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Pascrell, Van Duyne, DelBene and LaHood Lead Ways and Means Members Blasting “Discriminatory” Canada Trade Policy

41 bipartisan Members echo administration opposition to unilaterally imposed digital services tax

House Ways and Means Committee members led by U.S. Reps. Bill Pascrell, Jr. (D-NJ-09), Beth Van Duyne (R-TX-24), Suzan DelBene (D-WA-01), and Darin LaHood (R-IL-16) urged the U.S. Treasury Department, the U.S. Trade Representative, and the Organization for Economic Cooperation & Development to combat Canada’s unilateral imposition of a digital services tax (DST) that goes against the global consensus and underscored how Canada’s action will hurt American interests.

“We write as Members of the Ways and Means Committee to express our disapproval of Canada’s decision to move forward with a digital services tax that, if imposed, would seriously harm American companies and workers,” the members write. “We urge you to impress upon your counterparts in Canada that its unilateral approach is discriminatory and, if enacted, could face significant consequences.”

The letter is signed by Reps. Pascrell, Van Duyne, DelBene, LaHood, Jodey Arrington (R-TX-19), Donald Beyer (D-VA-08), Earl Blumenauer (D-OR-03), Brendan Boyle (D-PA-02), Vern Buchanan (R-FL-16), Mike Carey (D-OH-15), Judy Chu (D-CA-28), Danny Davis (D-IL-07), Ron Estes (R-KS-04), Dwight Evans (D-PA-03), Randy Feenstra (R-IA-04), A. Drew Ferguson (R-GA-03), Michelle Fischbach (R-MN-07), Brian Fitzpatrick (R-PA-01), Jimmy Gomez (D-CA-34), Kevin Hern (R-OK-01), Mike Kelly (R-PA-16), Daniel Kildee (D-MI-08), David Kustoff (R-TN-08), John Larson (D-CT-01), Nicole Malliotakis (R-NY-11), Carol Miller (R-WV-02), Blake Moore (R-UT-01), Gregory Murphy (R-NC-03), Jimmy Panetta (D-CA-19), Stacey Plaskett (D-VI), Linda Sánchez (D-CA-38), Bradley Schneider (D-IL-10), David Schweikert (R-AZ-01), Terri Sewell (D-AL-07), Adrian Smith (R-NE-03), Lloyd Smucker (R-PA-11), Michelle Steel (R-CA-45), W. Greg Steube (R-FL-17), Claudia Tenney (R-NY-24), Mike Thompson (D-CA-04), and Brad Wenstrup (R-OH-02).

The full text of the members’ letter is below.

 

September 19, 2023

 

Dear Ambassador Tai, Secretary Yellen, and Ms. Chargé d’Affaires ad interim:

We write as Members of the Ways and Means Committee to express our disapproval of Canada’s decision to move forward with a digital services tax (DST) that, if imposed, would seriously harm American companies and workers. Despite nearly all 140 economies participating in the Organization for Economic Cooperation and Development’s (OECD) work to reach agreement on updated international tax rules approving a one-year extension of the moratorium on DSTs through December 31, 2024,[1] we are disappointed that Canada is unfortunately moving against this global consensus with a punitive DST scheduled to take effect next year.[2] We urge you to impress upon your counterparts in Canada that its unilateral approach is discriminatory and, if enacted, could face significant consequences.

The proposed three percent DST included in Canada’s budget would apply retroactively to January 1, 2022. Canada’s unusually aggressive and discriminatory approach would target U.S. companies and workers who would disproportionally bear the burden of this new tax.  Further, Canada’s approach raises serious questions about its obligations under the United States-Mexico-Canada Agreement and the World Trade Organization Agreement.

We echo the Biden administration’s message that Canada should drop its proposed tax, along with the warning that the United States “would examine all options, including under our trade agreements and domestic statutes,” if Canada does not change course. Given our prolific trading relationship with Canada, its retroactive DST proposal would be especially damaging to U.S. industry and workers. Therefore, we strongly encourage the Biden administration to work with Congress on action to safeguard our economy and challenge these unfair practices, including through our trade agreements and domestic trade statutes.

The Biden administration pushed to extend the moratorium on DSTs to allow more time for negotiations on a multilateral convention addressing the establishment of taxing rights for market jurisdictions. If Canada chooses to proceed with its DST despite this moratorium, that choice would be risky and may damage bilateral relations with its largest trading partner. The decision by nearly all economies participating in the OECD’s two-pillar process to extend the moratorium reflects a broad international consensus that unilateral DSTs are counterproductive.

Accordingly, we ask in our oversight capacity as members of the Ways and Means Committee that you provide us an update by October 3, 2023 on your efforts to ensure Canada does not enact a DST or any other discriminatory unilateral measure.

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