Trump’s ‘revenge tax’ on other countries could hit U.S.

A controversial tax proposed by the administration of President Donald Trump who could cost Canadians and Canadian companies of billions of dollars which also cost a cost of the United States government, according to an assessment of a non -partisan Congress office.

It is also likely to cost American companies by encouraging investors from countries to reach the tax to eliminate investments from the United States, depending on the evaluation.

Nicknamed the “revenge tax”, article 899 of One Big Bill Bill Act of Trump calls for a new retention tax to be imposed On investment income paid by US companies to investors who live in countries, the US government considers unjust or discriminatory taxes.

Canada’s digital services tax, which strikes businesses like Amazon, Google, Meta, Uber and Airbnb with a tax on Canadian user income, is one of the Taxes that the United States considers discriminatory.

High Canadian officials recognize in private that they are concerned about the prospect of Trump’s new reservoir tax and are looking closely at Washington – just like Canadian investors, companies, investment advisers and tax lawyers.

Digital reinforcement service tax

Federal Minister of Finance François -Philippe Champagne says that he is following the tax – which has His first big payment due on June 30.

“The DST is in force and it will be applied,” he told journalists on the hill of Parliament last week.

Two different versions of section 899 are currently before the congress, but the two versions are likely to hit Canadians and Canadian companies with a new reservoir tax.

The version adopted by the House of Representatives would take effect quickly and impose a tax of restraint of five percent on things such as dividends to the Canadians of American companies, adding five% more each year to a maximum of 20%.

An amendment to this section, currently in front of the Senate, would delay the tax until 2027 and supplied it to 15%. The Senate has not yet voted on the bill, although it is forced by Trump to approve the legislation by July 4, the American national holiday.

A study of article 899 of the joint committee not in favor of the US Congress on Taxation (JCT), which exercises a similar function in the Canadian Parliamentary Budget Office, provides that the new tax would initially bring billions to the US Treasury. However, he also predicted that this income would then begin to decrease – and that in 2033 or 2034, this would actually lead to a drop in income.

The version of article 899 adopted by the House of Representatives is expected to go to approximately $ 116.3 billion between 2025 and 2034 for the United States Treasury, with US $ 12.5 billion in 2026 from 28.7 billion US dollars in 2027 and 31.8 billion US dollars in 2028.

However, the analytical projects that income would then begin to decrease. By 2033, the tax of restraint should cost the US Treasury 4.8 billion dollars lost in income and, by 2034, 8.1 billion US dollars.

The modified version of article 899 should report only 52.2 billion US dollars between 2025 and 2034. But by 2034, it would also cost the US $ 2.5 billion in income loss.

A familiar source with the work of the JCT said that its analysis supposes that the American gross national product will remain fixed and that foreign laws, such as the DST, will not change. What he supposes will change, however, is the behavior of individuals and businesses to avoid restraint to restraint.

The JCT provides that the reduction in direct investment and portfolio demand from foreign investors will reduce the value of American assets. In turn, this drop in value will result in a loss of tax revenue for the US Treasury.

David Macdonald, principal economist of the Canadian Center for Political Alternatives, said that JCT analysis was making a very great hypothesis – that countries like Canada will not retaliate in the United States with their own recovery taxes.

He said The current trade war has shown that Canada is ready to fight back.

If Canada retaliated, Macdonald said the United States was more exposed than Canada on the tax front because many American companies operate here.

“They make much more benefits in Canada than Canadian companies make profits that operate in the United States,” said Macdonald.

Macdonald agreed with the JCT evaluation that the restraint tax could cause an exodus of investments in American titles, predicting that many companies probably already find ways to cover their investments.

He said it was bad for business and risks damaging the economies of the two countries.

“No one wins a trade war and no one won a tax war,” said Macdonald.