Following Canada's recent elections, one of the priorities of the new government will likely be to secure U.S. ratification of the United States-Mexico-Canada Agreement (USMCA). As Joe Kennedy writes for The Hill Times, the new government should abandon its recent support for a digital services tax in order to move forward with the USMCA. A digital services tax would violate most international trade agreements, including the USMCA, and impose an artificial distinction between digital companies and the rest of the economy—something the OECD has warned against.
It is one thing to apply normal sales or value added taxes to imports, putting them on the same basis as domestic suppliers. It is wholly different, and violates trade agreements, to enact a significant revenue tax that is narrowly targeted to fall solely on foreign companies in a few highly digital industries. If Canada hopes to be part of a robust North American trade framework and agreement, it should drop this unwise proposal.
