US trade raises alarm over Canadian digital services tax

More than a dozen U.S. trade groups and the U.S. Chamber of Commerce on Friday urged the Trump administration to block a Frenchstyle digital services tax proposed by Canadian Prime Minister Justin Trudeau during October's election.

The groups said the tax would undermine U.S. investment in Canada's technology market and threaten Canada's compliance with commitments under the World Trade Organization, the North American Free Trade Agreement (NAFTA), and the United-States-Mexico-Canada

Agreement (USMCA).

"We urge you to engage rapidly with your Canadian counterparts to discourage them from proceeding with this proposal," the groups wrote in a letter addressed to U.S. Secretary of State Mike Pompeo, Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, U.S. Trade Representative Robert Lighthizer and White House economic adviser Larry Kudlow.

Trudeau's Liberal party during the campaign proposed a digital services tax similar to a French plan which led to criticism and the threat of retaliatory tariffs by the United States.

France and the United States are still working out their differences over the tax, which U.S. officials say unfairly targets U.S. companies such as Facebook (FB.O), Google (GOOGL.O) and Amazon (AMZN.O).

The Liberals called for digital companies with worldwide revenues of at least C$1 billion and Canadian revenues of more than C$40 million to be subject to a new 3% tax on revenue generated through the sale of online ads and user data. The tax would take effect on April 1, 2020.

Trudeau is trying to form a minority government after the Liberals lost their majority in last month's election.