By David Loder
WASHINGTON (Reuters) – The Biden-Harris administration said on Friday the United States has requested consultations to resolve trade disputes with Canada over a new digital services tax, adding that the “discriminatory” tax appears inconsistent with Canada’s obligations under the North American Trade Agreement.
The U.S. Trade Representative’s office said in a statement that it will work with Canada to resolve U.S. concerns about the new tax, which was imposed in June, through consultations. But if no agreement is reached after 75 days, it may seek a dispute settlement panel under the U.S.-Mexico-Canada Agreement.
The request for consultations is the first step in the dispute resolution process in the USMCA, which could eventually lead to retaliatory US tariffs on imports from Canada.
The USTR had previously prepared retaliatory tariffs against seven other countries that have imposed digital services taxes (DSTs) — Austria, the UK, France, India, Italy, Spain and Turkey — but they were put on hold as global negotiations continued on reallocating tax rights to large multinational corporations. The move was supposed to replace DSTs, but those talks have stalled over technical details.
The Office of the US Trade Representative has found that the unilateral digital services tax, which is largely aimed at collecting revenue from US tech giants like Alphabet (NASDAQ:) Google, Apple (NASDAQ:), Amazon (NASDAQ:), and Meta (NASDAQ:), discriminates against US companies.
“The United States opposes unilateral digital services taxes that discriminate against U.S. companies,” U.S. Trade Representative Katherine Tai said in a statement. “Today, the Office of the U.S. Trade Representative is taking action to address Canada’s discriminatory policies.”
“As we continue these consultations, we will continue to support the Treasury Department in the OECD-G20 global tax negotiations to reach a comprehensive solution to the digital services tax challenge,” Tai said.