OTTAWA — Canada scrapped its digital services tax targeting US tech firms late on Sunday, just hours before it was due to take effect, in a bid to advance stalled trade talks with the United States.
Canadian Prime Minister Mark Carney and US President Donald Trump will resume trade negotiations in order to agree on a deal by July 21, Canada's Finance Ministry said.
Trump abruptly called off trade talks on Friday over the tax targeting US technology companies, calling it a "blatant attack".
He reiterated his comments on Sunday, pledging to set a new tariff rate on Canadian goods within the next week, which threatened to push US-Canada relations back into chaos after a period of relative calm.
The breakdown in trade talks came after the two leaders met at the G7 summit in mid-June and Carney said they had agreed to wrap up a new economic agreement within 30 days.
Canada's planned digital tax was to impose a 3 percent levy on Canadian revenue from digital services exceeding $20 million, and payments were to be retroactive to 2022.
It would have affected US technology companies, including Amazon, Apple and Meta.
Monday's collection will be halted, the Canadian Finance Ministry said, and Finance Minister Francois-Philippe Champagne will bring forward legislation to rescind the Digital Services Tax Act.
"The DST was announced in 2020 to address the fact that many large technology companies operating in Canada may not otherwise pay tax on revenues generated from Canadians," the ministry said.
"Canada's preference has always been a multilateral agreement related to digital services taxation."