USTR Warns Canada DST Could Trigger Section 301 Tariffs
The Office of the U.S. Trade Representative is asking Canada to "abandon any plans" for a digital services tax while countries continue to negotiate international taxation principles, including how to tax companies that derive revenues from a country's population but do not have a physical nexus there.
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The U.S. submitted comments, published Feb. 22, in opposition to the 3% DST on revenue for companies that derive more than $15 million in revenues from Canadian activities and have global gross revenues of at least $850 million. "If implemented, the proposed DST would be payable with respect to revenues retroactively to January 1, 2022, despite the proposed entry into force date of 'not earlier than January 1, 2024,'" the comments say. The U.S. believes the design of the tax would hit U.S. firms and not Canadian ones, and says it believes that the Canadian legislation echoes DSTs adopted in France, Italy, Spain, Turkey and the United Kingdom. "The United States found these DSTs (and others) to be actionable under Section 301 of the United States Trade Act of 1974 and concluded that these DSTs are discriminatory and burden U.S. commerce. Any tax adopted by Canada would be assessed against the same standard," they said.