(Bloomberg) — The Biden administration said it’s concerned by Canada’s plans to move forward with preparation of a tax on big technology firms, pledging to review potential actions if the nation approves the measure.
The Office of the U.S. Trade Representative is worried because most digital-services taxes, or DSTs, “have been designed in ways that discriminate against U.S. companies,” spokesman Adam Hodge said in a statement Wednesday. “If Canada adopts a DST, USTR would examine all options, including under our trade agreements and domestic statutes.”
Canadian Finance Minister Chrystia Freeland on Tuesday submitted proposed legislation on the previously announced 3% tax that would apply to revenue earned by large businesses from some digital services that use data and content contributions from Canadian users, like social media platforms.
But the government wouldn’t apply the tax until 2024, and then only if a multilateral accord spearheaded by the Organization for Economic Cooperation and Development isn’t implemented by then. The OECD wants its two-pillar plan on international tax reform, which 136 nations accepted in October, to be effective by 2023.
Mark Agnew, a senior vice president at the Canadian Chamber of Commerce, said Canada “doubled down” on the tax on Tuesday in the face of U.S. opposition.
“Our government put down a marker saying we’re going ahead with this — and not only are we going ahead, but now here’s the draft legislation to how we’re going to go ahead,” Agnew said by phone. “I think the USTR felt the need to respond to that with its own public marker.”
The tax issue adds to simmering trade tensions between the two nations after Canada objected to U.S. electric vehicle tax credits that are part of the $1.75 trillion Build Back Better Act currently before the U.S. Senate. Canada has slammed the tax credit as a violation of the North American trade pact between Canada, U.S. and Mexico, saying it amounts to unraveling five decades of integration in the auto sector and last week threatened to retaliate.
Read more: Canada Proposes Deal to Align Electric Vehicle Credits With U.S.
Freeland’s office did not immediately respond to a request for comment, nor did Canada’s Trade Minister Mary Ng.
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