Quebec’s Coalition Avenir Québec party won a majority government in October and maintained the policy.
The budget measures applied to both physical and digital goods and services.
The provincial budget estimated this would raise $27.5-million in the 2019-20 fiscal year, increasing to $45-million by 2022-23, or $154.5-million over five years.
The Canada Revenue Agency and provincial governments have generally taken the view that only companies with physical stores or offices in the country are required to register with tax authorities to collect and submit sales tax. Based on that interpretation, many large foreign-based online companies have opted not to collect sales tax from Canadian consumers.
By law, Canadian consumers are supposed to track their sales tax owed from such transactions and submit it to the government, but this provision is widely ignored by consumers and the government.
Rosalie Wyonch, a policy analyst with the C.D. Howe Institute, authored a 2017 paper that estimated federal and provincial governments could raise about $97-million a year in new revenue if foreign-based companies were required to charge sales tax. Quebec’s estimates suggest revenue from a national approach would be higher. Ms. Wyonch said Quebec’s move could pressure Ottawa and other provinces to follow suit.
“The federal government should have taken the lead, but since it was clear that they were not going to effectively address sales tax challenges in the digital economy, I applaud Quebec for attempting to collect these tax revenues and address a competitive disparity within the province,” she said in an e-mail. “I caution, however, that having differing tax policies from province to province should be avoided."
Supporters of Quebec’s approach say the federal Liberals have complicated the issue with irresponsible rhetoric by repeatedly stating their opposition to a “Netflix tax.”
NDP Heritage Critic Pierre Nantel, who represents the Quebec riding of Longueuil-Saint-Hubert, said the issue is about applying existing sales taxes fairly across the economy and has nothing to do with a new tax.
“There is no Netflix tax. It is just sales tax that should be added to any product," he said.
The phrase “Netflix tax” has been used to describe a proposal by the Canadian Radio-television and Telecommunications Commission to regulate Netflix and other streaming services and require them to contribute toward a fund for Canadian content. The CRTC abandoned the idea in 2015, but that August, in the midst of a federal election campaign, then-Conservative leader Stephen Harper released a video saying he opposes a Netflix tax.
Mr. Nantel said the Liberal government’s position on the issue is “ridiculous, awkward and obnoxious” and is likely driven by fear that the Conservative Party will make it an issue in the next election.
© Globe and Mail