Google: 2.5% DST Fee for ads served in Canada

On July 31, Google sent an email informing advertisers of a new 2.5% surcharge on ads displayed in Canada, to begin on Oct. 1, 2024.

Google said it was implementing the charge “to cover part of the costs associated with complying with digital services tax legislation in Canada.”

Canada is far from the only country to be impacted by jurisdiction-specific surcharges. The current surcharges as listed by Google are:

• Austria: 5% DST Fee (from November, 2020)
• Spain: 3% Regulatory Operating Cost (from July 1, 2024)
• France: 2% Regulatory Operating Cost (from May 1, 2021)
• UK: 2% DST Fee (from November, 2020)
• India: 2% Regulatory Operating Cost (starting October, 2021)
• Italy: 2.5% Regulatory Operating Cost (from July 1, 2024)
• Turkey: 7% Regulatory Operating Cost (from July 1, 2024)

The Digital Services Tax, enacted on June 28 as part of Bill C-59, imposes a 3% levy on companies that earn €750 million or more in global revenue and Canadian digital services revenue over CAD$20 million, retroactively from 2022. This levy primarily applies to online marketplaces, advertising, and social media services, as explained in a PwC report from July.

The federal government argues the tax brings Canada in line with measures from lawmakers around the world who are increasingly taking on tech giants.

“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,” Finance Minister Chrystia Freeland’s deputy director of communications, Katherine Cuplinskas, told CBC News in July.

Last year, the parliamentary budget officer, Yves Giroux, estimated the tax would bring in more than $7 billion over five years.

In a strong criticism, Steve Suarez, tax partner at Canadian law firm Borden Ladner Gervais, told International Tax Review that the measure would likely be “a spectacular own goal for Canada.”

“There is little doubt that bringing a DST into force will trigger punitive trade retaliation from the US, likely far more costly to the Canadian economy than whatever tax revenue would be collected,” he said in the piece, published by the London-based publication last month.