Google Announces New 2.5% Digital Service Tax for Canadian Media Spend

Digital Marketing / August 02, 2024

In a recent development that will impact many businesses, Google is set to implement a new 2.5% “digital service tax” (DST) starting October 1st, 2024. This change affects businesses serving ads on Google Ads and DV360. 

This tax fee isn’t just for Canadian businesses, it applies to ALL businesses advertising in Canada regardless of their business location. 

Why this new tax?

The taxation of digital services has been an ongoing debate in Canada for several years. As digital platforms and tech giants increasingly generate significant revenues from Canadian users, there has been growing pressure on the government to address the gap in tax legislation. This debate has led to the introduction of a digital service tax aimed at ensuring that these global companies contribute their fair share to the Canadian economy

Canada’s legislation (included in Bill C-50) implementing the Digital Services Tax Act (DSTA), entered into force in July 2024. The Canadian government is asking foreign tech giants like Google to now pay a three percent levy on revenue from Canadian users, retroactive to 2022. 

In response to this tax, Google has decided to pass most of this cost increase onto its customers, which is why the DST being applied is slightly less than the government’s total increase.

All Tech Giants Will Need to Comply

Google isn’t the only tech giant navigating through these new tax regulations. Similar adjustments are anticipated from other major players like Apple and Amazon, as they too must adapt to digital service taxes. We expect more announcements to come.

The Impact on Advertisers

With this 2.5% additional fee, businesses will need to account for a slight increase in their advertising budgets. It’s advisable to review your current budget allocations and adjust them accordingly to avoid any surprises.

As a digital marketing agency, we recognize that this new fee will affect advertisers and require adjustments to their strategies. We are aware of the potential impact this increase may have on their advertising budget and overall approach. 

We are actively in touch with Google to obtain detailed information about this update. We will update this post as we learn more and we will support our clients in planning for this change in business costs.