Scrapping the DST Opens Door to Smarter Competition Policy, Says ITIF’s Centre for Canadian Innovation and Competitiveness

OTTAWA—Following Prime Minister Mark Carney’s announcement that Canada will rescind its planned digital services tax (DST) to pave the way for a broader trade deal with the United States, the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy, released the following statement from Lawrence Zhang, head of policy at ITIF’s Centre for Canadian Innovation and Competitiveness:

Repealing the digital services tax was the right decision. It would have cost Canadian consumers and businesses the most and invited retaliatory taxes from the United States government, worsening trade tensions just as Canada faces rising tariff pressure.

While intended to address challenges in taxing cross-border digital activity, the DST’s structure was flawed from the start. It would have imposed a 3 percent fee on gross revenues, even for unprofitable firms, retroactively applied to 2022, forcing companies to calculate payments under unclear rules. It also increased the risk of double taxation for firms already paying abroad and would have undermined fair competition by targeting only large international providers while shielding domestic firms.

With the DST off the table, Canada can shift from reactive policymaking to a real competitiveness agenda. That means accelerating digital adoption, strengthening IP enforcement, and helping Canadian firms scale. That’s not a consolation prize, because these aren’t second-best options. This is the path to success in a fragmented and strategically contested global economy.

Contact: Sydney Mack, [email protected]