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Royal Bank of Canada will soon require its small business clients to pay a monthly fee to a third-party service if they wish to pay their taxes through their bank account.Alex Lupul/The Canadian Press

Some banks are adding monthly service fees for businesses who want to pay their tax bills through their bank accounts, an extra expense that business groups say is unreasonable.

Royal Bank of Canada RY-T will soon join the Bank of Nova Scotia in requiring small-business clients to pay a monthly fee to a third-party service if they wish to pay their taxes through their bank account.

RBC recently informed its personal and commercial account holders that it was discontinuing its use of Interac Online Payments, which had no fees, as of May 30. Going forward, commercial accounts will have to use a service provided by Can-Act Payment Services Inc., which is owned by software company Dye & Durham Corp.

RBC and Scotiabank both charge business clients a $25 setup fee for registering with Can-Act, along with a $2 fee per transaction and a minimum $2 monthly fee that is waived if there is at least one tax payment that month. (Scotiabank said users who use their Scotia Online service are not charged a set-up fee.)

Toronto-Dominion Bank TD-T and Canadian Imperial Bank of Commerce CM-T charge a $2 transaction fee, but no monthly or setup fees. Bank of Montreal BMO-T said it does not charge a special fee for tax payments.

Groups that represent small businesses criticized the increased costs.

“These fees are excessive and to be paying for paying taxes is a bit much,” said Gary Sands, senior vice-president of public policy and advocacy at the Canadian Federation of Independent Grocers.

Aaron Binder, director of the Better Way Alliance, called the move “fee creep” and questioned why RBC needed to raise fees while also hiking its dividend for shareholders.

Dan Kelly, president of the Canadian Federation of Independent Business, said eliminating Interac as a low-cost payment option was worrisome, and added that it would not help banks make their case against regulation of other fees, such as for processing credit-card transactions.

“This is further confirmation that banks are keen to move small-business clients to higher-cost payment options rather than focusing on providing convenience or lower fees,” Mr. Kelly said.

RBC said the move was part of an update to its payment system that would allow for new options such as multi-user approval and payment scheduling.

“We continue to focus on providing innovative payment solutions that are secure, convenient and offer added value for our clients, and RBC’s decision to decommission the [Interac] service is consistent with the actions taken by many other major Canadian financial institutions in recent years,” said Jason Storsley, RBC’s senior vice-president of everyday banking and client growth, in a statement.

RBC said sole proprietors can continue to pay their taxes without fees by adding the CRA as a payee on their bank accounts.

Can-Act manages the payment infrastructure that connects 17 financial institutions – including the Big Five banks – and federal and provincial tax authorities, including the Canada Revenue Agency.

Toronto-based software company Dye & Durham DND-T bought Can-Act as part of its $500-million purchase of Telus Inc.’s financial solutions division on Dec. 6, 2021.

Dye & Durham said the service processed more than 450,000 CRA transactions in the month of December, and more than $450-billion in payments in all of 2022. The company said more than 900,000 businesses are registered with Can-Act.

Matthew Proud, Dye & Durham chief executive, said corporations and government institutions have found it beneficial to have only one service at the nexus of tax payments because it is simpler to reconcile data.5:

“It makes their lives easier … this is a widely used service that is part of that core infrastructure plumbing,” he said.

He declined to say how the tax-payment fees are split between Dye & Durham and the banks, but said the share taken by his company is per transaction, “very small,” and has not changed since Can-Act was acquired.

He said Dye & Durham does not charge setup or monthly fees. “That’s not coming from us,” he said.