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Canada Urged To Introduce Digital Tax Nexus Rules

by Mike Godfrey,, Washington
Friday, April 27, 2018

The Canadian Parliament's international trade committee has recommended that the federal Government tax products supplied to Canadian consumers by online platforms.

The House of Commons Standing Committee on International Trade has tabled a report entitled "E-Commerce: Certain Trade-Related Priorities of Canada's Firms."

The Committee said that the Government should "apply sales taxes on tangible and intangible products that are sold in Canada and by foreign sellers, including when such sales occur using an e-commerce platform."

The Committee's report contained references to a number of comments by witnesses on the taxation of e-commerce. For instance, Canadians for Tax Fairness told the Committee that foreign firms "have been exempted from paying taxes by the Canada Revenue Agency because they have no physical presence," putting Canadian firms at a disadvantage. The Canadian Union of Public Employees argued that the Government should require foreign companies that have Canadian sales to "pay their fair share in taxes."

Fashion firm La Maison Simons Inc suggested that sales taxes be levied at the point of consumption on tangible and intangible products. Canadians for Tax Fairness called for value-added taxes to be paid in the country where a sale occurs, regardless of whether an e-commerce platform is used.

Regarding the de minimis threshold – the amount above which goods imported into the country are assessed for duties and taxes – eBay Canada said that the threshold should be increased. It argued that the current CAD20 (USD15.52) threshold negatively affects the ability of SMEs "to access low-value international supply chains" and "does not support what the Canadian consumer wants: fairness and choice."

Canadian Manufacturers and Exporters called the threshold "ridiculously low" and Startup Canada said that increasing the threshold would enhance the competitiveness of the country's companies.

The Committee also recommended that Canada work with other countries to ensure that "online sales, and the profits earned by firms making such sales, are taxed in the country where the products are consumed and where the economic activities that created the income occur." It said these efforts should be consistent with the recommendations made as part of the OECD's BEPS project.