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 in Waterloo, believes that businesses of all sizes will feel the pressure once the surcharge is implemented. He emphasizes that even a small percentage increase in advertising costs can have a noticeable effect on a company’s budget.
Google has announced that they will be implementing a 2.5 per cent surcharge for businesses advertising with them in Canada to cover some costs associated with Canada’s Digital Services Tax (DST). This move comes as multinational digital companies like Meta, Alphabet, Facebook, and Amazon have been able to avoid paying certain taxes by not being based in the countries where they conduct business. The Canadian government sees the DST as a way to update the tax code and capture revenues earned in Canada by foreign firms.
For many businesses, advertising with Google and Facebook has become a necessity due to the reach and effectiveness of these platforms. Micacchi expresses concern about how the additional costs will impact his clients, who rely heavily on Google for advertising. He notes that the lack of alternative options leaves businesses feeling trapped in Google’s ad ecosystem, with few viable alternatives.
Jasmin Guénette, vice president of national affairs with the Canadian Federation of Independent Business, echoes these sentiments, highlighting the limited options available to small businesses when it comes to online advertising. While platforms like Instagram and Amazon offer alternatives, they also come with their own challenges, leaving many businesses feeling at the mercy of a few key players in the online advertising space.
The U.S. has been critical of Canada’s digital services tax, calling it aggressive and discriminatory towards big tech companies. Micacchi believes that more attention should be paid to how these policies will impact small businesses, which often bear the brunt of additional fees and taxes imposed by larger corporations.
As the implementation of the surcharge draws closer, businesses are left grappling with the reality of increased advertising costs and limited alternatives. The concentration of online advertising power in the hands of a few major players like Google poses a challenge for small businesses looking to reach their customers effectively. Despite the challenges ahead, businesses will need to adapt and find creative solutions to navigate the changing landscape of digital advertising in Canada.