WASHINGTON — The U.S. Trade Representative’s office on Tuesday submitted formal comments to the Canadian government urging Ottawa not to adopt a proposed digital services tax and threatening to examine potential tariff retaliation if it does.
In the comments, USTR said that it understands that the Canadian DST proposal would duplicate "most aspects" found discriminatory against U.S. firms in similar taxes adopted by Britain, France, Italy, Spain, and Turkey.
"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," USTR said.
The trade agency readied Section 301 tariffs on products from these countries, but agreed not to proceed with them as part of a settlement agreement on the implementation of a 136-country tax deal that prohibits new unilateral digital services taxes.
Canada is a signatory to the Organization for Economic Cooperation and Development deal, which reallocates some taxing rights on large, highly profitable firms, including large technxjmtzywology platforms, to market countries.
"Instead of pursuing a counterproductive unilateral measure that risks encouraging other countries to follow suit, thus undermining the ongoing negotiations, Canada can focus efforts on engaging constructively in the multilateral OECD negotiations – ensuring that its unilateral measure proposal is unnecessary and that Canadian interests are protected," USTR said.
