Facebook misses Jan. 1 deadline to collect Quebec sales tax, while Amazon, Apple, Google, Netflix and Spotify comply
PUBLISHED JANUARY 9, 2019
Quebec says 76 international companies – including Amazon, Apple, Google, Netflix and Spotify – are all complying with new provincial rules requiring them to collect sales tax from Quebec customers.
However Facebook Inc. is not on the list. The province said the social media giant requested an extension and the government expects it will start charging sales tax on online ad sales within weeks.
“We’re very pleased with the results,” said Stéphane Dion, a spokesperson for Revenu Québec.
Quebec’s new rules took effect on Jan. 1 and stand in contrast to the federal Liberal government, which is resisting calls to take a similar approach.
Revenu Québec released an update Wednesday on the roll out of the new policy. The provincial tax agency released a list of the companies that have registered to collect and remit the provincial portion of sales taxes, worth 9.975 per cent.
Quebec Finance Minister Éric Girard said in a statement that the goal of the policy is to ensure fairness for Quebec-based companies that are already collecting sales tax from customers but have been competing with international firms that have not.
The Liberal-dominated committee on international trade in Ottawa urged the federal government to require large digital companies to collect sales tax, but Federal Finance Minister Bill Morneau has said he wants to wait for the results of international discussions on the issue. Those talks, which are led by the Organization for Economic Co-operation and Development, are scheduled to conclude next year.
Mr. Morneau has left open the possibility of taking a similar approach to Quebec, telling Bloomberg in March, 2018, that “we are studying the issue with an intent to have a point of view.”
Quebec – under the previous provincial Liberal government – announced in its 2018 budget that it would be making the collection of provincial sales tax mandatory for companies that are based outside of Quebec or Canada but sell services to Quebeckers.
Quebec’s Coalition Avenir Québec party won a majority government in October and maintained the policy.
The budget measures applied to both physical and digital goods and services.
The provincial budget estimated this would raise $27.5-million in the 2019-20 fiscal year, increasing to $45-million by 2022-23, or $154.5-million over five years.
The Canada Revenue Agency and provincial governments have generally taken the view that only companies with physical stores or offices in the country are required to register with tax authorities to collect and submit sales tax. Based on that interpretation, many large foreign-based online companies have opted not to collect sales tax from Canadian consumers.
By law, Canadian consumers are supposed to track their sales tax owed from such transactions and submit it to the government, but this provision is widely ignored by consumers and the government.
Rosalie Wyonch, a policy analyst with the C.D. Howe Institute, authored a 2017 paper that estimated federal and provincial governments could raise about $97-million a year in new revenue if foreign-based companies were required to charge sales tax. Quebec’s estimates suggest revenue from a national approach would be higher. Ms. Wyonch said Quebec’s move could pressure Ottawa and other provinces to follow suit.
“The federal government should have taken the lead, but since it was clear that they were not going to effectively address sales tax challenges in the digital economy, I applaud Quebec for attempting to collect these tax revenues and address a competitive disparity within the province,” she said in an e-mail. “I caution, however, that having differing tax policies from province to province should be avoided."
Supporters of Quebec’s approach say the federal Liberals have complicated the issue with irresponsible rhetoric by repeatedly stating their opposition to a “Netflix tax.”
NDP Heritage Critic Pierre Nantel, who represents the Quebec riding of Longueuil-Saint-Hubert, said the issue is about applying existing sales taxes fairly across the economy and has nothing to do with a new tax.
“There is no Netflix tax. It is just sales tax that should be added to any product," he said.
The phrase “Netflix tax” has been used to describe a proposal by the Canadian Radio-television and Telecommunications Commission to regulate Netflix and other streaming services and require them to contribute toward a fund for Canadian content. The CRTC abandoned the idea in 2015, but that August, in the midst of a federal election campaign, then-Conservative leader Stephen Harper released a video saying he opposes a Netflix tax.
Mr. Nantel said the Liberal government’s position on the issue is “ridiculous, awkward and obnoxious” and is likely driven by fear that the Conservative Party will make it an issue in the next election.