US vs. Canada over potential innovative tech tax burdens that may charge Apple billions

The US Trade Representative objects to Canada’s unilateral Digital Services Tax.
The new Digital Services Tax in Canada could cost iPhone maker Apple Billions. But the US claims that the fees are discriminatory against American tech companies and is pushing for an extension. Canada proposed the legislation as an interim measure in 2021, following a G20 statement allowing international digital service tax reform. The G20 has been working to create a tax on global tech companies’ profits through services. However, progress is slow. Canada and other countries are looking to tax profits from online marketplaces, advertising services and social media services as well as revenue from the sale of user data. For a tech firm to qualify under Canadian law, they would need to make $750 million in qualifying revenue each year, with at least $20 millions coming directly from Canadian users. The US is opposed to the interim DST imposed by the Canadian government, claiming that it discriminates US-based businesses. Nearly all the largest global tech players, including Apple, Microsoft and Google, as well as Amazon, Meta, and Meta amongst others, are based in America. The Biden administration has stated that, if such a tax structure is passed, it may violate the rules set forth in the North American Free Trade Agreement. It has requested consultations on trade dispute resolution with Canada. If US Trade Representative Katherine Tai is unable to reach an agreement within 75 days after the consultations to resolve US concerns regarding the Canadian tax, she could request that a settlement panel be established under the USMCA. The dispute could lead to US tariffs on Canadian imports. The US had previously prepared tariffs against seven other countries which have already passed legislation on digital service taxes — Austria, Britain France, India Italy, Spain, and Turkey — however, these were suspended pending the result of global negotiations for a worldwide distributed DST. Tai said that the US “opposes digital service taxes unilaterally imposed that discriminate against US-based companies.” We will continue to support the Department of the Treasury as we pursue these consultations in the OECD/G20 international tax negotiations to find a comprehensive solution for DSTs. If the negotiations are successful, Canada’s DST law could come into effect later this year and amounts owed to tech companies will be retroactively dated back to January 1, 2022. Some see the Canadian legislation as a negotiation tactic to encourage progress on global G20 tax reforms affecting digital services.