The US Trade Representative’s office said in a statement that it will work with Canada to resolve U.S. concerns over the new tax enacted in June, through the consultations. But if an agreement cannot be reached after 75 days, it may request a dispute settlement panel under the US-Mexico-Canada Agreement on Trade.
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The United States on Friday requested dispute settlement talks with Canada over a recently introduced digital services tax, said the Biden-Harris administration, adding that the ”discriminatory” tax appears inconsistent with Canada’s North American trade deal obligations.
The tax, enacted by an order in late June, would be a three-percent levy on large or multinational companies such as Alphabet, Amazon and Meta that provide digital services to Canadians. It was forecast in the 2024 federal budget to bring in Can$5.9 billion (US$4.2 billion) over five years.
US Trade Representative Katherine Tai, however, said Washington was against such taxes.
“The United States opposes unilateral digital service taxes that discriminate against U.S. companies,” she said, adding in a statement that the USTR was taking action to address Canada’s “discriminatory policies.”
The USTR charges that Canada’s tax “appears to be inconsistent” with its commitments under the cross-border trade in services and investment chapters of the United States-Mexico-Canada Agreement (USMCA).
The settlement talks have been requested under the USMCA.
If both sides cannot resolve US concerns within 75 days, Washington may ask to convene a dispute settlement panel to look into the matter.
Canada’s Deputy Prime Minister Chrystia Freeland said in July that the country was following the lead of other G7 nations such as Britain, France and Italy.
Ottawa had proposed the tax in 2019 but held off implementing it to allow for the conclusion of talks on a global treaty on taxing multinationals.
Those negotiations dragged on without a deal, and “it’s simply not reasonable, not fair for Canada to indefinitely put our own measures on hold,” Freeland said.
With inputs from agencies.