Ottawa is underestimating the revenue it could derive from new taxes on Internet giants, believes the Parliamentary Budget Officer (PBO).

A 3% tax on the revenues collected in Canada by Google, Apple, Facebook, Amazon and other multinational digital companies would bring in almost 4 billion in five years to the federal government, calculated PBO in analysis unveiled at the end of last month. This would be 560 million more than anticipated in the economic update presented in November by Finance Minister Chrystia Freeland.

Usually presented as a transitional measure while waiting for countries to agree on international tax rules better suited to the ability of companies to choose widely how they report their profits and losses – and where they do so – this tax which details to be spelled out in the upcoming budget draws on a similar initiative in other countries and would apply to companies with revenues of at least $ 1 billion globally and $ 40 million in Canada. The difference between Ottawa’s estimate and that of the PBO seems to be due, according to the latter, to the fact that trends in recent months have led it to revise upwards the expected growth rate of the revenues of the Web giants.

A more systematic application of the GST on goods and services sold in Canada by these same web giants, but also Netflix, Spotify and many other foreign companies, would also bring in a little more than Ottawa thinks, estimated. the PBO in another analysis unveiled, this one, two weeks ago. Instead of the $ 1.2 billion expected by the federal government over five years, it could get almost $ 130 million more, it is estimated, provided that the main platforms of the digital market accept with good grace. to collect the same consumption tax. The reasons for this difference between the two estimates are not specified.

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The duty estimated, last fall, that by exempting Netflix from the GST, the federal government was already depriving itself of 125 million per year. Remember that, unlike Ottawa, the Quebec government has been collecting the QST for two years from a list of digital platforms and companies outside Quebec which today has more than 900 names, some of which are very well known, such as Airbnb, Google, etc. Amazon, Apple, Netflix, Spotify, Expedia and Facebook.

“Canadians want a fair tax system, where everyone pays their fair share, so that the government has the resources it needs to invest in Canadians and keep our economy strong,” Chrystia Freeland said in November at the time of the report. ” announce these measures that the PBO has looked into.

Uncertainties

All of these analyzes come with many caveats about the “high level of uncertainty” and lack of data he had to contend with in his estimation work.

This is particularly the case in a third analysis unveiled last week and dealing, this time, with the additional revenues that Ottawa can hope to derive from a more systematic application of the GST on these masses of goods that companies, like Amazon, bring into the country and keep in warehouses while they are being collected. sell to Canadians. If the GST were applied on the final sale price to consumers, rather than just the wholesale price, it could bring in an additional $ 600 million over five years, PBO estimates. Ottawa, however, believes that at the rate this kind of trade grows, it could fetch two and a half times as much, or $ 1.6 billion.

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We will have to wait for the next federal government budget to obtain more details on the measures it intends to put in place. And several months, if not a few years, to see how businesses and consumers adjust to it.

The PBO has already included in its analysis of the tax on Internet giants revenue losses of around 30%, attributable to avoidance strategies on the part of the targeted companies. Imposing the GST on certain foreign goods and services could also suddenly make them less attractive to Canadian consumers, he observes elsewhere.

It is also very likely that the costs of applying certain measures are underestimated, notes the PBO. In the case, once again, of his analysis of the tax on web giants, he explains, for example, that it “does not take into account the fact that the government will have to deploy additional resources to monitor transactions on Canadian soil, because this data is not currently collected ”.

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