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Under Trump's NAFTA proposal, Canadians could see steep increase in tax-free online shopping

The Trump administration wants to see a steep increase of Canada’s de minimis threshold, the amount Canadians can purchase online without an import tax, to $800 (U.S.), a move the retail industry is already speaking out against.

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The Trump administration wants to see a steep increase of Canada's de minimis threshold, the amount Canadians can purchase online without an import tax, to $800 (U.S.), a move the retail industry is already speaking out against.

The demand came as part of a list of priorities for NAFTA negotiations released by the U.S. government on Monday. Canada's threshold is currently among the lowest in the world at $20. Mexico's is at $300 for postal shipments. The United States' threshold was raised from $200 to $800 in March, 2016.

According to the Retail Council of Canada, the move would give homegrown retailers, required by law to collect taxes on all goods, a severe disadvantage. The national Goods and Services Tax sits at 5 per cent with provincial sales taxes and harmonized sales taxes varying by province or territory.

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"Why should goods from one source be tax free when the ones from another source are taxable?" said Karl Littler, vice-president of public affairs at the Retail Council of Canada. "We're not pushing to push it down. Our point is that it shouldn't be raised at all and the fundamental point is tax fairness and not cutting your own throat economically."

For subscribers: Trump administration issues sweeping demands on trade as NAFTA talks near

Explainer: What the U.S. wants from NAFTA talks

Unlike Canada, the United States does not have a nationwide general sales tax, but 45 states have statewide sales taxes.

Meanwhile, online retailers such as eBay have been calling for an increase to the Canadian threshold for years, saying it would benefit customers and small businesses that import goods alike.

"I see my role as advocating for our users, our buyers and our sellers. They bring up two key issues: shipping costs and de minimis being the other," said Andrea Stairs, managing director of eBay Canada. "I think the good thing about this particular issue is that there's strong support on both sides of the border."

The C.D. Howe Institute put out a report last year that said collecting duties and taxes at the current threshold costs the government $166-million (Canadian) while only generating $39-million in additional revenues. According to a poll done by Nanos Research last year on behalf of the Canadian American Business Council, 76 per cent of Canadians support raising the duty-free limit to $200 (U.S.).

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While Canada's threshold hasn't changed in 35 years, Australia's government went the other way this year by eliminating tax-free imports all together, bringing their once $1,000 (Australian) threshold down to $0.

NAFTA talks could start as soon as Aug. 16 and the Canadian government will not be releasing a similar list of goals and priorities for negotiations before then.

Laura Dawson with the Canada Institute says Canadian business leaders need to remind Main Street U.S. how important trade with Canada is to their economy
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