The U.S. Trade Representative’s office says it will take the steps necessary to halt Canada’s taxes on large foreign digital services companies.
Last month, Parliament approved a government plan to impose a 3% tax on foreign tech companies that earn revenue from Canadian users, meaning the companies will have to pay tax in Canada on that revenue.
Many of these companies are based in the United States, and American industry is calling for action.
The Computer and Communications Industry Association, which represents major tech companies including Amazon, Apple and Uber, called on President Joe Biden’s administration to take formal steps under the United States-Mexico-Canada Free Trade Agreement.
“Now that Canada’s Daylight Saving Time law has come into effect, the time has come to announce action,” Jonathan McHale, the association’s vice-president of digital trade, said in a news release.
The association, along with 10 other industry groups, sent a letter to U.S. Trade Representative Katherine Tai calling for strong action.
A source from Tai’s office said Monday they were prepared to use all available tools.
A digital tax was part of the Liberal Party’s election platform during the 2019 election campaign. The Conservative and New Democratic parties have also proposed similar taxes.
But the Liberal government delayed its implementation to allow time for a global effort to establish a broader multinational tax scheme.
A spokesman for Finance Minister Chrystia Freeland said multilateral agreements have always been Canada’s priority and priority.
“The Canadian government has made it clear for several years that it would move forward with its own digital services tax in the absence of an international agreement,” Katherine Kupplinskas said in an email.
“And we are committed to protecting Canada’s national economic interests.”
Other countries have introduced similar measures to tax the profits of large multinational digital companies, but critics of Canada’s move have called for the government to put it on hold to give the Organization for Economic Cooperation and Development (OECD) more time to put in place a global framework.
But the framework has faced significant delays, particularly in the United States, where a divided Congress could keep progress on signing the agreement stalled.
The Liberals argued they had communicated clearly with the U.S. that Canada would go ahead with the tax if no progress was made on a global framework.
The U.S. Chamber of Commerce and the U.S. Chamber of Commerce said in a news release last month that Canada’s tax violates global frameworks and principles of international taxation.
“At this extremely delicate moment in Canada-U.S. trade relations, we urge the Canadian government to reconsider this unilateral and discriminatory new tax, refrain from prescribing its implementation, and rejoin the multilateral process, recognizing the importance of a common approach to the North American market.”