The CRA said it couldn’t refund the digital services tax collected until legislation to revoke the tax had passed.Adrian Wyld/The Canadian Press
The Canada Revenue Agency says it’s refunding approximately $647-million it had collected from the digital services tax (DST) before Ottawa repealed the policy last year in response to threats from U.S. President Donald Trump to end trade talks with Canada.
The legislation to repeal the Digital Services Tax Act, included in the federal government’s budget bill, received royal assent on March 26, clearing the way for CRA to refund companies that had already paid the tax before it was cancelled the day before the taxes were due on June 30, 2025.
The CRA had said it couldn’t refund the tax collected until legislation to revoke it had passed.
The DST was an annual 3-per-cent tax applied on digital services revenue generated in Canada by large tech giants, many of which are based in the U.S.
The Parliamentary Budget Office projected in an October, 2023, report that the DST would increase federal government revenues by $7.2-billion over five years.
Of the $647-million collected from companies before the DST was cancelled, the CRA has applied $358-million toward those companies’ other outstanding tax liabilities instead of issuing a refund directly, said Kim Thiffault, a CRA spokesperson, in an e-mail responding to questions from The Globe and Mail.
As of April 23, about $154-million had been refunded to companies directly, including approximately $4-million in interest, with the rest of the refunds to be completed April 30.
The CRA’s website states that the tax agency is calculating interest on DST payments at the rate generally applicable to corporate tax refunds, from the date the payment was received. The current rate on corporate taxpayer overpayments is 3 per cent.
Ms. Tiffault said the CRA spent $30-million on costs related to the “implementation of the new tax, systems and form development, and related accommodation and information technology.”
Canada passed the DST legislation in June, 2024, effective retroactively to 2022. For the first filing deadline, companies subject to the tax had to file DST returns and pay tax for 2022, 2023 and 2024.
The U.S. government has long been opposed to digital services taxes, which it sees as unfairly targeting U.S. companies.
Last year, in an early version of the One Big Beautiful Bill Act, the U.S. threatened to hike taxes on investors or companies from foreign countries that applied “discriminatory” taxes, such as digital services taxes and the Organisation for Economic Co-operation and Development’s undertaxed profits rule, a part of its global minimum tax regime.
The U.S. removed the threatened hikes from the final version of the bill when G7 finance ministers announced the U.S. would be excluded from the global minimum tax regime.
Last week, U.S. President Donald Trump threatened to impose tariffs on the United Kingdom if it didn’t drop its DST.