• by Laurie Sullivan  @lauriesullivan, June 30, 2025

Canada withdrew its digital services tax on companies such as Amazon, Google, Microsoft, and Meta Platforms in hopes of restarting trade talks with the United States.

The goal of the DST is to ensure that major technology companies pay their fair share of taxes from revenue generated in Canada. The reason for halting the DST prior to Monday's deadline, Canada said, is to advance broader trade negotiations with the United States

“Rescinding the DST will allow the negotiations to make vital progress and reinforce our work to create jobs and build prosperity for all Canadians,” Finance Minister Francois-Philippe Champagne wrote in a post on X late Sunday.

Canada first proposed the DSTA during its 2019 federal election under then-Prime Minister Justin Trudeau, and received approval in Canada on June 20, 2024.

The tax came into force a week later, on June 28, 2024. The first payments of this tax are due on Monday, June 30, 2025, which is one reason why Trump and Carney have been at odds.

This initial proposal stated the tax would apply to revenue exceeding $20 million earned from Canada by corporations with global revenue of at least €750 million. 

Late Friday, U.S. President Donald Trump said he would end all trade discussions with Canada in retaliation for the digital services tax (DST). He also threatened to start additional tariff rates.

Trump and Carney agreed that the two countries will restart negotiations and try to agree on a deal by July 21, according to a statement.

The release states that Canada announced the tax in 2020 to address that the many large technology companies operating in Canada may not otherwise pay tax on revenues generated from Canadians.

“Canada’s preference has always been a multilateral agreement related to digital services taxation,” according to the release. “While Canada was working with international partners, including the United States, on a multilateral agreement that would replace national digital services taxes, the DST was enacted to address the aforementioned taxation gap.”

U.S. digital companies play a major role in Canada’s growth rate. Google, for example, would have been subject to a 3% tax on revenue from certain digital services generated from Canadian users, but the company had already responded to Canada’s digital services tax rules by introducing an additional 2.5% fee for ads shown in Canada.

Called the “Canada DST Fee,” the fee began in October 2024. Google told the Financial Post last week that the surcharges cover part of the costs of complying with DST legislation in Canada.

Google remains the dominant search engine in Canada. The company says is estimated to contribute 1.1% of Canada's gross domestic product, which supports about 240,000 jobs across the country, including direct employment at Google and jobs related to their services and products.

In 2023, Google Search, Google Play, YouTube, Google Cloud and Google Advertising tools helped provide more than $60 billion of economic activity for Canadian businesses, nonprofits, publishers, creators and developers, according to an Economic Impact Report released by Public First.