Small Businesses Struggle Under Digital Tax Burden

By Elke Porter | WBN News Finance | April 29, 2025

A new 3% Digital Services Tax (DST), introduced under Canada’s Digital Services Tax Act, is putting unexpected pressure on small Canadian businesses that rely heavily on online advertising. Although the tax is targeted at large multinationals like Google and Meta, the cost is trickling down, raising advertising rates and making it harder for small enterprises to compete online.

The DST applies to digital revenues earned from Canadian users by large corporations with global revenues over €750 million and Canadian digital revenues exceeding $20 million. While this may seem targeted at tech giants, Canadian small businesses are feeling the brunt as platforms pass the tax burden down the line. Many of these businesses depend on cost-effective, targeted online ads to promote their services and connect with customers.

This situation echoes concerns raised during the rollout of Bill C-18, the Online News Act, which resulted in Google and Meta restricting Canadian news content from their platforms. These policy changes are altering how Canadians — and their businesses — interact online. The irony is you can still place an ad, if you do business in Canada, and pay the money, but as soon as you hit send, you can no longer see it, if you are running a news platform.

"Small advertisers have become collateral damage in Ottawa's digital tax strategy," says a Vancouver-based marketing consultant. “We’re not just paying more — we’re losing visibility.”

The DST was originally proposed as a stopgap measure pending a global agreement under the OECD’s Pillar One tax framework. While Canada waits for a multilateral solution, small businesses are left absorbing higher ad costs during an already fragile economic recovery. Maybe the Canadian election will result in changes, once the new Prime Minister has settled in.

But for now, critics argue the DST needs to be reevaluated to ensure it does not undermine Canada's entrepreneurial landscape. For now, advertisers — especially solopreneurs and small business owners — must adjust their budgets and strategies to stay competitive in a digital economy that’s getting more expensive by the click.

#Digital Services Tax #Small Business Canada #Online Advertising #Canadian Economy #Tax Burden #Support Local Businesses #WBN News Finance #Elke Porter

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