Some banks charge companies a monthly tax payment fee

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

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

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

Both RBC and Scotiabank charge business clients a $25 setup fee to sign up for Can-Act, with a $2 per transaction fee and a $2 minimum monthly fee that is waived if there is at least one tax payment that month. (Scotiabank said there is no set-up fee for customers using its Scotia Online service.)

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 separate tax payment fee.

Small business groups have criticized the cost increase.

“These fees are excessive and there is little to pay for the tax,” 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 increasing its dividend for shareholders.

Dan Kelly, president of the Canadian Federation of Independent Business, said removing Interac as a low-cost payment option is troubling, adding that it won’t help banks oppose regulation of other fees, such as for processing credit card transactions.

“This is further confirmation that banks are looking to move small business customers to more expensive 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 payments system that would enable 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 to our customers, and RBC’s decision to retire [Interac] the service is consistent with actions taken by many other major Canadian financial institutions in recent years,” Jason Storsley, RBC’s senior vice-president of everyday banking and client growth, said in a statement.

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

Can-Act operates a payment infrastructure that connects 17 financial institutions – including five major banks – and federal and provincial tax authorities, including the Canada Revenue Agency.

Toronto-based software company Dye & Durham DND-T has acquired Can-Act as part of its $500 million purchase of Telus Inc.’s financial solutions division. December 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 companies are registered with Can-Act.

Matthew Proud, chief executive of Dye & Durham, said that corporations and government institutions have found it useful to have just one service at the tax payment link because it is easier to reconcile data.5:

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

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

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