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Small-business lobby group wants Ottawa to impose sales tax on Netflix-like services

Canada’s main small-business lobby group wants Ottawa to follow Quebec’s lead in requiring foreign-based digital companies such as Netflix to start collecting sales tax.

Dan Kelly, president of the Canadian Federation of Independent Business, said a Liberal government focused on issues of fairness should address the fact that Canadian companies must collect taxes in areas where their foreign competitors do not.

“It seems crazy to us that the federal government squeezes every little small-business owner in the country for nickels and pennies and then leaves giant multinational corporations completely free of the burden of collecting and remitting sales tax,” Mr. Kelly said in an interview. “My organization’s been accused of never supporting a tax increase in its 46-year history, but this is one where we have supported it.”

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The small-business lobby group has raised the issue during recent meetings with federal officials, Mr. Kelly added. The Chartered Professional Accountants of Canada is also of the view that Ottawa should “level the playing field” for Canadian digital businesses, although a spokesperson said it is not lobbying on that front.

The views of those business groups are in line with those of the federal NDP, which has been raising the issue on a near-daily basis in Question Period recently. The topic is prominent in Quebec, where Premier Philippe Couillard’s Liberal government has announced that digital companies will be required to collect and remit sales tax as of Jan. 1, 2019.

The House of Commons international trade committee – where Liberal MPs hold a majority – recently issued a report calling on the federal government to adopt the same policy nationally.

Finance Minister Bill Morneau responded that Canada is studying the matter and is working with OECD allies on a co-ordinated response.

At issue is the Canada Revenue Agency’s position that foreign-based internet vendors with no physical presence in Canada are generally not required to collect sales tax. That means Canadians are not charged sales tax when they subscribe to Netflix or download a song or movie from Google Play.

In contrast, Canadians are required to pay sales tax on digital content bought or rented from Canadian-based companies such as Bell or Rogers. The Conservative government asked the Finance Department in the 2014 budget to consult on the matter. However, the Tories’ position today is somewhat murky.

Conservative MPs on the international trade committee appeared to reject the idea in a supplementary report, stating the party “remains strongly opposed to making Canadians pay unnecessary taxes on intangible products.” They also said “a new tax on Canadians who use online video streaming services like Netflix and YouTube would not benefit Canadian small businesses – it would only create additional costs for consumers.”

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Yet Conservative Leader Andrew Scheer left the door open to a change in position recently before a large Quebec audience as a guest on the TV show Tout Le Monde en Parle.

“I know there are inequities in our economy when we look at Canadian companies that compete with foreign digital companies,” he said. Mr. Scheer said his party is consulting Canadians on its next election platform and has not reached a final position.

“There are two ways of arriving at fairness,” he said. “The Liberals’ idea is that everyone raises taxes, and the idea of the Conservatives is to find ways to reduce taxes.”

In the House of Commons this week, NDP MPs have accused the Liberal government of being too cozy with large internet companies, and pointed to the fact that former Liberal staffers are now working in senior lobbying roles with Facebook, Google and other large technology companies.

Google Canada’s head of public policy and government relations, Colin McKay, will face questions on Thursday morning from a House of Commons committee looking into how large internet companies handle personal data.

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