Global Tech Giants Breathe Easy? Canada Backs Down in Shocking Tax U-Turn, While UK Gamblers Face Stiffer Taxes!

Ottawa blinked! Canada’s government executed a stunning reversal this past summer, scrapping its contentious Digital Services Tax (DST) on major U.S. tech companies. This averted an explosive trade war with the United States. The move sends ripples through global markets and the digital entertainment industry.

Digital Tax Drama: Canada vs. USA

Canada's initial Digital Services Tax, enacted in June 2024, aimed to tax 3% of Canadian-source digital services revenue exceeding CA$20 million. The tax was even retroactive to January 1, 2022. This directly targeted revenue from online marketplaces, advertising, and social media. Many of these services are fundamental to modern entertainment consumption.

But the U.S. hit back hard. President Donald Trump, in May 2025, backed "The One, Big, Beautiful Bill," which included a menacing Section 899. This provision was designed to penalize countries with "unfair foreign taxes" like Canada's DST. The stakes were enormous: U.S. withholding tax rates on Canadian investments could have soared by 5% annually, reaching a staggering 50%. This would have devastated Canadian businesses and individual investors with U.S. holdings.

The U.S. Commerce Secretary, Howard Lutnick, publicly thanked Canada for rescinding the tax, calling it a "deal breaker" for trade talks. Canada's Prime Minister Mark Carney’s government axed the levy just hours before it was set to take effect. This dramatic U-turn prevented a full-blown tariff battle that would have shaken both economies. Major firms like Alphabet, Amazon, and Meta were expected to collectively owe an estimated $3 billion under the scrapped tax.

Ian Bragg, Vice-President of Research and Statistics at the Securities and Investment Management Association, warned that proposed U.S. measures "would penalize ordinary Canadians saving for retirement, education, or other long-term goals, and create unnecessary uncertainty in the market." The quick reversal signals the immense pressure Ottawa faced.

UK Targets Online Gambling: A New Tax Reality

Across the pond, the UK's Labour government is tightening its belt and eyes the booming online gambling sector. In its November 2025 budget, Chancellor Reeves announced a significant tax increase on online gambling, raising the duty from 15% to 25%. This move aims to curb the sector's explosive growth and generate new revenues for public services.

The budget also delivered other significant tax-raising measures for the UK. Personal tax thresholds for income tax and National Insurance Contributions (NICs) are now frozen until April 2031. Additionally, tax-free limits on pension savings will be slashed to £2,000 for salary sacrifice schemes, impacting high earners. A new mileage-based tax for electric vehicles is also on the horizon.

Broader North American Tax Shifts

Beyond the Canada-U.S. tax showdown, other significant policy changes are unfolding. The U.S. House of Representatives passed "The One, Big, Beautiful Bill" in May 2025. This legislation extended and expanded President Donald Trump's 2017 Tax Cuts and Jobs Act. It also ushered in higher standardized deductions for singles, increasing to $15,750 for 2025. The IRS recently announced federal income tax bracket and standard deduction adjustments for 2026.

In Canada, Prime Minister Mark Carney's 2025 budget brought several changes. It eliminated the "inefficient" Underused Housing Tax and the luxury tax on private aircraft and vessels. The government also confirmed a middle-class tax cut, reducing the lowest tax rate by one percentage point as of 2026. The consumer carbon tax was also eliminated. For low-income Canadians, automatic tax filing and benefits are being introduced for the 2026 tax year. The Canada Revenue Agency (CRA) is also streamlining processes, no longer proactively mailing income tax packages to most filers.

What's Next

The U.S. "One, Big, Beautiful Bill" now awaits Senate approval and presidential sign-off. Its Section 899 remains a potent threat to countries with digital services taxes. Canada's decision to scrap its DST averted immediate crisis, but the underlying tensions over digital taxation persist globally.

In the UK, the online gambling industry will need to adapt to the higher tax burden, potentially affecting operations and consumer offerings. The broader tax freezes and changes to NICs will impact millions of households and businesses. These ongoing tax policy shifts will continue to shape national economies and influence daily life.