Subscription Service Prices Could Soon Rise as Ottawa Plans New Sales Taxes
Netflix, Spotify, Amazon Prime or Disney+ subscription prices could soon rise as Prime Minister Justin Trudeau plans to apply sales tax to the streaming services.
According to a new report from The Star, Ottawa will soon apply the GST/HST sales tax to foreign-based subscription services, like Netflix and Spotify, that are available in Canada. The government is applying the tax “to be fair to streaming services that are Canadian,” Trudeau said during a press conference on Tuesday.
“The world is changing,” Trudeau said. “The presence of online giants that haven’t paid their fair share of taxes in the countries where they are operating is something that needs to end.”
In addition to the GST/HST measures, Ottawa is also exploring the application of a three percent Digital Services Tax (DST) to companies like Amazon, Google, Facebook and Apple, the PM said.
“The DST is expected to bring in $3.4 billion over five years while the GST/HST measures, outlined in the fall economic statement, are expected to generate about $3 billion over five years for the federal government,” reads the report.
The DST tax is expected to launch on January 1, 2022, and will apply to businesses that bring in over $1 billion CAD in revenue annually and generates over $20 million in revenue from Canadian users. The GST/HST is expected this summer.
Moshe Lander, an economist at Concordia University, said the additional costs will likely get added to subscription fees. “It’s going to mean that some of it, most of it — probably close to all of it — is going to get passed on to consumers,” he said.
As such, we can expect price hikes from the aforementioned companies over the next years.
“The biggest thing, from an efficiency standpoint, is to make it as broad based as possible, and as low as you can get away with,” Lander added, “so, much better to tax everything seven per cent than only some things 10 per cent and some not at all.”