“O, Canada” has taken on a frustrated tone in the U.S. among foes of digital services taxes (DSTs), which include big computer companies.

The Northern neighbor has ruffled some Bald Eagle feathers in Washington with the decision to invite comment on its proposal to impose a DST on online business within its borders.

Those are taxes on the in-country digital revenues of large foreign-based companies, including U.S.-headquartered giants and their revenue from search (Google), social media (Facebook) and online marketplaces (Amazon).

It was not clear whether the tax would include streamers, or as Canada had previously pondered, carving out video content providers and instead taxing their subscribers, which drew some in-country pushback.

Reps. Suzan DelBene (D-Wash.) and Darin LaHood (R-Ill.), co-chairs of the Digital Trade Caucus, issued a statement Friday expressing their unhappiness with the tax proposal, which Canada billed as part of a needed response to the economic hit of the COVID-19 pandemic, though it would not go into effect until 2024 but would apply retroactively.

“We are concerned with Canada’s decision to move forward with a unilateral DST,” they said. “If enacted, this tax would erode confidence in the October OECD/G20 agreement reached by the United States, Canada and more than 130 other countries. This agreement was designed to address global taxation issues and end the worldwide proliferation of DSTs, which disproportionately hurt American businesses and their workers. Although Canada’s proposed DST would not go into effect until 2024, it would apply retroactively to all earnings starting Jan. 1, 2022, putting at risk the long-term stability of the global tax agreement and creating immediate, significant tax complexities for American companies."

CTV reported that the proposed tax would only go into effect if the OECD/G20 agreement had not been implemented by 2024.

The EU had been planning a digital tax, but held off given the ongoing OECD talks that resulted in that agreement. That digital tax was also part of a larger EU plan to fund recovery from the COVID-19 pandemic and with the justification that tax rates for digital companies are lower than for those in traditional businesses.

In the OECD/G20 agreement, the countries agreed to withdraw existing DSTs and not impose any new ones — Canada had been teeing up a DST for launch in January 2022. The agreement gave countries that imposed digital taxes more time to withdraw then, but however much digital tax is collected from companies in the interim will count toward the 15% minimum corporate tax they had also agreed to.

“Canada’s determination to pursue a unilateral, retroactive DST immediately following the OECD’s much-heralded final agreement threatens years of work by the U.S. government,” the Computer & Communications Industry Association warned back in November. 

“We encourage Canada to reconsider the new digital tax, which targets specific U.S. companies and undermines the immense efforts by international partners to deliver a long-term solution to global tax reform,” CCIA president Matt Schruers said. “It is particularly inappropriate that Canada would proceed with its own digital taxes, breaking with the global tax agreement reached just months ago. Imposing discriminatory taxes on each others’ exporters are not how close allies and trading partners act.”

“Canada’s advancement of a digital services tax undermines the ongoing OECD/G20 Inclusive Framework negotiations to address the tax challenges arising from the digitalization of the global economy, particularly in light of the moratorium on the imposition of newly enacted measures,” said Megan Funkhouser, director of tax, policy, and trade for ITI, the global tech association. “We strongly encourage Canada to demonstrate its commitment to the multilateral negotiations by withdrawing its unilateral tax proposal and continuing its engagement to develop a consensus-based solution to bring much-needed certainty to businesses and stability to the international tax system.”

Under a new agreement, international digital services taxes will be around a little longer, but will count toward a new corporate minimum tax until those digital services taxes can be phased out.

The U.S., Austria, France, Italy, Spain, and the UK have struck an agreement on transitioning away from digital services taxes, which Austria, France, Italy, Spain, and the UK adopted before Organization for Economic Cooperation and Development tax reform talks resulted in a historic agreement on a minimum corporate tax of 15%.

The EU had been planning a digital tax, but held off given the ongoing OECD talks that resulted in that agreement.

The U.S., Austria, France, Italy, Spain, and the UK all signed on to the OECD agreement but disagreed on how to transition from the digital taxes all but the U.S. had enacted before that agreement was struck.

Those countries agreed to withdraw those taxes and not impose any new ones. The new agreement gives countries that imposed digital taxes more time to withdraw those digital services taxes, but however much digital tax is collected from companies in the interim will count toward the 15% minimum corporate tax.

The agreement drew praise by computer companies.

"We welcome the leadership of the United States, Austria, France, Italy, Spain, and the United Kingdom in reaching a compromise that will lead to the removal of existing digital services taxes," said Computer & Communications Association president Matt Schruers.

“While today’s transitional agreement is a meaningful step, it is imperative that all governments urgently and fully withdraw their digital services tax measures,” said ITI’s president and CEO Jason Oxman. “The elimination of such measures is essential to provide much-needed certainty and predictability for businesses, and to prevent further negative ramifications for all industries that do business across borders. As we review the terms of today’s interim agreement, we strongly urge the United States to retain its focus on securing the removal of all unilateral tax measures.”

President Donald Trump will be pressing France on its decision to "unilaterally" impose a digital services tax, going after U.S. companies in the process.  

That will come in a bilateral meeting with French President Emmanuel Macron during the G7 summit in France this weekend, according to a senior administration official speaking on background.  

France last month imposed a 3% services tax on digital revenues of companies that earned over 25 million euros in French revenue and over 750 million euros worldwide. 

The President's stance--he has reportedly called the tax 'foolish'--will please tech companies, whose just-released list of issues they wanted the G7 countries to consider included "a multilateral approach to tax policy issues arising from digitalization," while "refraining from pursuing unilateral digital tax measures." That is a reference to the fact that Macron pushed for an EU-wide digital services tax, but proceeding with his own when that was unsuccessful.  

Of that French tax, a senior official said the President would talk about not overtaxing tech and of his disappointment in the unilateral tax measure. The official said the President wants to see a global approach to the challenges of the digital economy and did not plan to back down in the face of France's attempt to undermine a multistakeholder process and go after U.S. industries. 

The official said the tax has become a big point of interest during conversations between the President and Macron.  

Digital issues more broadly will be discussed during a multilateral G7 working lunch on "digital transformation Monday, Aug. 26. 

The President's message on the digital economy and innovation will be that the U.S. has one of the most innovative economies in the world, thanks to the President's pro-growth, pro-jobs approach that eschews overregulation and over-taxation.  

In a bilateral meeting with India's Prime Minister Narendra Modi, the President plans to urge India to lift communications restrictions in Kashmir.