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Nearly 50,000 Canadian eBay customers signed a letter urging Finance Minister Bill Morneau to raise the duty-free limits for online shoppers.

Andrew Harrer/Bloomberg

Nearly 50,000 Canadian customers of eBay, the American online retail giant, have signed a letter to Finance Minister Bill Morneau calling for Ottawa to raise the duty-free limits for online shoppers.

Currently, only goods worth less than $20 can be shipped without duty or tax, a threshold that hasn't budged since the early 1980s. International shippers are lobbying for a higher limit on what is called the de minimis threshold, arguing that Ottawa spends more to enforce these rules for lower value parcels than it collects in duty and tax.

The issue is caught up in a larger debate over how governments should enforce sales taxes in an age of expanding e-commerce that crosses provincial, state and international borders. A report in The New York Times speculated this week that the de minimis threshold could form a key part of the horsetrading that would result from U.S. President Donald Trump's desire to renegotiate the North American free-trade agreement.

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Andrea Stairs, managing director for eBay Canada, said the company was surprised by the number of signatures it collected from customers. For comparison, an eBay campaign last year to express concern over a Canada Post labour dispute attracted just 2,100 signatures.

"There's a groundswell of support," she said in an interview. Ms. Stairs said the company is optimistic that the government will raise the limit or launch a study of the issue, based on conversations with government officials.

"I think it's clear to the government that there is a significant portion of the Canadian population who is in favour of this," she said.

Ms. Stairs may end up disappointed.

With a budget expected within weeks, Mr. Morneau's office issued a statement to The Globe and Mail that suggests the government hasn't been swayed by the lobbying campaign.

"While we're broadly supportive of streamlining custom processing and importation requirements, when it comes to waiving duties and taxes, the impact that would have on Canadians and on Canadian businesses needs to be carefully considered, not to mention economic and administrative considerations for both the federal and provincial governments," spokeswoman Annie Donolo said in a statement. "This is an issue that some stakeholders have brought up in the context of pre-budget consultations, and the government continues to listen to all views‎."

A new report released Thursday by the Public Policy Forum points out that countries around the world are shifting sales-tax rules so that they apply based on the location of the customer, rather than the location of the seller.

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The report was focused on the state of the Canadian media industry, pointing out that foreign media companies such as Netflix do not charge GST for Canadian customers. However, the debate also applies to other types of cross-border online transactions.

"Many jurisdictions in recent years have eliminated the discriminatory value-added tax holiday treatment accorded to foreign digital companies," the report states in advocating for such a change in Canada. The report lists New Zealand, Australia, Norway, South Korea, Japan, Switzerland, South Africa, Israel and the European Union as examples.

"By and large, they have shifted taxation on digital goods from the locale of the company to the location of the customer. The large companies have not resisted," the report states.

Canadian-based retailers are lobbying Mr. Morneau to ignore the calls from eBay and others.

Karl Littler, a vice-president with the Retail Council of Canada, said Ottawa shouldn't make it easier for foreign firms to compete with Canadian retailers with a tax-free advantage.

"We're feeling reasonably confident that the government understands that there isn't a lot of great Canadian public policy in giving a tax and duty advantage to foreign shippers, to the disadvantage of those who hire and invest in Canada," he said.

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Mr. Littler also expressed hope that the de minimis threshold does not become a topic in any renegotiation of NAFTA.

"We don't want to be some chip in some future negotiation on some broader trade arrangement," he said. "That said, it does raise the question as to why on earth anybody would want to offer this up in this context [of the budget]."

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