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OTTAWA — Ottawa is under pressure to pause digital services tax legislation that directs large tech companies to make a big retroactive payment by June 30.
Canadian and U.S. business groups, organizations representing U.S. tech giants and American members of Congress have all signed letters calling for the tax to be eliminated or paused.
The Canadian Chamber of Commerce and other organizations say retaliatory measures in a U.S. spending and tax bill could hit Canadians’ pension funds and investments.
A portion of U.S. President Donald Trump’s “big, beautiful” bill could increase taxation “on any holding of an American asset by a Canadian or the U.S. operations of a Canadian-parented company,” the groups warned in an open letter Friday.
“The negative impact of this measure cannot be understated for the Canadian economy,” the letter added. “Every pension fund, retirement fund, investment account, and deeply interconnected investment funds with American holdings, held by the likes of teachers, municipal workers, elected officials and regular everyday Canadian families, are at risk.”
David Pierce, the chamber’s vice-president of government relations, said the tax has given the U.S. administration a “ready-made talking point” for those and other retaliatory measures.
Canada’s digital services tax is set to take effect just weeks before a deadline Canada and the U.S. have set for coming up with a new trade deal. The two countries have been in a trade war for months, initiated by Trump’s imposition of tariffs.
Pierce said a pause would take the tax off the table now and allow the negotiations to go forward.
If Canada sticks with the tax and the retroactive payment requirement, he said, “we’re worried that’s going to add fuel to the fire and that will only aggravate an already very tricky trade discussion with the Americans.”
“Forcing these companies to make this payment… on June the 30th, will be, in our opinion, extremely inflammatory,” Pierce said.
The tax applies to companies that operate online marketplaces, online advertising services and social media platforms, and those that earn revenue from some sales of user data, if they have worldwide annual revenues greater than 750 million euros and Canadian digital services revenue greater than $20 million.
That means companies like Amazon, Google, Meta, Uber and Airbnb will be hit with a three per cent levy on revenue from Canadian users.
The tax is expected to bring in an estimated $7.2 billion over five years and the first payment is retroactive to 2022.
A June 11 letter signed by 21 members of Congress says that first payment will cost U.S. companies $2 billion US.
It says U.S. companies will pay 90 per cent of the revenue Canada will collect from the tax.
A separate letter from U.S. industry associations and the U.S. Chamber of Commerce sent earlier in the month called the retroactive requirement an “egregious overreach.”
The office of Finance Minister François-Philippe Champagne declined to answer when asked whether the government is considering putting the tax on hold.
The U.S. was already pushing back on the tax under former president Joe Biden.
The Liberals first promised the tax in the 2019 election, but it was delayed for years due to global efforts to establish a broader, multinational digital taxation plan.
Following significant delays in that process at the Organization for Economic Co-operation and Development, Canada went ahead with its own tax.
Other countries have also adopted digital service taxes in recent years, including France and the United Kingdom.
This report by The Canadian Press was first published June 18, 2025.
Anja Karadeglija, The Canadian Press
