Canada will scrap tax that prompted Trump to suspend trade talks

By MATINA STEVIS-GRIDNEFF

Canada’s government announced Sunday night that it would cancel a tax on American technology companies that led President Donald Trump to suspend trade talks between the two countries, handing an important victory to Trump.

Prime Minister Mark Carney discussed the decision to scrap Canada’s digital services tax with Trump on Sunday, Carney’s office said. In a sign that trade talks were resuming, Canada’s finance minister, François-Philippe Champagne, spoke with the U.S. trade representative, Jamieson Greer, on Sunday, according to Carney’s office.

The tax, which had been due to take effect Monday, became the latest flash point in difficult negotiations between the United States and Canada on Friday, when Trump said the talks were off. On social media, Trump called the levy a “blatant attack” and said he would inform Canada within a week about the duties “they will be paying to do business with the United States of America.”

Forty-eight hours later, the Canadian government folded, announcing it would not go ahead with the tax. The Finance Ministry said the government had decided to “rescind the Digital Services Tax in anticipation of a mutually beneficial comprehensive trade arrangement with the United States.”

Technically, the cancellation of the tax needs to be approved in legislation, so until that time, the government is suspending its collection.

Canada’s 3% digital services tax has been in place since last year, but the first payments were only due beginning Monday. Because the tax is retroactive, American companies were preparing to turn over roughly $2.7 billion to the Canadian government, according to a trade group for large American tech companies.