Evidence of meeting #41 for Canadian Heritage in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was gst.
A recording is available from Parliament.
11:45 a.m.
Conservative
11:45 a.m.
Liberal
Darrell Samson Liberal Sackville—Preston—Chezzetcook, NS
I really don't have any more questions, but I would like to make a comment. My comment would be to confirm that both Mr. Waugh and I pay taxes in Canada.
11:45 a.m.
Conservative
The Vice-Chair Conservative Larry Maguire
Is there anyone else on the Liberal side who would like to ask questions?
11:45 a.m.
Liberal
Darrell Samson Liberal Sackville—Preston—Chezzetcook, NS
We don't know if Google Canada pays, but we do.
11:45 a.m.
Voices
Oh, oh!
11:45 a.m.
NDP
Pierre Nantel NDP Longueuil—Saint-Hubert, QC
These are issues that have to do with confidentiality. I understand your caution, but certainly everyone is scratching their heads, wondering how it all works. The public will be pleased to know that we aren't sitting idly by situations that may seem unfair to average citizens.
This committee also heard people say that advertising purchases on these platforms remained expenses that could be used to benefit from the advertising deduction.
Companies that advertise in Canada condemn the fact that these international companies have many advantages. First, they don't collect taxes. They don't have to pay general fees, either, since they operate outside the country, don't have employees and don't have an office here. In addition, they don't provide support to communities or sponsor a soccer team, for instance. It's a series of fees that a corporate citizen ends up paying.
Furthermore, the advertising that is bought from these international companies is just as eligible for a deduction as advertising that is bought from a community newspaper.
Would it be possible to exclude advertising that would not be purchased from traditional advertising suppliers? The word “traditional” may not be appropriate here. Basically, I'm talking about companies that are located here and have employees.
11:50 a.m.
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
As I said, there are rules that have been in place for quite some time in respect of the ability for businesses.... In general, businesses can claim a deduction for expenses that they incur to earn income. That's generally, but not in all cases. There are certainly special considerations, but generally that's the principle: that businesses incur expenses and they can claim those. If those expenses are properly incurred to earn income, they can claim those against the determination of their profits for tax purposes.
11:50 a.m.
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
In the case of newspapers, in respect of advertising in a newspaper, a full deduction can only be claimed in respect of advertising in newspapers that are owned by Canadians. There are certain other rules in respect of magazines and broadcast media as well. Those are there to promote certain cultural goals and were put in at a time when those were the primary sources of media that Canadians used.
Obviously, the world is changing and, as in the GST case, we had certain rules that applied to the way that Canadians in businesses bought things. New challenges arise, so is it.... We may need—
11:50 a.m.
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
Well, I guess the question that comes to mind is that those rules in respect of newspapers and magazines are more of a cultural policy, but the tax system promotes that policy. The question for the government, I guess, and for the committee that's looking at this becomes, is that a cultural policy that should be promoted with the tax system—
11:50 a.m.
NDP
Pierre Nantel NDP Longueuil—Saint-Hubert, QC
You refer it to us as parliamentarians to potentially influence that change. Just to make things clear, can we summarize and say that, for the moment, in 2016, close to Christmas, a hardware store owner can buy advertising in the local paper and have some deductions for the advertising, and he can do the same on Facebook, and it's still admissible? Is it right to say that?
11:50 a.m.
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
That is my understanding: that there are no limitations on the deductions that can be claimed on advertising taken out in—
11:50 a.m.
NDP
Pierre Nantel NDP Longueuil—Saint-Hubert, QC
The question I'm asking is, if we do our work, we can potentially speak in favour of having some discrimination on what's eligible for deductible advertising. Is this is what you're telling us?
11:50 a.m.
NDP
Pierre Nantel NDP Longueuil—Saint-Hubert, QC
Okay.
I have another simple question. I notice that when I buy music on iTunes, there's no tax. When I subscribe to iTunes music on a monthly basis, there is no tax, but if I buy an app, there is tax. Would you have any idea of why that is? It's the same supplier, but obviously it's not. It's looks and is branded as the same. Why would it be this way?
11:50 a.m.
Conservative
11:50 a.m.
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
I would say what I was saying in respect to the previous question. When we look at how to determine the revenue loss in coming up with an estimate, there are instances where an individual's experience with purchasing things online.... If I wanted to buy something and there was a store where I could buy it, but I bought it online, then that company may be registered, and the online purchases are subject to tax.
Our understanding is that for certain app providers, they purchase them from individuals. They may be acting as an agent for the company. If the company is a registrant, then they would be required to collect the tax, even though they may not be a registrant. If the situation is different, if they own it, then—
11:55 a.m.
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
It's kind of a—
11:55 a.m.
NDP
Pierre Nantel NDP Longueuil—Saint-Hubert, QC
It could be, let's say, that this application has been created by a Canadian-owned company, so they charge taxes. The other one has been created by some Korean company, and since they don't have to pay taxes, then Apple iTunes, as a middleman, would not charge the tax. Would that be the idea?
11:55 a.m.
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
It would very much depend on the circumstances and whether ultimately the provider is the registrant for GST purposes. Perhaps I could speculate—
11:55 a.m.
Director, Sales Tax Division, Tax Policy Branch, Department of Finance
—but I wouldn't be speaking with knowledge.