When Ottawa announced it would refund Digital Services Tax (DST) payments following the new global tax deal, many tech firms breathed a sigh of relief. That relief may be premature, as the Canada Revenue Agency revealed yesterday that it cannot process these promised refunds without new legislation.
The CRA’s announcement came during a technical briefing where officials explained that Parliament must pass a specific law authorizing the return of collected funds—a process that could take months given the current legislative calendar.
“We need clear statutory authorization to issue refunds for taxes that were legally collected,” explained Sarah Mortimer, Assistant Commissioner for the CRA’s International, Large Business and Investigations Branch. “This isn’t a matter of administrative discretion; it requires parliamentary action.”
The digital services tax, which took effect in January, imposes a 3% levy on revenues earned by major tech platforms operating in Canada. Companies like Google, Amazon, and Meta have already made quarterly payments totaling approximately $240 million, according to Finance Canada estimates.
Canada implemented the DST while simultaneously joining the OECD’s new global minimum corporate tax framework—a seemingly contradictory position that confused many in the business community. When the international agreement was finalized in April, Finance Minister Chrystia Freeland announced that DST payments would be refunded, calling it “the fair thing to do.”
The mechanics of this promise, however, appear more complicated than initially suggested.
“It’s a bit like promising to return something you don’t yet have legal permission to give back,” says Heather Walsh, tax policy director at the Canadian Chamber of Commerce. “Companies made these payments in good faith, but now they’re stuck in a legislative limbo.”
Government sources speaking on background indicate that draft legislation is being prepared but faces a crowded parliamentary agenda. With summer recess approaching and fall election speculation intensifying, the timeline for passage remains uncertain.
For affected companies, the delay creates financial planning challenges. Meta Canada had previously announced it would factor the expected refund—approximately $35 million for their first-quarter payment—into their Canadian investment strategy for 2026.
“The uncertainty around the timing of these refunds has real business implications,” notes Richard Wong, technology sector analyst at RBC Capital Markets. “Companies made budgetary decisions assuming these funds would return to their balance sheets by year-end.”
The issue highlights the complex interplay between domestic tax policy and international agreements. Canada’s DST was designed as a temporary measure until the OECD framework took effect, but the overlapping implementation has created administrative complications.
Tax experts suggest the situation represents a deeper problem in how digital economy taxation is approached. “We’re trying to retrofit century-old tax concepts to the digital economy,” explains Miyo Chen, professor of taxation law at York University. “The refund issue is just one symptom of a system struggling to keep pace with how value is created in the digital age.”
For smaller Canadian tech companies caught in the DST’s scope, the delay is particularly problematic. Toronto-based Shopify, which barely meets the revenue threshold for the tax, has reportedly set aside $18 million for DST payments while awaiting clarity on refunds.
“For growth-stage companies, that’s capital that could be deployed for innovation or talent acquisition,” says Vass Bednar, executive director of McMaster University’s Master of Public Policy in Digital Society program. “The administrative uncertainty compounds the competitive challenges they already face.”
The Finance Department maintains that the refund commitment remains firm, despite the legislative hurdles. “The minister’s position has not changed,” said ministry spokesperson Jacob Robertson. “We are working with parliamentary colleagues to advance the necessary legislation promptly.”
Industry groups have called for temporary payment suspensions while the legislative process unfolds, but the CRA indicated yesterday that collection will continue as scheduled until Parliament directs otherwise.
This situation represents yet another chapter in the ongoing global effort to fairly tax digital business models—a process that has proven neither simple nor swift. As Canada navigates this complexity, affected companies must continue making quarterly DST payments while waiting for Parliament to create the legal pathway for their eventual return.
The matter now moves to the House of Commons Finance Committee, which is expected to consider the issue when Parliament returns from its Canada Day break next week. Whether resolution comes before year-end remains an open question—one with significant financial implications for the global tech giants that have reluctantly adapted to Canada’s digital tax regime.
