U.S. President Donald Trump's administration is proposing a 'revenge tax' (Section 899 of the One Big Beautiful Bill Act) on investment income from countries with 'unfair' taxes, like Canada's digital services tax. A U.S. congressional office predicts this tax, while initially generating revenue, will eventually lead to a decline in U.S. revenue and an exodus of foreign investment, potentially harming both U.S. and Canadian economies.
Trump's 'revenge tax' on other countries could hit U.S.
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TL;DR: Key points with love ❤️U.S. President Donald Trump's administration is proposing a 'revenge tax' (Section 899 of the One Big Beautiful Bill Act) on investment income from countries with 'unfair' taxes, like Canada's digital services tax. A U.S. congressional office predicts this tax, while initially generating revenue, will eventually lead to a decline in U.S. revenue and an exodus of foreign investment, potentially harming both U.S. and Canadian economies.
Trending- 1 June 30: First big payment due for Canada's digital services tax.
- 2 July 4: Trump pressuring Senate to approve legislation by this date.
- 3 2025-2034: JCT projects revenue impacts of Section 899.
- 4 2027: Senate version of Section 899 would delay tax until this year.
- 5 2033: JCT projects House version of tax to cost U.S. Treasury $4.8 billion US in lost revenue.
- 6 2034: JCT projects House version of tax to cost U.S. Treasury $8.1 billion US in lost revenue; Senate version to cost $2.5 billion US.
- Canadians and Canadian businesses could face billions in new withholding taxes
- U.S. government revenue could decline in the long term
- American companies could lose foreign investment
- potential for retaliatory taxes from Canada
- damage to economies of both countries ('nobody wins a tax war')
What: President Donald Trump's administration is proposing a 'revenge tax' (Section 899 of the One Big Beautiful Bill Act) on investment income from countries deemed to have unfair or discriminatory taxes, such as Canada's digital services tax.
When: Proposed now, with different versions before Congress. House version would take effect quickly, Senate version delayed until 2027. Pressure to approve by July 4. JCT projections for 2025-2034.
Where: United States (Washington, Congress, House of Representatives, Senate), Canada.
Why: The U.S. aims to retaliate against countries with digital services taxes it considers discriminatory. Canada's Finance Minister is standing by the DST.
How: The proposed tax is a new withholding tax on investment income paid by American companies to investors in targeted countries. The U.S. Congress's Joint Committee on Taxation (JCT) has analyzed its potential revenue impact and effects on investor behavior.