National Taxpayers Union (NTU) on Monday praised the decision by Canada to drop its discriminatory 3% digital services tax (DST), which would have targeted U.S. providers of tech services.
The decision should open the door to trade agreements that preclude the imposition of such taxes in the future.
Although foreign DSTs discriminate against U.S. providers, much of the burden falls on the countries that impose such taxes. Dropping the DST will benefit not just U.S. companies and customers, but also taxpayers throughout Canada.
A 2019 Deloitte/Taj analysis of a similar 3% tax proposed by France found that just 5% of the burden of the tax would be borne by large internet companies. Consumers would bear 55% of the costs, and businesses using digital platforms would bear the remaining 40%.
National Taxpayers Union President Pete Sepp said the move is the first step toward a more taxpayer-friendly trade agreement between the U.S. and Canada.
“Canadian leaders’ decision to remove this discriminatory tax by Canada should pave the way toward expanded, mutually beneficial trade between our two countries. NTU urges the Trump Administration to build on this momentum by negotiating strong new trade agreements to discourage the use of discriminatory DSTs on the part of our other trading partners,” Sepp said.