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Donald Trump’s abrupt decision to end trade negotiations with Canada, coupled with threats of retaliatory tariffs over the latter’s 3% Digital Services Tax (DST), highlights once again the administration’s willingness to use economic intimidation to protect U.S. tech giants. In Stiglitz’s view, this is not only economically misguided but also a breach of international norms and sovereignty.
Digital Taxes: A Fair and Efficient Tool
Digital taxes are designed to apply levies on revenue generated by online services, such as advertising, streaming, and e-commerce, even if the provider lacks a physical presence in the taxing country. Several nations including Canada, New Zealand, India, and over 18 others have adopted or proposed such taxes to ensure Big Tech pays its equitable share of corporate tax, closing loopholes exploited through profit-shifting to low-tax havens.
Shifting revenue through offshore strategies is common. For instance, Google reportedly moved $17 billion to Bermuda, while Apple paid only 0.005 % in tax on its European profits in some years. The digital tax helps redress this imbalance.
Ottawa’s Capitulation and Pressure on Other Nations
Under Trump’s pressure, Canada rescinded its DST two days after postponing it, citing a desire to resume U.S. trade talks by the July 21 deadline.
Stiglitz admonishes this decision as succumbing to unilateral coercion rather than defending tax sovereignty. Similar retreats have been reported in New Zealand and India, further weakening collective leverage.
America’s Role in Undermining Global Tax Fairness
The Trump administration has abandoned efforts toward a global corporate tax reform under the OECD/G20 Inclusive Framework, including provisions concerning digital taxes. An executive order in January declared the agreement “had no force or effect” in the U.S., effectively revoking the moratorium on DSTs. This shift pressures countries to either comply with U.S. demands or risk significant revenue losses.
Stakes Beyond Tax Revenue
The struggle around digital taxes reflects broader issues of international rule of law and economic justice. If a major power can override small and medium economies at will, the integrity of multilateral frameworks such as OECD agreements and trade dispute mechanisms is at risk.
“The question now: will countries cave in to these threats or stick together and collect the billions they are rightly owed?” Stiglitz warns.
By backing down, Canada sent a chilling message: the stronger partner always wins. Stiglitz calls on countries to resist such threats and uphold tax fairness, claiming that digital taxes are simple to administer and enjoy broad support from economists and civil society.
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