Skip to content
Search

Latest Stories

Top Stories

Just the Facts: Digital Services Tax

Just the Facts: Digital Services Tax
people sitting down near table with assorted laptop computers
Photo by Marvin Meyer on Unsplash

President Donald Trump said on Friday that he has ended trade talks with Canada and will soon announce a new tariff rate for that country, as stated in a Truth Social post.

The decision to end the months-long negotiations came after Canada announced a digital service tax (DST) that Trump called “a direct and blatant attack on our Country.”


“Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately. We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period,” he wrote.

"We'll continue to conduct these complex negotiations in the best interest of Canadians," Prime Minister Mark Carney said. He did not respond to questions about whether his government is prepared to drop the DST — an action the Business Council of Canada is calling for in exchange for U.S. tariff relief.

Beginning on June 30, the DST would require U.S. companies, such as Amazon, Google, Meta, Uber, and Airbnb, to pay a 3% levy on revenue from Canadian users. The policy will apply retroactively, leaving U.S. companies with a $ 2 billion bill.

The DST tug-of-war between Canada and the U.S. has been ongoing for years, with former President Joe Biden's ambassador to Canada, David L. Cohen, warning during his tenure that if a DST were enacted, the U.S. would retaliate.

While Canada and other Organization for Economic Co-operation and Development (OECD) countries had been discussing some global DST, the Justin Trudeau administration decided to move ahead with its own tax rather than wait for coordinated action.

What is the digital services tax (DST)?

Here are just the facts:

A digital services tax (DST) is a tax levied on the gross revenues generated from certain digital activities within a jurisdiction. It is not an income tax, online sales tax, or VAT.

Key characteristics of DSTs:

  • Tax base: Revenues from specific digital services. Examples include online advertising, digital intermediary services (like online marketplaces), and the sale of user data.
  • Target: Primarily aimed at large, multinational companies providing digital services to users in a specific country.
  • Purpose: To address the challenge of taxing digital businesses that operate globally and may not have a physical presence in the countries where they generate revenue. Many countries believe that multinational tech companies should contribute a fair share of tax revenue in the jurisdictions where they have users and derive value.
  • Structure: DSTs typically involve:
    • Defining the scope of digital services subject to the tax.
    • Calculating a company's presence in the jurisdiction based on user location or other factors.
    • Applying a tax rate to the estimated revenue generated within that jurisdiction.
  • Examples of taxable activities: Online sales, digital advertising, data usage, e-commerce, streaming and downloading, and Software as a Service (SaaS). Australia's DST, for instance, includes online dating services, website design, and webinars.
  • Potential impacts: DSTs can potentially lead to higher prices for consumers as businesses may pass on the costs. They can also affect loyalty programs and may increase government overhead and export risks.

Why countries implement DSTs:

  • To ensure fair taxation of multinational companies operating in their jurisdiction, even without a physical presence.
  • To capture tax revenue from the growing digital economy.
  • To level the playing field between international and domestic digital service providers.
Note: The global implementation and structure of DSTs vary across different jurisdictions, and ongoing discussions and efforts have been made to establish a more unified approach through initiatives such as the OECD's BEPS 2.0 project.

Hugo Balta is the executive editor of the Fulcrum. He is also the publisher of the Latino News Network.

Read More

Avoiding Policy Malpractice in the Age of AI

"The stakes of AI policymaking are too high and the risks of getting it wrong are too enduring for lawmakers to legislate on instinct alone," explains Kevin Frazier.

Getty Images, Aitor Diago

Avoiding Policy Malpractice in the Age of AI

Nature abhors a vacuum, rushing to fill it often chaotically. Policymakers, similarly, dislike a regulatory void. The urge to fill it with new laws is strong, frequently leading to shortsighted legislation. There's a common, if flawed, belief that "any law is better than no law." This action bias—our predisposition to do something rather than nothing—might be forgivable in some contexts, but not when it comes to artificial intelligence.

Regardless of one's stance on AI regulation, we should all agree that only effective policy deserves to stay on the books. The consequences of missteps in AI policy at this early stage are too severe to entrench poorly designed proposals into law. Once enacted, laws tend to persist. We even have a term for them: zombie laws. These are "statutes, regulations, and judicial precedents that continue to apply after their underlying economic and legal bases dissipate," as defined by Professor Joshua Macey.

Keep ReadingShow less
Donald Trump

There's been an emerging pattern of the Trump administration embracing AI-generated propaganda art in official communications.

Brandon Bell/Getty Images

Superman Trump and the White House’s AI Art Problem

On July 10, the White House’s official social media accounts posted a mock movie poster depicting President Donald Trump as Superman, soaring through the air in the Man of Steel’s iconic tights and cape. The meme, emblazoned with the slogan, “THE SYMBOL OF HOPE. TRUTH. JUSTICE. THE AMERICAN WAY. SUPERMAN TRUMP,” was intended to capitalize on the buzz around a new Superman film. Instead, it was met with widespread ridicule; one congressman quipped that Trump is “literally Lex Luthor.” But, while easy to write off as a one-time social media gaff, the bizarre incident wasn’t an isolated one. It highlights an emerging pattern of the administration embracing AI-generated propaganda art in official communications.

A Pattern of AI-Generated Fantasies

Keep ReadingShow less
Biased Coverage Distorts the Historical Record We Later Inherit
white printer paper on black table
Photo by Ashni on Unsplash

Biased Coverage Distorts the Historical Record We Later Inherit

I used to enjoy doing my schoolwork in my college newspaper’s office. There is a series of tall library shelves filled with dusty books held together by loose binding that contain every article printed since our inception in the 1930s.

The book covers have lost the sharpness of their hues over time, and the thin old papers inside are yellow and torn, but inside those books lie almost 100 years of articles that tell the stories and history of the college town, Isla Vista, and UC Santa Barbara, as written by student journalists at the Daily Nexus.

Keep ReadingShow less
Media criticism
News media's vital to democracy, Americans say; then a partisan divide yawns
Tero Vesalainen/Getty Images

Public Media Under Fire: Why Project 2025 Is Reshaping NPR and PBS

This past spring and summer, The Fulcrum published a 30-part, nonpartisan series examining Project 2025—a sweeping policy blueprint for a potential second Trump administration. Our analysis explored the proposed reforms and their far-reaching implications across government. Now, as the 2025 administration begins to take shape, it’s time to move from speculation to reality.

In this follow-up, we turn our focus to one of the most consequential—and quietly unfolding—chapters of that blueprint: Funding cuts from NPR and PBS.

Keep ReadingShow less