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Digital Services Sales Tax Floated In Canada

by Mike Godfrey,, Washington

24 January 2017

Canada's ruling Liberal party is reportedly considering levying a consumption tax on digital services purchased from overseas firms.

Broadcasting company CBC said it had obtained via an Access to Information request a briefing note prepared for Heritage Minister Mélanie Joly. Joly last year launched a consultation on "Canadian content in a digital world."

According to CBC, the briefing warned that the lack of tax collection by such companies "not only represents a significant loss of potential tax revenue for government, but it can also place domestic digital suppliers at an unfair competitive disadvantage."

The briefing added: "Specifically, the requirement to charge customers sales tax can make the goods and services of domestic digital businesses more expensive than those of offshore businesses that do not comply with the appropriate sales tax regime."

The briefing did nevertheless warn that, "beyond voluntary compliance, little can be done to enforce a sales tax regime, even when a foreign-based company has registered with the relevant authority." It cautioned that tax authorities have "little recourse where a foreign-based supplier does not remit any sales tax or where there is a dispute over the amount of tax remitted."

The proposals outlined in the briefing note are separate from those to impose a tax on overseas suppliers to fund Canadian content. The Government has repeatedly rejected the latter policy. A spokeswoman told CBC, "Our Government has said there will be no Canadian-content levy on Netflix."

TAGS: compliance | tax | business | sales tax | VAT legislation | VAT cross-border transactions | goods and services tax (GST) | offshore | legislation | Canada | services | VAT compliance matters

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