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Canada's Deputy Prime Minister and Minister of Finance Chrystia Freeland speaks to journalists on Parliament Hill.
The US ambassador has once again warned Canada that it should expect consequences if it proceeds with a plan to impose a digital service tax on the tech giants. David Cohen, in response to an audience question at a Canadian Club luncheon in Ottawa, signaled that it could get nasty.
“That will be an area of contention unless it is resolved," he said. “There’s a place where we’re either going to have to have agreement, or we’re going to have a big fight.”
Finance Minister Chrystia Freeland surprised observers, and her friends in the United States, when Canada refused to agree with other countries to delay adopting such a tax at a meeting of the OECD this summer, complaining that it had waited long enough.
The tax would impose a 3% levy on big tech firms — many of them American — that earn revenue from Canadian customers without paying tax in the country. It is scheduled to kick in on Jan. 1.
On Wednesday, Freeland said that after a recent trip to Washington, she was “cautiously optimistic” that she would reach a deal with the Americans and avoid a showdown.
Neither side would benefit from a high-profile dispute over the matter, so a face-saving compromise would be welcomed by both countries’ business communities, which have warned Freeland against forging ahead in the face of opposition from Washington and Silicon Valley. If a showdown has been averted, Freeland may reveal as much in her department’s Fall Economic Statement, due for release later this month.