Thursday, 15 January 2015

E-Commerce Sales Tax

Q15: Will the Canadian federal government require that sales tax be charged on e-commerce sales from abroad by the end of 2015?
Yes: 25%
No: 75%
(Definition note: This question will be resolved as yes if a law to this effect is passed by the end of 2015; the new sales tax does not actually have to go into effect)

Currently, sales tax is notionally payable on e-commerce sales from abroad, but does not have to be collected by the foreign vendor.  In practice, almost no one declares the resulting tax liability.  The federal government has recently asked for input on requiring foreign vendors to charge the tax themselves.  In practice, this would increase taxes on popular on-line services and products (e.g. Netflix, Amazon.com eBooks) but increase government revenues (this is kind of a reverse flypaper theory effect).

The EU has already introduced sales tax on e-commerce sales from abroad.  I think that Canada will do so as well, but not in 2015.  The optics of increasing taxes in an election year would discourage it.  Most likely, there will be further consultations or delay, leading to an eventual introduction of taxes in 2016 or later.

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