The CMDC and the ACA Raise Concern to the Government Over Digital Services Tax Impact on the Advertising Industry

• The CMDC and ACA have issued a statement expressing concern regarding the new Digital Services Tax (DST) introduced through Bill C-59.
• The CMDC and ACA urge the Government of Canada to urgently reconsider the implementation of the Digital Services Tax Act (DSTA), which imposes a 3% tax on digital services revenue.

Toronto, August 14, 2024 - The Canadian Media Directors' Council (CMDC) and The Association of Canadian Advertisers (ACA) have issued a statement expressing concern regarding the new Digital Services Tax (DST) introduced through Bill C-59.

The CMDC and ACA urge the Government of Canada to urgently reconsider the implementation of the Digital Services Tax Act (DSTA), which imposes a 3% tax on digital services revenue. While the tax is intended to ensure fair taxation of multinational digital companies, the reality is that this levy is being unfairly passed down to Canadian advertisers - effectively transforming it into a fee on the Canadian advertising industry.

Major digital service providers such as Amazon and Google have already indicated their plans to pass on 2.5 - 3% of the DST to their advertising partners. This pass-through fee places additional financial pressure on Canadian media agencies and advertisers, jeopardizing the economic health of the Canadian advertising sector.

Shannon Lewis, President of the CMDC, stated, "The Digital Services Tax, as it stands today, is more than just a tax on multinational digital corporations; it is becoming a fee that Canadian advertisers are having to absorb. This was not the intended outcome of the legislation, and we urge the government to revisit this issue to alleviate the pressure on Canada's media and advertising industry. Implementing this tax during a time of economic and productivity challenges could be detrimental, risking vital growth and innovation in a media sector that contributes $25.2 billion to Canada's GDP and employs over 8,000 individuals."

Judy Davey, VP Media Policy and Marketing Capabilities commented "ACA works hard to ensure a legislative and regulatory environment where our members' products and services can be responsibly marketed. With major digital players passing along some or all the DST, it increases the cost burden to advertisers. This could diminish the ability of marketers to cost effectively reach their target audiences, potentially disproportionately impacting smaller advertisers and emerging businesses that rely heavily on digital advertising. We encourage the government to take a strong look at re-evaluating the DST implementation to reduce the potential damage to the Canadian economy."

The CMDC and ACA support fair taxation but is concerned about the DST's unintended consequences. Specifically, the imposition of pass-through fees complicates the reporting of return on ad spend (ROAS) for campaigns. These additional costs must be factored into campaign budgets, creating logistical challenges and hindering effective comparisons between platforms. This complexity comes at a time when the advertising industry is already facing significant economic pressures.

The CMDC and ACA call for a dialogue with the government and partners to explore solutions that prevent this tax from being passed down to Canadian advertisers. The goal is to preserve the integrity of the DST while protecting the advertising industry, advocating for a more collaborative approach that supports and strengthens the Canadian economy.

Contacts:
Judy Davey, VP Media Policy and Marketing Capabilities, ACA: //// *protected email*
Shannon Lewis, President, CMDC: //// *protected email*

ABOUT THE ASSOCIATION OF CANADIAN ADVERTISERS
The ACA is the only professional trade association solely dedicated to representing the interests of client companies that market their products and services in Canada. Our members, over 300 companies and divisions, have collective annual sales of approximately $300 billion. Membership in ACA is restricted to client marketers only and it is this single stakeholder focus that sets us apart from other marketing associations. www.acaweb.ca

ABOUT THE CANADIAN MEDIA DIRECTORS' COUNCIL
The Canadian Media Directors' Council (CMDC) is an independent, non-profit association representing advertising media agencies across Canada. Our mission is to ensure a fair and progressive marketplace on behalf of our clients, agencies, and media partners. We advocate for the interests of media agencies that contribute $12 billion to the Canadian economy and support vital job and communication infrastructure. As trusted advisors, the CMDC is dedicated to driving a sustainable and inclusive Canadian media marketplace. www.cmdc.ca

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