The size of the tariff is not relevant. Canada and the United States had a free trade treaty that expressly forbade a digital services tax. When Trudeau unilaterally imposed a DST, he rendered the USMCA null and void in the eyes of the Americans, and in doing so, imperiled Canada's manufacturing economy.
It absolutely did not. No such clause appears anywhere in the text, nor has the U.S. ever asserted otherwise.
It asserted (when filing dispute solution under the USMCA) that the Digital Services Tax violated the agreement on the basis that it discriminated against U.S. companies in a general sense, which is precluded under the Treaty.
Canada's defense is that the tax does not in fact single out U.S. based digital services, the tax applies to all digital services with annual revenues exceeding 750M.
The complaint by the U.S Trade Representative can be found here:
WASHINGTON – United States Trade Representative Katherine Tai today announced that the United States has requested dispute settlement consultations with Canada under the United States-Mexico-Canada Agreement (USMCA) regarding Canada’s recently enacted digital service tax (DST).
ustr.gov
A deal is a deal. Even a deal signed with Donald Trump. How can Canada insist that Trump abide by the USMCA that he negotiated and signed when idiot Justin Trudeau abrogated the agreement by implementing a DST?
Again, Canada has not breached the USMCA which does not forbid a DST.
I predict that at this rate, Canada will not have an automotive industry this time next year, and it's our most important industry. Was it worth risking an industry that is the lifeblood of the Ontario economy by imposing a DST tax that will bring in relatively little revenue and will not create one new job? And it is not just auto's what about our steel industry? What about Aerospace? Trump will not be satisfied with destroying our auto industry; he wants to destroy every Canadian industry, and figuratively speaking, our idiot politicians handed Trump the high-powered rifle to shoot us in our collective heads.
While this is a possible, if unlikely outcome (it would drastically increase the cost of cars made and sold inside the U.S. ), the economic consequences of proceeding with a DST should certainly be considered.
While there are ~600,000 jobs in Canada related in some way to the Auto Industry, there are ~240,000 related to the production of film and television which this tax is designed to fund.
Could a different vehicle (no pun intended) be found to garner that revenue? Sure. But this one was designed to capture a contribution from players who otherwise may not contribute, despite making profit in Canada.
Historically, all film and television rights (distribution and broadcast) were divided at the national level, this is/has been true around the world. This allowed local distributors/ broadcasters to acquire popular American films/shows and make profit on them in Canada (or France, or Australia etc.) which could then be reinvested in the local industry. Netflix et al. upended this model. The world could simply break Netflix by asserting local rights must continue to exist and geo-blocking the service off the Canadian internet entirely.
The 3% DST seems far more tame in comparison. You could expressly hit Canadian broadcasters with the same tax, but they, of course, already pay corporate taxes here, or would if they made any profit.
Its all rather more nuanced than you make it out to be.
Another option would simply be imposing Canadian content quotas on Netflix et al. As we are permitted to do under the USMCA by way way of an exemption for protecting cultural industries.
They could refuse, then be geo-blocked; or make the requisite investments. In most cases, it should be said, the streamers already make sufficient content here (because its cheaper) to meet the industrial aim of the policy, the challenge is that much of said content is not culturally Canadian. (ie. almost all Star Trek TV shows are shot at CBS facilities in Mississauga)
www.thestar.com
