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1 1 (July 24, 2025)

handle is hein.crs/eagho0001 and id is 1 raw text is: Congressional .Research Service ~~~ ~~informing the legislative debate since 1914___________________ Canada's Digital Services Tax Act: Issues Facing Congress Updated July 24, 2025 In June 2024, the Canadian government enacted Bill C-59, which included a 3% digital services tax (DST)-retroactive to January 2022-on certain revenues of large digital services providers active in, for example, online marketplaces, online advertising, social media platforms, and the sale or licensing of user data. Digital services providers had been expected to make their first tax payments by June 30, 2025. On June 27, 2025, however, President Trump announced he would terminate bilateral U.S.-Canada trade discussions due to Canada's DST. On June 29, the Canadian government announced that to resume talks, it would repeal its DST. The Canadian government has halted collection of the DST and will reportedly repeal the DST through legislation in the fall. Some Members of Congress during the 118t Congress had argued that Canada's DST would disproportionately affect U.S. firms and urged the Office of the U.S. Trade Representative (USTR) to consider retaliatory measures. The United States is home to several of the world's largest digital services providers (e.g., Meta, Netflix), which are a large and fast-growing segment of the U.S. economy, with an estimated $225 billion of revenue and 293,000 workers in 2025. Following Canada's policy shift, Members may assess whether and/or how to influence the executive branch's approach to foreign DSTs. Background Globally, around 30 countries have implemented DSTs. DSTs are taxes on revenue derived from the sale of digital goods and services in the jurisdiction imposing the tax and differ from existing corporate income taxes. The existing global tax regime taxes multinationals' profits (revenue adjusted for expenses) in the country in which the income is earned and, in some instances, the country in which a parent firm is headquartered. Proposals for DSTs are increasingly common in part because they allow governments to tax multinationals providing digital services in a jurisdiction even if the firm does not generate income through the ownership of assets in their jurisdiction. In October 2021, members of the Organization for Economic Co-operation and Development (OECD)/Group of 20 (G20) Inclusive Framework, including the United States and Canada, agreed on a plan to update the global tax system to address profit shifting and develop an international digital tax framework. In July 2023, 138 out of 145 Framework members agreed to hold off on imposing DSTs until Congressional Research Service https://crsreports.congress.gov IN12399 CRS INSIGHT Prepared for Members and Committees of Congress