On June 20, 2024, Canada enacted the Digital Services Tax Act aimed at ensuring that digital companies pay their fair share of tax in the absence of timely implementation of an international, multilateral system.
In October 2021, the federal government agreed to pause the implementation of Canada’s Digital Services Tax, which had been announced in 2020, until the end of 2023, in order to give time for negotiations on Pillar One to conclude.
Last month, the OECD revealed that the Inclusive Framework on BEPS is nearing completion of the negotiations on a final package on Pillar One (which includes a text of the Multilateral Convention for Amount A and a framework for Amount B) with the goal of reaching a final agreement in time to open the MLC for signature by the end of June.
The US Chamber of Commerce and the American Chamber of Commerce in Canada (AmCham Canada) strongly objected to Canada’s adoption of the Digital Services Tax Act, noting that “the Government of Canada is forging ahead with a retroactive and discriminatory digital services tax in contravention of both prevailing international tax principles and the OECD/G20 Inclusive Framework process that it has long claimed to support.”
“Once implemented, Canada’s DST would disproportionately harm U.S. companies, undermine digital exports, harm Canadian innovation, and contravene Canada’s obligations under both the US-Mexico-Canada Agreement (USMCA) and the World Trade Organization,” a June 20 statement issued by the American Chamber of Commerce in Canada reads.
The Chambers urged the Government of Canada to reconsider this unilateral and discriminatory new levy, refrain from designating its implementation, and re-join the OECD/G20-led multilateral process in recognition of the importance of a common approach to the North American marketplace.