After years of dismissing the warnings of likely retaliation, the Canadian government caved last night on the digital services tax. Faced with the prospect of the U.S. suspending trade negotiations, Finance Minister François-Philippe Champagne announced that the government would drop the DST altogether, payments scheduled for Monday would be cancelled, and legislation will be forthcoming to rescind the legislation that created it in the first place. Over the weekend, I wrote about the repeated warnings that the DST was a serious trade irritant with the U.S. that cut across party and presidential lines. While ignoring the risks was bad enough, I argued that Canada played its DST card too early. Rather than delaying implementation in the hopes of incorporating it into a broader trade deal with U.S., it marched ahead, leading to an entirely predictable response from U.S. President Donald Trump. That left Canada in a no-win situation: stick with the DST but face the prospect of higher tariffs or embarrassingly drop the DST (and $7.2 billion in revenue over five years) with only restarting negotiations that were on until government overplayed its hand to show for it.
Post Tagged with: "dst"
Ignoring the Warning Signs: Why Did the Canadian Government Dismiss the Trade Risks of a Digital Services Tax?
U.S. President Donald Trump announced yesterday that he was suspending trade negotiations with Canada due to the imminent implementation of the digital services tax (DST). The result could be increased tariffs on Canadian products and a stalemate on many of the current trade battles between the two countries. This result should not come as a surprise. Indeed, the prospect of a trade war over the DST has been readily apparent for years. In my Law Bytes podcast episode in May on Canadian digital policy under Prime Minister Mark Carney, it was the top short term issue (I did not anticipate burying lawful access in a border bill).
Just prior to Trump’s inauguration in January, I wrote:
Why Years of Canadian Digital Policy Is Either Dead (Prorogation) or Likely to Die (Trump)
The Canadian political and business communities are unsurprisingly focused on the prospect of U.S. President Donald Trump instituting 25% tariffs on Canadian goods and services. The threat of tariffs, which could spark a retaliatory response by Canada and fuel a damaging trade war, would likely cause serious harm to the Canadian economy. But tariffs aren’t the only story arising from new Trump actions in his first day in office. Amidst the many executive orders signed on day one are several with significant implications for Canadian law, particularly Canadian digital policies such as the digital services tax, mandated streaming payments arising from Bill C-11, and mandated payments for news links due to Bill C-18. When combined the government’s decision to prorogue Parliament earlier this month, the results of years of Canadian digital laws and policies now largely fall into two groups: those that have died due to prorogation and those that are likely to die due to Donald Trump.
The Law Bytes Podcast, Episode 223: Looking Back at the Year in Canadian Digital Law and Policy
Canadian digital law and policy in 2024 featured the long-delayed online harms bill, controversial implementation of streaming and online news legislation, as well as a myriad of notable copyright, AI, and privacy court cases. Government legislation stalled in the House of Commons, but with trade battles over a digital services tax, a competition case against Google, and plans to kick TikTok out of the country, there were no shortage of high profile issues. For this final Law Bytes podcast of 2024, I go solo without a guest to talk about the most significant developments in Canadian digital policy from the past year.
The Bill on Canada’s Digital Policy Comes Due: Blocked News Links, Cancelled Sponsorship, Legal Challenges, and Digital Ad Surcharges
Canada’s digital policy has seemingly long proceeded on the assumption that tech companies would draw from an unlimited budget to write bigger cheques to meet government regulation establishing new mandated payments. Despite repeated warnings on Bills C-11 (Internet streaming), C-18 (online news), and a new digital services tax that tech companies – like anyone else – were more likely to respond by adjusting their Canadian budgets or simply passing along new costs to consumers, the government and the bill’s supporters repeatedly dismissed the risks that the plans could backfire. Yet today the bill from those digital policy choices is coming due: legal and trade challenges, blocked news links amid decreasing trust in the media, cancellation of sponsorship deals worth millions of dollars that will be devastating to creators, and a new Google digital advertising surcharge that kicks in next week to offset the costs of the digital services tax.
Recent Posts
Canadian Government Caves on Digital Services Tax After Years of Dismissing the Risks of Trade Retaliation 
The Law Bytes Podcast, Episode 238: David Fraser on Why Bill C-2’s Lawful Access Powers May Put Canadians’ Digital Security At Risk 
Ignoring the Warning Signs: Why Did the Canadian Government Dismiss the Trade Risks of a Digital Services Tax? 
Why Bill C-2 Faces a Likely Constitutional Challenge By Placing Solicitor-Client Privilege at Risk 
The Law Bytes Podcast, Episode 237: A Conversation with Jason Woywada of BCFIPA on Political Party Privacy and Bill C-4
