Federal government to impose tax on digital giants like Netflix and Amazon

The federal government is planning to force multinational technology companies like Netflix and Amazon to collect HST and GST on services sold to Canadians.

Finance Minister and Deputy Prime Minister of Canada Chrystia Freeland made the announcement as the government delivered the Fall 2020 Economic Statement on November 30th.

The government notes that this will apply to “foreign-based vendors selling digital products or services to consumers in Canada.”

“Canadians want a tax system that is fair, where everyone pays their fair share, so the government has the resources it needs to invest in people and keep our economy strong,” Minister Freeland said to the House of Commons.

“That is why we are moving ahead with implementing GST/HST on multinational digital giants, and limiting stock option deductions in the largest companies.”

The new changes are scheduled to go into effect on July 1st, 2021. The government notes that the measure will increase federal revenues by $1.2 billion over five years

Freeland stated that this will ensure that digital corporations pay their fair share just like any other company operating in Canada.

The taxes will also apply to companies that make sales through marketplace platforms along with digital services that facilitate short-term rentals, such as Airbnb.

Under current rules, foreign-based digital businesses can sell their goods and services to Canadians without charging GST and HST.

“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,” the government notes.

It’s worth noting that some provinces, including Quebec and Saskatchewan, introduced provincial sales taxes on streaming services like Netflix earlier this year.

Image credit: Chrystia Freeland