Canada has recently enacted a 3% Digital Tax on companies providing digital services to Canadian users or selling Canadian user data. Despite warnings from U.S. officials about potential trade retaliation, Prime Minister Justin Trudeau’s cabinet went ahead with the decision to ensure fair contributions from digital businesses.

Finance Minister Chrystia Freeland projects that this tax will generate $2.3 billion CAD by March 2025 and nearly $6 billion over five years. The move comes after delays in implementing a global tax accord supported by the Biden administration, prompting Canada to proceed with its own tax plan.

While some have criticized the tax for potentially increasing prices for Canadians, others have expressed disappointment in its discriminatory nature. The Digital Services Tax is in addition to the CRTC’s plan to impose a 5% fee on foreign streaming services like Netflix and Disney+ to support local content, which has also faced criticism for being discriminatory.

It is important for Canada to work with its allies and trading partners on an international solution that would better serve Canadians and avoid damaging trade actions. By staying engaged in ongoing global tax talks and addressing concerns raised by various stakeholders, Canada can navigate these challenges effectively while ensuring fair contributions from digital businesses operating within its borders.