Amazon, HBO and Hulu are exempted
Toronto Star, 8 May 2019, MICHAEL LEWIS BUSINESS REPORTER
A reluctance to tax foreign vendors of digital streaming and video content cost Ottawa $169 million in GST revenue in 2017, according to the auditor general’s report released Tuesday.
“This is a result of a decision by the federal government,” said Philippe Le Goff, principal of the e-commerce audit component of the spring report. “It is related to something that is not taxable as we speak.”
In 2017, Canada reaffirmed its commitment not to tax offshore streaming services without a physical presence in the country. It included Amazon, HBO and Hulu under a so-called new media exemption, although Los Gatos, Calif.based Netflix is expected to invest $500 million into Canadian programming over five years.
Several Organisation for Economic Co-operation and Development (OECD) countries have introduced measures to collect sales taxes on imported digital products on the same basis and at the same rates as domestic products and services.
Last year, Quebec became the first Canadian province to tax non-resident providers of digital services. Quebec implemented a requirement for foreign vendors without a physical or significant presence in the province to register for and collect the QST using a simplified registration system. The provincial government says it hopes to raise $154.5 million in additional sales tax revenue over the next five years.
“This is a result of a decision by the federal government. It is related to something that is not taxable as we speak.” PHILIPPE LE GOFF PRINCIPAL OF E-COMMERCE AUDIT COMPONENT OF AUDITOR GENERAL’S REPORT
The audit of e-commerce taxation also found that the Canada Revenue Agency (CRA) and the Canada Border Services Agency (CBSA) had not done enough to ensure that all sales taxes on foreign goods and services purchased online are collected and remitted to the government.
Among other changes, it called for improved oversight of couriers who remit the GST and HST on products purchased online and shipped into Canada when they are valued at greater than $20 but no more than $2,500.
Le Goff said both the CRA and CBSA have committed to actions to improve the collection of information from providers of e-commerce subject to Canadian tax, with e-commerce including digital products and services purchased online such as video streaming and ride sharing.