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Online advocates press Ottawa for digital tax credit for small businesses

The giants of the online economy are urging Ottawa to launch a tax break so that small and medium-size businesses can boost their Web presence.

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The giants of the online economy are urging Ottawa to launch a tax break so that small and medium-size businesses can boost their Web presence.

In a report to be released Tuesday, the Internet Association is calling for a "digital renovation tax credit," which would be modelled after the popular but short-lived home renovation tax credit that encouraged construction during the recession.

The Internet Association is a U.S.-based organization representing major players in the online economy, including Inc., eBay Inc., Expedia, Facebook Inc., Google Inc., Twitter Inc. and Uber.

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The goal of the proposed credit would be to encourage small and medium-sized businesses to increase their online presence, either by launching their first website, making an existing website mobile-friendly or other options, such as advertising their business online.

With confirmation this week that Ottawa's finances are improving, the Conservative government is facing hundreds of requests for new spending and tax breaks in the run-up to the 2015 budget. The government is currently forecasting a $6.4-billion surplus for the 2015-16 fiscal year, but that is likely to face a significant upward revision this fall when Finance Minister Joe Oliver releases his fiscal update. Mr. Oliver's department confirmed Monday that last year's deficit was nearly $11-billion smaller than originally projected earlier this year.

Mr. Oliver has said that job creation will be a guiding theme as the government decides what should be in the 2015 budget.

In its report, titled "Reasserting Canada's Competitiveness in the Digital Economy," the Internet Association points to Canadian success stories such as Shopify as positive examples of growing online firms. However, the report argues Canada is falling behind when it comes to the Internet economy.

"Generally speaking Canadian businesses have been slow to adopt Internet technologies that are mainstream among key competitors globally," the report states, pointing out that only 45.5 per cent of Canadian businesses have a website.

"Canadians are active users of Internet services and are spending 41 hours a month online – second only to the U.S. market but in terms of competitiveness, [Canada] is lagging behind G20 nations," said Hauwa Otori, the Internet Association's director of legal and regulatory policy, who will promote the idea during a panel presentation at the Economic Club of Canada in Ottawa Tuesday.

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