US bill could override tax treaty and cost Canadian investors $81 billion over seven years, warns industry
Canadian investors could face more than $81bn in additional taxes over seven years if the US enacts a sweeping tax bill targeting Canada’s digital services tax (DST), according to a report by the The Globe and Mail, which cites an e-mailed statement from the Securities and Investment Management Association.
The Globe and Mail article reports that the “One, Big, Beautiful Bill” passed the US House of Representatives by a single vote (215-214) and includes section 899, a provision designed to counter what the US calls “discriminatory or unfair taxes” imposed by foreign nations.
Among those is Canada’s DST, introduced in 2024. The article adds that legislation still requires Senate approval and presidential sign-off, with the White House expecting US President Donald Trump to sign it by July 4.
Ian Bragg, vice-president of research and statistics at the Securities and Investment Management Association, told The Globe and Mail “these measures would penalize ordinary Canadians saving for retirement, education, or other long-term goals, and create unnecessary uncertainty in the market.” Bragg stated that the draft legislation could cost Canadian investors more than $81bn in added taxes, prompting calls for the issue to be raised at the highest levels of Canada-US trade dialogue.
The bill threatens to override the Canada-US tax treaty that has been in place since 1942, dramatically raising withholding tax rates for Canadian corporations and individuals earning US income.
Canadian corporations currently benefit from a 5 percent withholding tax on dividends from US subsidiaries. This would rise by five percentage points each year under section 899 until it reaches 50 percent—20 points above the statutory US rate. Canadian individuals, who now face a 15 percent withholding tax on US securities, would also see that rate rise to 50 percent if the provision is enacted, according to the Globe report.
The proposed changes would reverse decades of cross-border tax coordination.
Karl Dennis, national leader for KPMG’s US corporate tax team in Canada, told the Globe the eventual impact of the bill will depend on final legislative developments.
“It’s important for Canadians with US investments to monitor developments relating to this provision as this bill moves through the legislative process,” he wrote in an email.
In broader terms, the bill enacts many of Trump’s prior policy pledges.
According to Reuters, it extends tax cuts from 2017, eliminates green-energy incentives, and includes new work requirements for Medicaid and food assistance programs.
It also proposes funding for a border wall, increased immigration enforcement, and introduces “Trump accounts” for child savings.
The bill is projected by the Congressional Budget Office to add approximately $3.8tn to the US national debt over the next decade.
