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Overseas Online Sellers 'Have Advantage' Over Canadian Platforms

by Mary Swire, Tax-news.com, Hong Kong

24 August 2017


A new report from the C D Howe Institute has claimed that foreign providers of online services enjoy a tax advantage over Canada's domestic providers.

The Institute said that foreign providers of digital products and services are not currently required to collect and remit sales taxes if they are not "carrying on business" in Canada. It explained that while the onus is on consumers to pay the associated goods and services tax/harmonized sales tax (GST/HST), the tax is rarely enforced by the online services.

The Institute argued that as compliance is "virtually non-existent" among consumers, significant levels of tax revenue remain uncollected. It said this means that foreign vendors can extract more revenue than domestic providers, who are required to charge consumers the necessary tax, giving them an unfair advantage.

The report called on the Government to amend the Excise Tax Act so that it is applicable to all businesses that supply digital goods and services for consumption within Canada. It said: "Whether or not a business has to report and remit GST/HST should be based on the consumer's, not the supplier's location."

"Any policy change needs to balance the application of new measures with minimizing the additional administrative burden placed on both foreign and domestic businesses," it added.

Report author Rosalie Wyonch commented: "Canada hasn't kept pace in adapting tax policy to the digital economy in comparison to its peers. Other entities such as the European Union, Japan, and Norway have already acted on this issue, and moved ahead of Canada in terms of addressing the different tax treatment that puts domestic vendors at a competitive disadvantage relative to foreign suppliers of goods and services from the digital economy."

TAGS: compliance | tax | business | sales tax | goods and services tax (GST) | Norway | Canada | tax reform | European Union (EU) | Japan | services | Europe

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