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Canada approved a digital 3% last year in June and the first set of payments was due on Monday.
The President of the United States, Donald Trump, said that the United States immediately ended commercial negotiations with Canada in response to the country’s digital service tax on technological companies, in a clear climbing of pressure tactics.
On Friday, Trump in an article on his social platform Truth described the Canadian tax a “direct and flagrant attack against our country” and said: “Based on this flagrant tax, we are putting on all discussion on trade with Canada, with immediate effect”. He added: “We will make the price in Canada that they will pay to do business with the United States of America in the next seven days.”
Canada had approved Digital Services Tax Act on June 20, 2024 and it came into force shortly after June 28. Under this, Canada will charge a 3% tax of digital services revenues that a company makes Canadian users greater than 20 million Canadian dollars ($ 14.6 million) in a calendar year.
Companies have called for a break, saying that it would increase the cost of providing services and increases the anger of the United States government. But the Canadian federal government has so far refused and made the plans. The Canadian Revenue Authority should start to collect the tax on Monday and cover income retroactively in 2022.
Last week, the Minister of Finance François-Philippe Champagne suggested to journalists that the digital tax could be negotiated in the context of broader and in progress in Canada, Bloomberg News reported. These discussions seemed to be going well and a trade agreement was expected in July. Now the status of this is not clear.
“It is definitely an escalation of Trump,” said Vina Nadjibulla, vice-president of research and strategy at the Asia-Pacific Foundation in Canada. “But we have already seen this tactic. Canada will have to work behind the scenes to find a ramp without giving up its requests,” she said.
“The digital tax is also part of Trump’s negotiations with the European Union. Canada will have to coordinate with the EU and other partners when it is considering its response,” added Nadjibulla.
Rachel Ziemba, the main auxiliary stock market of the Center for a New American Security, told Al Jazeera that even if Trump’s declaration was unfortunate, it was “not surprising”, adding, it would also serve as frightening tactics for the EU, with whom the United States would still negotiate its trade agreement.
Canadian goods prices are bad for the United States and Canada because it increases the cost of companies and, ultimately, consumers, according to experts.
