Mark Lowey
Read Ottawa’s lips: no new taxes on electronic commerce.
Finance Minister Paul Martin may not have said this explicitly in his mini-budget last week, but the Finance Department “is not looking at any new taxes on e-commerce,” says department spokesman Jean-Michel Catta.
To ensure a level playing field between traditional “storefront” business and e-commerce, however, “it is important that existing taxes continue to apply to e-commerce, in the same way that they apply to traditional commerce,” Catta says.
E-commerce sales represented only 0.2 per cent of Canadian companies’ business last year, according to Statistics Canada. Still, that amounted to $4.4 billion. Analysts predict the country will have $93.67 billion, or five per cent of the global e-commerce market, by 2003, according to International Data Corporation.
E-commerce operations have to pay GST, provincial sales tax where applicable and other customs and excise taxes the same as storefront operations, says Richard Simpson, director-general of e-commerce for Industry Canada.
But, he stresses: “The government is not going to be moving in with some scheme for taxing a brand-new area of economic activity that’s generating hundreds of millions of dollars.”
With a federal election just over a month away, that’s good news for new economy players such as the Canadian Advanced Technology Alliance, the Canadian Federation of Independent Business, and the ICET Alliance in Alberta.
All organizations had sought the continuation of federal policy, first announced in October 1998, against implementing any new taxes specifically for e-commerce.
Speaking of the ICET (Information, Communications and Technologies) Alliance, last week’s column focused on four of Calgary’s new economy companies participating at the first ICET Banff Venture Forum this summer. They were Eleven Engineering Inc., J-Commerce Inc., Mower Technologies Inc. and MyMarketWorks.com Inc.
Here’s a look at the other four local startups. Readers should not infer any investment advice from these snapshots.
* Control F-1 is an e-support company that enables the delivery of technical support via the Internet for software vendors, technology value-added resellers, outsource support providers and centralized corporate help desks.Strategic partners include Support.com, UUNET and TechExcel. Control F-1, launched in March, has grown to 22 employees and projects $50 million annually in business within three years.
* Replicon provides companies with innovative Web-based solutions, including automated payroll, project and client-billing processes, to optimize use of resources and increase productivity. Launched in June 1999, the company now has 38 employees. More than 3,000 customers in 25 countries use Replicon’s Web TimeSheet product, including Fortune 500 companies Hewlett-Packard, Philip Morris and pizza-delivery giant Domino’s. With financial performance of $4 million a year, Replicon projects $20 million annually in business within three years.
* RightsMarket Inc. enables the commercial distribution of digital content via the Internet, providing revenue to writers, musicians, publishers and others with intellectual property. The company’s technology encrypts, establishes and enforces the right to use, and meters the use of, digital content for content owners. RightsMarket, with 35 employees, says its patent-pending distribution system allows metering, authorization, persistent encryption and disconnected use. With more than 15,000 technical publishers in North America, the company’s initial market focus is on e-publishing. With financial performance of $500,000 a year, RightsMarket projects $3 million to $5 million in annual business within three years.
* Stormworks Inc. provides complete Internet development services to establish emerging e-commerce companies. Stormworks integrates new media design and development, software technology development, marketing communications strategy and technology commercialization. In 10 months, the company has grown to more than 40 employees. Key strategic partner is Launchworks Inc. With financial performance of $3 million a year, Stormworks plans to open offices in Toronto and Vancouver and projects $17 million in annual business within three years.
