Canada’s digital services tax set for a reckoning with U.S. [Video]

The fight over Canada’s controversial digital services tax may escalate this week as the deadline looms for the Biden administration to decide whether to proceed with dispute arbitration amid threats of retaliation from Donald Trump’s incoming administration.

On Aug. 30, United States Trade Representative (USTR) Katherine Tai filed an official complaint under the Canada–United States–Mexico Agreement (CUSMA) arguing that the three per cent tax Canada implemented over the summer unfairly discriminates against American corporations.

The move started a 75-day consultation period that ends this week. But with President Joe Biden’s administration now in a lame duck position, it’s not clear whether Tai will escalate the dispute by asking an arbitration panel to decide whether Canada’s tax actually violates CUSMA.

The USTR’s other option is to let this complaint slide for now, leaving it to the incoming Trump administration to pick up and pursue — which may carry even more risk for Canada.

“The first Trump administration … was very clear on digital services taxes. They believed …