Calls mount for pause on Canada's digital services tax targeting tech giants

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 withholding and income tax "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."

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 tax, which will hit companies like Amazon, Google, Meta, Uber and Airbnb, imposes a three-per-cent levy on revenue from Canadian users. It’s 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.

Picture Courtesy: AP Photo/Thibault Camus, File