Google to charge new fee on ads in response to Canada’s digital services tax

Google says it will pass on the cost of the Liberal government’s digital services tax to advertisers.

The company says it will implement a 2.5 per cent surcharge for ads displayed in Canada, starting in October.

“Digital service taxes increase the cost of digital advertising,” a Google spokesperson said in a statement. They said the “surcharge is to cover part of the costs associated with complying” with the tax.

The tax, approved in Parliament in June, will add a three per cent levy on foreign tech giants that generate revenue from Canadian users.

A trade group representing Canadian advertisers has warned other companies could follow Google’s lead.

“This will increase the cost of running ads on Google and will likely spur similar action on the part of other platforms if they decide to follow suit,” the Interactive Advertising Bureau of Canada said on its website last week.

The digital services tax has drawn opposition from trade associations and business groups in the United States, where many of the tech giants are based.

The Computer and Communications Industry Association, which represents big tech companies including Amazon, Apple and Uber, previously called on U.S. President Joe Biden’s administration to take formal steps under the U.S.-Mexico-Canada Agreement.

The Information Technology Industry Council, whose membership includes Google, Meta, Apple and Amazon, also urged the Biden administration to “immediately address Canada’s measure that targets U.S. companies and attempts to ring-fence the digital economy.”

It said in a statement last month the tax “sends a damaging blow” to Canada’s “partnership with allies, the business community and Canadian consumers who will likely bear the burden of this tax.”

The Office of the United States Trade Representative said in July it is open to using all available tools to halt the tax.

The Google spokesperson said Thursday the company would “continue to pay all the taxes due in Canada and elsewhere, and we encourage governments globally to focus on international tax reform rather than implementing unilateral levies.”

The Liberals first promised the tax in the 2019 election, when the Conservatives and NDP also pledged a similar measure.

The levy was then delayed for years due to global efforts to establish a broader, multinational taxation plan. But following significant delays to that process at the Organization for Economic Co-operation and Development, Canada went ahead with its own tax.

Other countries have brought in similar tools to tax the profits of large multinational companies in the digital sector.

A spokeswoman for Finance Minister Chrystia Freeland said Canada’s preference has always been a multilateral agreement.

“Canada strongly supports international efforts to end the corporate tax race to the bottom and to ensure that all corporations, including the world’s largest corporations, pay their fair share,” Katherine Cuplinskas said in a statement.

“The Canadian government has been clear for several years that it would move forward with its own digital services tax if a global agreement is not reached. Unfortunately, despite best efforts, repeated deadlines to reach an international agreement have come and gone.”