The government is “moving forward” on applying the GST/HST to foreign-based subscription services, like Netflix, that are available in Canada, “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.”
The government is also looking at applying a three per cent Digital Services Tax (DST) to companies like Amazon, Google, Facebook and Apple, Trudeau said. It targets revenue generated through data sales and advertising, but leaves out subscription revenue.
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.
The DST is expected to launch on Jan 1, 2022, and will apply to any business that brings in over $1 billion in revenue annually and generates more than $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.
“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.”
The Organization for Economic Co-operation and Development (OECD) has been working on a global taxation framework for web giants so that countries are operating on the same page, but Ottawa has moved ahead with a its own plan.
Trudeau said he would prefer to work with the OECD.
“The OECD is working very hard on creating that alignment so that we’re able to move forward,” said Trudeau.
“We will ideally harmonize with what the rest of the world is doing to make sure that everyone is paying their fair share.”
In a joint statement, NDP MPs Alexandre Boulerice and Peter Julian criticized the government’s decision to leave streaming subscriptions out of the DST’s scope.
“The Liberals had a golden opportunity to bring all the web giants to heel and instead they are continuing to give gifts to multinationals like Netflix,” said Julien.
“These foreign companies already have an advantage over Canadian companies, and they threaten our local cultural-content producers.”
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