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An April 26, 2018 report
from the Canadian House of Commons Standing Committee on International Trade
recommends that Canada apply sales taxes to digital products sold in the
country by foreign sellers through e-commerce, and tax the profits of the
companies making the sales.
The report echoes recent proposals from the OECD and the
European Union to begin taxing such activities, although the types and amounts
of proposed taxes vary widely.
These proposals around the world have the potential to substantially
affect the tax liability of a wide range of companies doing business remotely.
The report recommends GST/HST tax on the sales themselves,
and a tax on the profits of those companies making the sales. The principal
evoked is that online sales and the profits companies earn from them should be
taxed in the country where the products are consumed, and where the economic
activities that created the profits occurred.
Online sellers would have to register in Canada to collect
and remit the GST/HST taxes, although the Committee acknowledges that Canada
generally would not have the ability to compel registration and collection by
non-residents with no permanent establishment in Canada.
Quebec has already enacted legislation intended to
accomplish a part of that goal. The Province’s new measure, which goes into
effect January 1, 2019, requires that foreign e-commerce sellers collect and
pay sales tax on digital services and intangible property sold in Quebec. The
Committee’s report would go further, and also require collection of sales tax
on sales of tangible property into Canada by means of the internet.
The Committee has asked the government to respond by
September 17, 2018, and Department of Finance has said it intends to do so,
although it has stated no preliminary position on the proposals.