The Taxman Cometh
The Canadian government is again considering a digital services tax on foreign services like Google Play, Netflix, Prime Video and Spotify, whose operations are not based in Canada.
Unlike Cineplex and Apple/iTunes, these companies are not compelled by law to collect taxes on their services because they have no physical presence in the country, no Canadian subsidiary, and simply broadcast services to Canada.
The CRTC had ruled against a Netflix Tax in March 2015 and in June 2018 the federal government had passed on implementing the tax. But the provincial governments of Quebec and Saskatchewan have collected provincial sales tax on these services since January 2019 and British Columbia followed suit in July 2020, setting a precedent that could ease the introduction of a federal tax.
Monthly subscriptions could get costly for some but I suspect these services will continue offering incentives and promotions to keep their clientele.
Discounts and bonus rewards are usually offered on gift card purchases throughout the year, some of which are considerable.
For example, Shoppers Optimum points users will get 7500 points when they purchase $50 iTunes cards from select Shoppers Drug Mart stores until December 11th, 2020. And the same offer will be made available to some users who purchase $50 iTunes gift cards at select Real Canadian Superstore locations from December 10th to December 16th, 2020.
I occasionally encounter similar offers for discounts and bonus points for Google Play, Netflix and Spotify gift cards. And in regards to Prime Video and Prime Music, these services are made available free to Amazon Prime members.
Apple TV is also offered free for a year on new Apple product purchases so some relief can be had on some digital purchases and subscriptions. But I don’t think the tax will be implemented for some time.
The provinces that have yet to implement a provincial sales tax on these services will likely wish to discuss the possibility of a Harmonized Sales Tax so I suspect our foreign digital services won’t be taxed until July 1st, 2021 or January 1st, 2022.
New Taxes On Streaming?
On New Years Day 2019, residents of Quebec will begin paying a tax on streaming services. And unfortunately the Canadian Radio & Telecommunication Commission is considering a “levy” to fund Canadian programming and a House of Commons committee is asking for sales taxes to be collected on these services.
This would of course raise the price of these services for the consumer, significantly. And these had been opposed by Canadians according to a Open Media poll conducted in early 2017 by the Innovative Research Group.
According to this poll, 70% of the respondents opposed a new tax on internet and mobile phone bills, 51% strongly. And in regards to the implementation of sales taxes on foreign streaming services, 47% of the respondents supported it provided the funds would be used on Canadian content.
CRTC chairman Ian Scott claimed the “levy” itself “would cost less than 50 cents on an average broadband bill of $47” durring a May 31st, 2018 Financial Times interview so they could easily just divert some of the sales taxes to Canadian Content instead. But there has yet to be a response in regards to these “contributions” from Canadian Heritage Minister Mélanie Joly and Prime Minister Justin Trudeau, who had both claimed there would be no internet taxes.
Please contact your local Member of Parliament on this issue. I will be contacting mine as soon as possible.
Thank you.