Canada removes digital tax to restart talks with US

Photo:Reuters

In an important decision, the Canadian government has decided to remove its plan to bring a digital tax. This move is expected to help Canada and the United States restart their trade talks, which had been stuck for some time.

Stay informed with the latest news. Follow DXB News Network on WhatsApp Channel 

What Was the Digital Tax?

The digital services tax was a new rule Canada had planned to introduce. It would make big online companies—like Google, Amazon, and Facebook—pay taxes on the money they make from Canadian users. These companies earn billions through ads and digital services but often pay very little tax in countries where they do business.

Canada had said it was not fair for local companies to pay more tax than foreign online giants. So, they had planned to start the new tax from January 2024. But this plan was strongly opposed by the United States. American officials said it was unfair and would hurt US companies. They also warned that they might put taxes on Canadian goods in response.

Why Did Canada Change Its Mind?

According to Canadian officials, they want to avoid a trade war. They said that even though the digital tax was meant to make things equal, the timing was not right. Canada’s Finance Minister said the country still believes in fair taxes but does not want to risk harming its strong trading relationship with the US.

The decision was announced just before the US was about to start a formal investigation into the tax plan. If the investigation had gone forward, it could have caused serious problems between the two countries. By removing the tax, Canada has taken a step toward peace and cooperation.

What Happens Next?

Now that the tax plan is off the table, Canada and the US are expected to return to the discussion table. The US Trade Representative’s Office said they were happy with Canada’s move and are ready to continue talks on finding a global solution for digital taxes.

Experts say that both countries understand the importance of strong trade ties. The United States is Canada’s largest trading partner, and any problems between the two can affect jobs, business, and the economy on both sides of the border.

The Organisation for Economic Co-operation and Development (OECD), a global group that helps countries make fair tax rules, is also working on a worldwide deal. The aim is to create a fair system where digital companies pay taxes where they earn their money. Canada has said it will support this plan and wait for a global solution rather than going alone.