as Alphabet, Amazon and Meta that provide digital services to Canadians.
It was forecast in the 2024 federal budget to bring in Can$5.9 billion (US$4.2 billion) over five years.
US Trade Representative Katherine Tai, however, said Washington was against such taxes.
“The United States opposes unilateral digital service taxes that discriminate against US companies,” she said, adding in a statement that the USTR was taking action to address Canada’s “discriminatory policies.”
The USTR charges that Canada’s tax “appears to be inconsistent” with its commitments under the cross-border trade in services and investment chapters of the United States-Mexico-Canada Agreement (USMCA).
The settlement talks have been requested under the USMCA.
If both sides cannot resolve US concerns within 75 days, Washington may ask to convene a dispute settlement panel to look into the matter.
The Computer & Communications Industry Association (CCIA) applauded the USTR move, saying Canada’s tax mainly targeted US digital services providers.
“This is an overdue but welcome development to protect the fair and non-discriminatory market access promised between these close trading and diplomatic partners,” said CCIA vice president of digital trade Jonathan McHale.
He warned that such a tax, if not challenged, could be replicated by other countries considering similar measures.
He also urged for the USTR to leave the door open to further action.
Canada’s Deputy Prime Minister Chrystia Freeland said in July that the country was following the lead of other G7 nations such as Britain, France and Italy.
Ottawa had proposed the tax in 2019 but held off implementing it to allow for the conclusion of talks on a global treaty on taxing multinationals.
Those negotiations dragged on without a deal, and “it’s simply not reasonable, not fair for Canada to indefinitely put our own measures on hold,” Freeland said.
