Letters November 3, 2023

Working with the U.S. to reach an agreement on DST

Goldy Hyder – President and Chief Executive Officer, Business Council of Canada

Economic Strategy North America Taxation

Letter to the Right Honourable Justin Trudeau, P.C., M.P., Prime Minister of Canada regarding the meeting with U.S. President Joe Biden about the digital services tax.

Dear Prime Minister,

In advance of your meeting tomorrow with U.S. President Joe Biden, I am writing on behalf of Canada’s business leaders with respect to your government’s plan to introduce a unilateral digital services tax as of January 2024.

As I have warned your government on several occasions, Canada’s economic interests will be severely harmed if Canada continues to defy the overwhelming OECD consensus. Amid growing economic uncertainty around the globe, Canada cannot afford a costly trade war with our most important trading partner.

The Biden Administration has been clear that were Canada to impose a unilateral DST – something it views as discriminatory and, as such, in violation of Canada’s commitments pursuant to the Canada-US-Mexico Agreement – the United States would impose countervailing retaliatory trade measures.

U.S. Ambassador David Cohen again reiterated the White House’s position this week when he said, “we are either going to have to have agreement or we’re going to have a big fight.” All the U.S. is asking of Canada, he said, is that we give an “additional year or two to try and put the OECD framework in place.”

Ambassador Cohen also expressed concern that Canada’s position in opposition to the OECD compromise aligns us with outlier countries, such as Russia and Belarus. This is inexplicable at a time when Canada is trying to strengthen ties with continental partners in the Americas and allies around the world.

Deputy Prime Minister Freeland has said officials from both countries are in discussions in the hopes of reaching a mutually acceptable agreement. We hope you and President Biden can do so based on a deferral of the DST.

Yours very truly,