Experts say the federal government’s decision to tax digital giants like Netflix and Amazon will lead to price increases.
In its fall economic statement, the government unveiled a plan to force foreign tech companies to charge HST and GST for services sold to Canadians. The new policy would apply to “foreign providers selling digital products or services to consumers in Canada.”
Basically, it would apply to services like Amazon Prime Video, Spotify, and Airbnb. The government has stated that Canadian companies already collect these taxes and that foreign companies should do the same.
University of Ottawa professor Michael Geist outlined in a blog post that “the reality is that when applicable, sales taxes are paid by consumers, not businesses.”
“Canadian resident businesses are simply required to collect and remit applicable sales taxes. The tax does not come from profits nor does it represent a profit for the companies, which act as intermediaries by collecting the sales tax and remitting it to the government ”, he highlighted.
Geist also stressed that the application of taxes will lead to higher costs for consumers, but that there will be equal treatment between Canadian and foreign streamers.
Also, Dwayne Winseck, Professor at Carleton University said to CBC that expects foreign technology companies to add the tax price to the total sales price of services.
“I mean, this really isn’t a very substantial amount, when we talk about corporate finance,” Winseck told the CBC.
The government has stated that this change will ensure that digital corporations pay their “fair share” like any other company operating in Canada and that this should create a level playing field.
Under current rules, digital companies based abroad can sell their goods and services to Canadians without charging GST and HST.
“This gives foreign-based digital corporations an unfair advantage and undermines the competitiveness of Canadian companies. It also deprives the government of tax revenue that could be used to improve everyone’s life, ”the government notes.
The new changes are scheduled to take effect on July 1, 2021. The government notes that the measure will increase federal revenue by $ 1.2 billion over five years.
Via: , Michael Geist