On 30 November 2020, the Finance Department published the Fall Economic Statement 2020 – Supporting Canadians and Fighting COVID-19, including prudent fiscal plan with proposed measures for a tax system for the digital economy. Under current rules, foreign-based digital businesses can sell their goods and services to Canadians without charging the Goods and Services Tax/Harmonized Sales Tax (GST/HST), which puts the burden on Canadian consumers to remit the sales tax. 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 proposes a number of following changes to level the playing field:
- To ensure fair taxation of cross-border digital products and services, the government proposes that foreign-based vendors selling digital products or services to consumers in Canada be required to register for, collect and remit the GST/HST on their taxable sales to Canadian consumers, effective 1 July 2021.
- To ensure fair taxation of goods supplied through fulfillment warehouses, the government proposes to apply the GST/HST on all sales to Canadians of goods that are located in Canadian fulfillment warehouses, effective 1 July 2021.
- To ensure fairness across the accommodation sector, the government proposes applying the GST/HST to all platform-based short-term rental accommodation supplied in Canada, effective 1 July 2021.
International Corporate Tax and Digitalization
Corporations in all sectors, including digital corporations, must pay their fair share of taxes in Canada. Canada has been working with our international partners in a process led by the OECD, with a view to developing a coordinated approach by mid-2021. The government remains committed to a multilateral solution, but is concerned about the delay in arriving at consensus. The government therefore proposes to implement a tax on corporations providing digital services, with effect from 1 January 2022, which would apply until such time as an acceptable common approach comes into effect.
