What Canada’s decision to scrap its tech tax means for future trade talks
Canada’s decision to rescind its digital services tax (DST) to restart trade negotiations with the U.S. represents a boon for major tech firms and could be a harbinger of what’s to come for similar measures in other countries, experts told The Hill.
The Canadian government announced late Sunday that it would scrap the tax on U.S. tech firms that was set to take effect Monday in a bid to bring the Trump administration back to the table and avoid heightened tariffs in the coming weeks.
The move was successful for Ottawa, with the White House saying that trade talks would resume immediately. It was also cheered by the tech industry, which has lambasted digital services taxes as “unfair” and “discriminatory.”
But experts say Canada’s move could put pressure on other nations to follow suit and rescind their tech taxes.
“Going forward, I think the fact that Trump managed to bully or cajole Canada into dropping its [digital services tax] means that this will be a big item that he insists on in talks with Europe and any countries in all these trade negotiations,” said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics.
“I see this as a harbinger of a more general repeal of digital services taxes,” he added, calling it a “pretty big deal and a real victory for Trump.”
Since taking office for a second time, Trump has repeatedly criticized taxes and fines on U.S. tech firms. He slammed the European Union (EU) in January, alleging that the bloc’s hefty fines against American companies amount to a “form of taxation.”
The EU’s top court ruled in September that Apple owed more than $14 billion in back taxes to Ireland, while upholding a $2.7 billion fine against Google by European antitrust regulators.
Meta, the parent company of Facebook and Instagram, was also fined about $840 million for antitrust violations in November. The social media giant was hit with another $228 million fine in April, alongside Apple, which faced a $570 million penalty.
Trump railed against the EU during a meeting with the NATO secretary-general in March, calling the European bloc “nasty” over the tech fines, as well as a tariff on U.S.-made cars.
“They’re suing Google, they’re suing Facebook, they’re suing all of these companies, and they’re taking billions of dollars out of American companies,” he said at the time.
The president has also taken aim at digital services taxes in particular, signing an executive order in February slamming the taxes as “designed to plunder American companies” and declaring that the U.S. would respond to such measures with tariffs or other actions.
Check out the full report at TheHill.com first thing Monday.
Welcome to The Hill’s Technology newsletter, I’m Julia Shapero — tracking the latest moves from Capitol Hill to Silicon Valley.
Programming note: The Hill’s Technology newsletter will be off tomorrow for the July 4 holiday. See you Monday!
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Welcome to Crypto Corner, a daily feature focused on digital currency and its outlook in Washington.
Sen. Cynthia Lummis (R-Wyo.) unveiled new legislation Thursday updating tax rules for cryptocurrencies, as Congress continues to move toward establishing a comprehensive regulatory regime for digital assets.
“In order to maintain our competitive edge, we must change our tax code to embrace our digital economy, not burden digital asset users,” Lummis said in a statement.
The crypto tax package would establish a de minimis rule for digital assets, exempting small transactions of less than $300 from taxes, in addition to exempting crypto lending from taxes and deferring taxes on income generated from crypto mining and staking until tokens are sold.
It would also apply the typical 30-day wash rule to digital assets, removing a loophole that has allowed crypto investors to sell tokens at a loss and then quickly buy them up again while still claiming a tax deduction.
Crypto dealers and traders would also be eligible for mark-to-market treatment under the rules.
This means that crypto holdings, like securities holdings, could be considered as if they were sold at market price at the end of the year for tax purposes, allowing individuals to claim losses that can then be deducted from their taxes.
Lummis underscored Thursday that the congressional Joint Committee on Taxation estimates the bill would generate about $600 million through 2034.
“This groundbreaking legislation is fully paid for, cuts through the bureaucratic red tape and establishes common-sense rules that reflect how digital technologies function in the real world,” she said.
The Wyoming Republican indicated earlier this week that she hoped to get crypto tax provisions into President Trump’s sweeping tax and spending bill.
However, the legislation ultimately passed out of the Senate on Tuesday without the measures.
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