With the federal government prorogued until March 24th, many bills that hadn’t received Royal Assent were set to die on the order paper. This provided some clarity amid ongoing uncertainty – except for the Digital Services Tax (DST), which remains a constant point of concern. IAB Canada is closely monitoring the DST’s future, and one of the main questions we’ve been hearing from our members is: What will happen to the DST?
The DST – a 3% tax retroactive to January 1, 2022, was designed to target international tech giants (including social media companies and their platforms) with global revenues of at least €750 million and at least $20 million in annual revenue from Canada. However, it has been poorly received, poorly implemented, and continues to cause issues. Some companies chose to absorb the cost, while others passed it on to clients. In the digital advertising space, this directly impacted Canadian small businesses that relied on ad platforms offered by these tech giants. Many reported that the DST severely affected their advertising budgets, with some even claiming it threatened their ability to stay in business.
As for U.S. – Canadian trade relations, neither Canadians nor Americans are happy with the tax, including both the Biden and Trump administrations. On August 30th, 2024, the Biden administration filed a formal complaint under the Canada-United States-Mexico Agreement (CUSMA), arguing that the DST unfairly targeted American companies. To make matters worse, President Trump issued an Executive Order to investigate any foreign countries that “have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies”, which the DST clearly does. The U.S. is expected to push for the tax’s revocation, possibly using it as leverage to reduce tariffs in Canada. The DST has become a major issue in U.S.-Canada relations and is likely to be a focal point of President Trum’s “America First” trade policies.
Since its introduction, the DST has caused tension between the U.S. and Canada. With Parliament prorogued and a new presidential administration that’s even more opposed to the tax, the DST’s future looks uncertain. While it’s not officially dead, it’s on life support, and IAB Canda will continue to monitor its developments closely. At this point, it wouldn’t be surprising if the DST is eventually scrapped.
IAB Canada has created this infographic to shed light on the devastating impact of the DST on our industry.
If you would like to stay updated or have any questions, please contact us at [email protected]
Further Reading :