United States Trade Representative Katherine Tai recently announced that the United States has requested dispute settlement consultations with Canada under the United States-Mexico-Canada Agreement (USMCA) regarding Canada’s recently enacted digital service tax (DST).
The Canadian DST requires foreign and domestic large businesses to pay tax on certain revenue earned from engaging with online users in Canada. The DST applies at a rate of 3% on revenue earned from certain digital services that rely on engagement, data, and content contributions of Canadian users and from certain sales or licensing of Canadian user data.
The United States’ Trade Representative (USTR), Katherine Tai, said “The United States opposes unilateral digital service taxes that discriminate against U.S. companies. USTR is taking action today to address Canada’s discriminatory policies.”
If the United States and Canada are not able to resolve their concerns through consultations within 75 days, under USMCA rules the U.S. could request the establishment of a USMCA dispute settlement panel to examine the matter.
A copy of the consultation request can be found here.