Foreign tech giants like Netflix will soon have to cough up money for the Quebec Sales Tax (QST), two high-level government sources recently confirmed to La Presse.
The measures expected to be included in today’s budget are inspired by the guidelines set forth in Quebec’s Tax Fairness Action Plan, published by Carlos Leitão—the Ministère des Finances—last November.
The reform will impact large foreign companies that make significant sales within the province without having a significant physical presence, such as Netflix or Amazon. Currently such companies are not required to collect sales tax. The government has been relying exclusively on the “self-assessment” of Quebec residents who purchase their goods and services through the web, an inefficient system resulting in remarkably low payments to the tax authorities.
In fact, the November report estimated $270 million in tax losses incurred last year thanks to this system. The current system also puts Quebec e-retailers at a disadvantage because they are required to charge taxes to their customers. Peter Simons, owner of the Simons department store, teamed up with the Québec solidaire party last fall to call for Quebec to act.
Carlos Leitão proposed his “coordinated strategy” in Ottawa in November that would impose the QST and GST on foreign web providers. Justin Trudeau’s government originally turned down the possibility of a “Netflix tax”, but the subject of discussion around it simply refuses to die down.The exemptions granted to the American television giant deprives Canada an estimated $100 million per year, further exacerbating federal and provincial tax losses.
The three main objectives of the proposed revisions are:
- To collect QST on services and intangible property from abroad
- To collect QST on tangible property from abroad;
- To collect QST on property—both tangible and intangible—and services from the rest of Canada
“So far, on these axes, we did not perceive a willingness to cooperate with the federal government,” an anonymous government source in Quebec told La Presse. “It limits our actions precisely on these axes, but that does not mean that there is no way around it.”
Quebec had already demonstrated an ability to act autonomously within the framework of e-commerce. The province previously signed agreements with Uber and Airbnb.