Another Canadian trade partner is extending its sales tax to Netflix and other foreign digital-content providers, a move the NDP says Ottawa should quickly follow.
In a budget released on Monday, the government of Singapore announced that it would be extending its goods and services tax to foreign-based music and video-streaming services as of 2020.
Singapore and Canada are among the 11 countries that agreed earlier this year to the reworked Trans-Pacific Partnership trade deal.
Governments around the world are currently grappling with how to adjust domestic tax rules in response to the dramatic rise of international e-commerce.
Canada is participating in discussions at the Group of 20 and Organization for Economic Co-operation and Development that are aimed at developing international standards. Some jurisdictions, including Australia, the European Union and some U.S. states, have already decided to collect sales tax on international digital content.
Currently, Canadians pay GST on digital content from Canadian-based companies – such as Bell's CraveTV streaming service – but sales tax is not collected by foreign-based companies, such as Apple, Google and Netflix.
In a speech on Saturday at a party convention, NDP Leader Jagmeet Singh said it wasn't fair that "web giants" such as Netflix are not required to follow the same tax rules as Canadian companies.
NDP heritage critic Pierre Nantel said Singapore's decision is a further example that Canada is lagging behind its global counterparts when it comes to updating its approach to sales taxes.
"It's such an obvious unfairness," he said on Monday. "We are absolutely behaving as trailers, as non-leaders on this issue."
Mr. Nantel noted that in Quebec – where the province has said it will charge sales tax on foreign digital content even if Ottawa won't – there is a strong societal consensus in favour of such a move.
"I don't understand why, outside of Quebec, people aren't more concerned about this," he said.
Prime Minister Justin Trudeau and his ministers have sent mixed signals on the issue.
The political debate in Ottawa has been complicated by the fact that the term "Netflix tax" means different things to different people. It has been used at times to describe a potential levy that would fund Canadian content, but it has also been used in the context of whether or not the GST should apply to foreign-based digital services.
Earlier this month, the NDP asked the government several times during Question Period whether the Liberals will follow the lead of other countries by requiring companies such as Facebook, Google and Netflix to "pay their fair share."
The Prime Minister appeared to give an unequivocal response on Feb. 6.
"It is not the web giants they want to pay more in taxes; it is taxpayers," he responded to the NDP. "We made a commitment to taxpayers that they would not have to pay more for their online services. We on this side of the House plan to keep that promise."
Yet the next day, Heritage Minister Mélanie Joly appeared to equivocate.
"The Prime Minister was very clear on this. We made a promise and we plan to keep it," she said. "That being said, we recognize that in the long term we need to develop a comprehensive solution for taxing digital platforms. We are not going to take a piecemeal approach."
On Monday, a spokesperson for the Prime Minister pointed out that Mr. Trudeau had said in a January interview with Radio-Canada in Quebec City that sales taxes on digital services need to be considered over the "long term," but that the government would not be imposing new taxes in this area in the "short term."
Also on Monday, a spokesperson for Ms. Joly said the government recognizes that "in the long term" a global taxation solution regarding digital platforms must be found.
University of Ottawa law professor Michael Geist, who holds the Canada Research Chair in Internet and E-commerce law, says the debate is complicated by the conflicting definitions of the term "Netflix tax."
He said the federal government appears to strongly oppose any form of levy that would raise money for cultural content, but is leaving the door open to sales-tax changes if and when an international consensus is reached.
Dr. Geist noted that applying the GST to digital services is more complicated than it may seem. He noted that foreign services used by minority language populations in Canada may simply pull their service from Canada if the compliance costs become too onerous.
"There are real-world challenges to implementation," he said on Monday. Even though the Prime Minister's comments appear to reject charging sales tax on Netflix and similar services, Dr. Geist said he expects Canada will eventually move in that direction if OECD negotiations produce a global agreement.
"I do think there is a bit of inevitability to it," he said.