Canadian businesses operating in the U.S. could ‘pay heavy price’ for digital services tax – Financial Post

An obscure American tax code clause could double corporate taxes paid by Canadian companies operating in the U.S. if the Trump administration decides to retaliate against Canada’s digital services tax (DST), say Matthew Kronby, partner, Competition, Trade and Foreign Investment, and Patrick Marley, partner, Tax, in an article in the Financial Post.

In an emailed statement, Matthew and Patrick wrote that the Biden administration clearly considered the DST discriminatory against American companies. “There’s no reason to think that the Trump administration takes a different view,” they said.

Matthew and Patrick believe Canada should reconsider its approach to the DST, particularly the retroactivity of the tax back to 2022. “It would be more constructive to negotiate an acceptable outcome with the U.S. in a manner that better aligns with international norms,” they said.

Also, they say Canada should pause the implementation of the global minimum tax (and the Undertaxed Profits Rule in particular) until the U.S. adopts the rules as well. Matthew and Patrick believe this tax would reduce the competitiveness of Canadian-based multinational enterprises, especially compared to those based in the U.S.

If you have a subscription to the Financial Post, you can read the full article by author Serah Louis posted on January 24, 2025.