A new service tax on advertising with Google is set to have a significant impact on businesses across Canada, starting as early as this fall. Michael Micacchi, the founder of MeetMichael Digital Marketing & E-Commerce, a Waterloo-based business that provides digital marketing and advertising services to clients, believes that businesses of all sizes will feel the pressure once the surcharge is implemented.
According to Micacchi, the 2.5 per cent surcharge that Google will start implementing in October for businesses advertising in Canada will have a noticeable effect on their advertising budgets. This surcharge is intended to cover some costs associated with Canada’s Digital Services Tax (DST), which aims to capture revenues earned in Canada by foreign firms.
Multinational digital companies such as Meta, Alphabet, Facebook, and Amazon are not based in many of the countries where they conduct business, allowing them to avoid paying certain taxes. The federal government sees the digital services tax as a way to bring the tax code up to date and ensure that these companies contribute their fair share.
Micacchi points out that businesses looking to advertise in Canada often have no choice but to use platforms like Google and Facebook, which have become dominant players in the online advertising space. This lack of competition leaves businesses at the mercy of these platforms, making it difficult for them to explore other options.
Jasmin Guénette, vice president of national affairs with the Canadian Federation of Independent Business, agrees that small businesses are particularly vulnerable to the surcharge imposed by Google. With a long list of increased costs already burdening small businesses, many feel they have no choice but to pay the extra fee to continue reaching their customers online.
While some businesses may consider turning to platforms like Instagram and Amazon for advertising, Guénette notes that online advertising is heavily concentrated in the hands of a few key players. This concentration limits the options available to small businesses, making it challenging for them to navigate the changing landscape of digital advertising.
Internationally, Canada faces pressure on the digital services tax, especially from its closest trading partner, the United States. Critics argue that the tax is aggressive and discriminatory towards big tech companies. Micacchi believes that more focus should be placed on how these policies will impact small businesses, which often bear the brunt of additional fees and taxes.
As the implementation of the surcharge draws near, businesses like MeetMichael Digital Marketing & E-Commerce are bracing for the financial impact it will have on their clients. With limited alternatives and a lack of competition in the online advertising space, small businesses are left feeling overlooked and burdened by additional costs imposed by dominant platforms like Google.
