Prime Minister Mark Carney has walked back his Digital Services Tax after President Trump threatened to axe talks on a new trade deal. "It is part of a bigger negotiation," Carney told reporters. "It is something we expected."

En route to Parliament Hill meetings, Carney confirmed rescinding the tax and restarting trade negotiations with its southern neighbour. "We’re making progress towards a final deal. There’s more to be done, to be clear."

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Trump ended talks on June 27 over Canada's Digital Services Tax (DST); Canada then announced on June 29 it would scrap the tax.

The Digital Services Tax Act passed Parliament on June 19, 2024. Large multinationals like Google, Facebook, and Amazon were to register with the Canada Revenue Agency by January 31, with first payments due June 30. Payments would include retroactive taxes backdated to January 1, 2022, covering digital services revenue earned from Canadian users since that date.

Prime Minister Carney admitted Canada gained nothing by pledging to repeal its $3.7 billion internet tax, then abruptly ended questions Monday, according to Blacklock’s.

"Did you get anything in exchange?" asked a reporter. "It is part of a bigger negotiation," replied Carney. "It is something we expected."

He cited "timing" as the reason for the sequence of events, given the agreement and DST start dates, noting it provides certainty.

Carney and Trump subsequently agreed to a trade deal by July 21. 

"It doesn't make sense to collect tax from people and then remit them back, so it provides some certainty," Carney said on trade negotiations. 

Cabinet confirmed Sunday morning the tax would not be collected, stating Finance Minister Champagne would soon introduce legislation to rescind the Act.

Champagne, despite recent support for the internet tax, backed Carney. He admitted rescinding the DST will advance a "new economic and security relationship" with the United States.

NDP leader Don Davies criticized the Prime Minister's reversal, calling its rescinding "pure caving into Trump and his billionaire friends." Advocates argue the tax ensures large companies pay their fair share locally.

The federal 3% tax targeted foreign companies with over $20 million in Canadian revenue and $1 billion globally. The Budget Office predicted it would generate $3.7 billion in its first two years, as stated in their 2023 report, Digital Services Tax.

Opponents of the tax say the DST would have passed on costs to consumers if payments were taken from tech companies.

"Axing the Digital Services Tax is a great thing for taxpayers," according to Gage Haubrich of the Canadian Taxpayers Federation. "Trade talks or not, it was the right thing not to hike taxes."

White House press secretary Karoline Leavitt stated on June 30 that Canada dropping its DST is a "big victory for our tech companies and our American workers here at home." She added that Carney "caved" to Trump, who "knows how to negotiate."

Trump earlier called the tax a "direct and blatant" attack on his country.

The digital services tax, viewed by the U.S. as an anti-American trade barrier, faced opposition since President Trump's February 13 statement. 

A White House Fact Sheet argued that only America should tax American firms, noting that Canada and France collect over $500 million annually from American companies through such taxes.