USTR Ambassador Katherine Tai expressed the United States' opposition to unilateral digital service taxes that target U.S. businesses. The USTR initiated a dispute settlement process against DST. Canada's Digital Services Tax Under USMCA is now under US Challenge.
 |
| The United States requests USMCA dispute settlement consultations on Canada’s digital services tax. Symbolic image |
Washington, D.C. – August 31, 2024:
The United States Trade Representative (USTR) has initiated a dispute settlement process against Canada under the United States-Mexico-Canada Agreement (USMCA) over Canada's recently enacted digital services tax (DST). The USTR argues that Canada's DST discriminates against U.S. companies and violates its commitments under the USMCA.
In a statement released on Friday, USTR Ambassador Katherine Tai expressed the United States' opposition to unilateral digital service taxes that target U.S. companies. She emphasized the importance of a multilateral solution to the challenges posed by DSTs and called for a comprehensive approach through the OECD/G20 global tax negotiations.
Canada's DST, which went into effect on June 28, 2024, imposes a 3% tax on revenues from online marketplaces, online targeted advertising, social media platforms, and user data. The tax applies to companies with annual global revenues of €750 million or more and Canadian digital services revenue of more than CA$20 million.
The USTR contends that Canada's DST is inconsistent with its commitments under the USMCA's Cross-Border Trade in Services and Investment chapters. By treating U.S. businesses less favorably than Canadian businesses, the DST violates the principle of national treatment.
The United States and Canada now have 75 days to resolve the dispute through consultations. If a resolution is not reached within this timeframe, the United States may request the establishment of a USMCA dispute settlement panel to examine the matter.
This move by the USTR marks a significant escalation in the ongoing trade dispute between the United States and Canada over digital taxation. It highlights the challenges of finding a fair and equitable solution to the complex issue of taxing digital services in a globalized economy.