The cost of digital services and goods sold by foreign companies like Netflix will rise under a tax plan the government wants to put in place next year, experts said Tuesday.
Ottawa said in its tax update released on Monday that it will require multinationals to collect GST or HST on digital goods and services, which it says would represent $ 1.2 billion over five years.
Sometimes referred to as a “Netflix tax,” the measure would also apply to other services such as Amazon.com Inc.’s Prime Video or the Spotify audio streaming service, as well as digital products such as software applications.
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The government claims that Canadian businesses already collect these taxes when they make digital sales, so it is only fair that foreign multinationals do the same.
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Joe Micallef, KPMG’s tax partner, said it is likely that Canadians will end up paying the taxes collected for the government by foreign multinationals.
“Right now the way they deliver their services, they’re not responsible for collecting it,” Micallef said.
“And so, effectively, that would mean that these charges would appear on (their) invoices. ”
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A regular monthly subscription for a streaming service that plays video or music would be a simple calculation, with the tax rate applied to the purchase price.
But Micallef said it was more difficult to estimate how much additional tax individuals or businesses would pay for other types of digital purchases, he said.
Something like gaming software may cost little or nothing on its own, but offers the option, for a later fee, to add features that enhance the experience.
” How many times? How many transactions? It adds up, ”Micallef said.
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Dwayne Winseck, a media industry researcher at Carleton University in Ottawa, also expects companies to add the price of the tax to the total selling price.
“I mean, it’s really not a very substantial amount, when we talk about corporate finance,” said Winseck, who is a journalism and communications professor.
He said the term “Netflix tax” has become highly politicized and is often used as “code” to level the playing field between US-based digital media companies and traditional Canadian broadcasters.
“And if the idea is to create a level playing field between these two services, then that makes perfect sense,” Winseck said.
© 2020 The Canadian Press