U.S. trade official raises concerns about Canada's proposed digital services tax

[January 13, 2022]  By Andrea Shalal

WASHINGTON (Reuters) -Deputy U.S. Trade Representative Jayme White expressed Washington's ongoing concern about Canada's proposed digital services tax in talks on Wednesday with Canada's deputy trade minister, David Morrison, USTR said in a statement.

White spoke with Morrison ahead of the first meeting of trade deputies under the U.S.-Mexico-Canada (USMCA) trade agreement enacted in 2020.

White also stressed the importance of Canada's fully meeting its USMCA commitments, including its allocation of dairy tariff-rate quotas and home-shopping, USTR said.

Washington said in December it would consider "all options" under its trade agreements and domestic statutes if Canada proceeds with its proposed tax on corporations providing digital services, but gave no details.

The United States in October withdrew its threat of tariffs against five European countries over their digital services taxes as part of a deal to manage the transition to a new global tax regime for large highly profitable corporations such as Alphabet Inc's Google and Facebook Inc.

But it remains at odds with Canada over the issue.
 

Canada unveiled the proposed measure in April, saying it would stay in place until major nations come up with a coordinated approach on taxing the big digital companies.

The Organisation for Economic Cooperation and Development has since agreed on a common approach to ensure such companies pay their share of taxes, but a treaty to enforce this has yet to be implemented.

USTR said White and Morrison agreed to continue stay in touch on the various issues, including bilateral steel trade, but there was no sign of progress on the digital tax dispute.

The leaders of the Senate Finance Committee on Wednesday urged chief trade negotiator Katherine Tai to press both Mexico and Canada to live up to their commitments under a new trade pact in areas ranging from potatoes to telecommunications.

Democratic Committee Chairman Ron Wyden and the top Republican on the panel, Mike Crapo, said it was preferable to resolve the disputes through negotiation, but USTR "must be prepared to use the strong and innovative enforcement tools" included in the UMSCA trade deal.

On the digital trade issue, the senators said efforts by Canada to proceed with a tax that would discriminate against U.S. firms would risk "setting a troubling precedent that could undermine years of work by negotiators at the OECD."

(Reporting by Andrea Shalal; Editing by Leslie Adler, Richard Chang and David Gregorio)

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