Federal Government Plan to Force Digital Companies to Tax Their Services

The Canadian federal government is planning to force foreign streaming platforms and digital tech companies to introduce GST/HST on their services sold to Canadians. Companies such as Netflix, Amazon, and others will then implement a sales tax on subscription services and in-app purchases.

The decision to enforce digital vendors to implement a sale tax was made during the federal government’s fall fiscal update. According to The National Post, companies like Netflix, Amazon, Spotify, etc. will be forced to charge and remit sales tax by July 1st, 2021. The decision to enforce the new tax system was quickly decided once the members of Parliament discovered that the country is losing $247 million in unpaid GST/HST each year. An estimated $1.2 billion will then be earned by 2027.

The new tax system aims to force all giant digital companies to pay their fair share in the country. Via the report, a document announcing the system states: “Under current rules, foreign-based digital businesses can sell their goods and services to Canadians without charging the (GST/HST), which puts the burden on Canadian consumers to remit the sales tax. This gives foreign-based digital corporations an unfair advantage and undercuts the competitiveness of Canadian companies. It also deprives the government of tax revenues that could be used to better the lives of everyone.”

Bell’s streaming service Crave has been forced to charge GST/HST to subscribers, while Netflix has only been collecting and paying sales tax in Saskatchewan and Quebec. A national-wide tax system will ensure that companies like Netflix are being treated the same as homebrewed companies providing services to Canadians.

The federal government is also planning to introduce an additional tax system on digital services to companies such as Google and Facebook by January 1st, 2022. Although details have yet to be outlined, it’s estimated that $3.4 billion can be earned over five years.