Netflix-, Amazon-Style Services in Focus in Canada Tax Proposal

Canada’s finance department has unveiled plans to levy new taxes on foreign technology companies.

Netflix-, Amazon-Style Services in Focus in Canada Tax Proposal
Netflix Inc. signage is displayed on a phone. (Photographer: Gabby Jones/Bloomberg)

Canada’s finance department unveiled plans to levy new taxes on foreign technology companies to increase government revenue amid rising deficits.

Finance Minister Chrystia Freeland has proposed charging a sales tax beginning July 1 on foreign companies that sell goods and services online in Canada. Other measures include new levies on short-term accommodation.

Based on the wording, companies such as Netflix Inc., Inc. and Airbnb Inc. would be included in the proposals. The measures would bring in about C$600 million ($463 million) next year and C$1.3 billion in the 2022-23 fiscal year, according to documents released as part of the government’s Fall Economic Statement.

The plan is part of an effort by Prime Minister Justin Trudeau’s government to raise revenue and address complaints by Canadian companies about a loophole that foreign companies have been able to exploit to avoid charging certain taxes. In September, Trudeau vowed to address tax avoidance by global web giants but offered few details. Monday’s proposal marks the government’s first attempt at a detailed plan.

Housing Tax

“The government proposes a number of changes to level the playing field by ensuring that the GST/HST applies to all goods and services consumed in Canada, regardless of how they are supplied, or who supplies them,” officials said in the statement, referring to taxes known as the goods and services tax and harmonized sales tax.

“At the same time, the government will continue to work with the international community, provinces and stakeholders to ensure that the sales tax system is fair and provides a level playing field for Canadian and foreign-based businesses.”

Currently, foreign-based vendors without a physical presence in Canada don’t have to charge the sales tax on digital services they sell in the country, including video and music streaming and mobile apps.

In addition to taxing digital companies, the government said it will take steps to implement a tax on non-Canadians who buy homes in Canada but leave them empty.

“To help make the housing market more secure and affordable for Canadians, the government is committed to ensuring that foreign, non-resident owners, who simply use Canada as a place to passively store their wealth in housing, pay their fair share,” the government said.

©2020 Bloomberg L.P.