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United States-Canada

17 December 2021

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USTR Warns Canada Over Plans to Introduce Digital Services Tax

The Office of the United States Trade Representative (USTR) has issued a statement concerning Canada's plans to introduce a 3% Digital Services Tax (DST) that would be imposed from 1 January 2024 if the treaty implementing the tax regime under the OECD global agreement (two-pillar solution) has not come into force. Canada's plans for the DST were confirmed on 14 December as part of the Economic and Fiscal Update 2021, including a Notices of Ways and Means Motion for the DST legislation. In response, the USTR issued the following statement:

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Statement by USTR Spokesperson Adam Hodge on Canada's Digital Services Tax As Described in Canada's Notice of Ways and Means Motion to Introduce an Act to Implement a Digital Services Tax

"The Office of the United States Trade Representative (USTR) is concerned with Canada's announcement that it will continue to pursue a unilateral Digital Service Tax (DST). As noted in comments to Canada regarding the DST described in Canada's 2021 budget document, most DSTs have been designed in ways that discriminate against U.S. companies, as they single out American firms for taxation while effectively excluding national firms engaged in similar lines of business. USTR continues to strongly oppose any new DSTs adopted by our trading partners.

"The standstill on new digital services taxes prior to the implementation of Pillar One of the October 8 OECD/G20 agreement is an important part of the new architecture for international taxation, which Canada joined. That agreement will help end the race to the bottom over multinational corporate taxation by leveling the corporate tax playing field. Canada's proposed DST would create the possibility of significant retroactive tax liabilities with immediate consequences for U.S. companies.

"If Canada adopts a DST, USTR would examine all options, including under our trade agreements and domestic statutes."

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