IAB Canada had the privilege of taking part in a closed-door roundtable hosted by StartUp Canada. We heard from several founders of Small and Medium Sized Enterprises (SMEs) about how they are affected by the Digital Service Tax (DST). In the wake of a plunging Canadian dollar, a political crisis in Ottawa, stalled legislation, and the threat of a trade war from the United States, the last thing SMEs need is another tax – especially one that directly impacts their abilities to promote their products and services.
StartUp Canada last week released a summarized report of the major concerns expressed by the founders at the roundtable which can be read here. Here is what they said:
- The retroactivity provision in the DST sets a dangerous precedent in Canadian tax law, but some small businesses will be required to pay an excess of $100,000.
- The DST sends mixed signals about the commitment the federal government has to the best interests of SMEs in Canada. By contrast, the United States now looks more appealing as a less taxed jurisdiction from which they can earn American dollars.
- Many entrepreneurs and founders are not even aware of the tax and its implications. The government needs to be clearer on how it affects them.
- Dual negative effect:
- The DST eats away at the budgets of large companies making it difficult to be able to partner with – and take risks – with smaller startups in Canada.
- Smaller businesses with professional services in marketing and digital spaces must charge more to their clients (many of whom are startups, charities, and non-profits) to offset the costs of the DST.
SMEs are the backbone of our economy and contribute overwhelmingly to Canada’s GDP. Unless the government is willing to scrap the DST altogether or at the very least eliminate its retroactivity provision, SMEs are going to suffer needlessly in an already dire economic situation. The federal government now more than ever must show its support for Canadian SMEs – it’s time to scrap the DST.
IAB Canada remains committed to monitoring the DST and keeping our members informed. Stay engaged—become an IAB Canada member today!