The digital tax fight just flipped. Canada has officially pulled its Digital Services Tax hours before the first $2 billion in retroactive payments were set to hit. The move came after President Trump cut off trade talks and threatened new tariffs by July 4. That pressure campaign worked. Ottawa blinked. The tax is gone. Trade talks are back on. And the EU is now signaling it may soften its stance too.
This wasn’t supposed to happen. The DST had been in place since 2024. It applied a 3% levy on digital revenues earned from Canadian users by large tech firms. That included Google, Meta, Amazon, and Apple. The tax was retroactive to 2022. The first collection was scheduled for June 30. That’s now canceled. Canada’s finance ministry confirmed legislation is being drafted to repeal the law entirely.
The reversal came fast. On Friday, Trump terminated all trade discussions with Canada. He called the DST a direct attack on US companies. He threatened tariffs on Canadian aluminum, autos, and energy. He floated a Section 301 investigation. By Sunday, Prime Minister Mark Carney reversed course. The tax was pulled. Trade talks resumed. A deal is now expected by July 21.
The EU is watching. Several member states have DSTs in place. France. Italy. Austria. Spain. The European Commission has said it won’t change its laws based on US pressure. But behind closed doors, officials are now weighing whether to delay enforcement or carve out exemptions to avoid tariffs. The US has made clear that DSTs are a red line. Section 899, the so-called “revenge tax,” is still in play. It would impose retaliatory levies on countries that target US tech firms.
The OECD spent years trying to broker a global deal on digital taxation. The US was always the holdout. Most countries backed the DST framework. The US opposed it. The Biden administration stalled. The Trump administration walked. Now the pressure is bilateral. And it’s working.
Canada’s reversal is a major win for the Trump administration. It shows that tariff threats and Section 899 are moving the dial. The DST was seen as untouchable. Now it’s gone. The EU may be next. The message is clear. If you tax US tech, you pay somewhere else.
Sources:
https://www.politico.eu/article/canada-drop-digital-tax-angere-donald-trump-resume-trade-talks/
https://www.vatcalc.com/global/digital-services-tax-dst-to-continue-and-threaten-new-trade-battles/