Canadian Heritage Committee on Dec. 1st, 2016

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Right.

Based on your knowledge, does Google respond to the description of a company that must pay taxes?

[Danielle Laflèche]

I don't know this situation, and I cannot comment. Furthermore, I can't comment on a particular taxpayer.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Forget it. I'll phrase the question in a different way.

Knowing the environment in which it operates and how it operates, might we think that the company should collect the tax?

[Danielle Laflèche]

If a non-resident company had a server in Canada and provided goods or services in Canada—advertising, for instance—it would be considered a Canadian business for the GST. Therefore, it would have to collect and remit the tax to the government.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Thank you.

I will move on to another question.

We've been doing this study for several months now. Many witnesses have told us that the playing field isn't level. I think it was Mr. Lord who said that Canadian telecommunications companies had to pay sales tax while others didn't. I think that's a problem.

Community newspapers and radio stations do exceptional work, but they are disappearing. They won't be able to survive in the current environment because the conditions aren't favourable.

I know that you aren't the one who creates taxation formulas, but is there something in the toolbox that could help these companies that provide an exceptional service to the local communities?

[Sean Keenan]

I'm not sure that we have specific ideas on that. From the viewpoint of tax policy, as I mentioned earlier, when we look at the tax system, we want to make it as efficient as possible so that it provides a regular source of revenue to ensure the expenditure needs of the government can be met. To the extent that the tax system may or may not be the most appropriate tool to promote certain activities, that's part of the analysis provided when we're presented with proposals. A lot of this is cultural policy, and ultimately, if the decision is on how we support cultural policy, is the tax system a way to do that, they would—

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

I understand the hesitation of being able to help directly in answering those questions. Let me rephrase it.

Is there any taxation and tax credit system strategy out there in the world that you know of and that would support small local radio and newspapers? They are the heart and soul of the real story of what's happening on the ground. Help us.

[The Vice-Chair, Conservative, Larry Maguire]

Please provide a very quick answer, if you could.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

Come on. My colleagues will give me more time, I'm sure. I'm sure there's more time to be had around the table.

[Voices]

Oh, oh!

[Sean Keenan]

I'm certainly not aware of specific supports that other countries have through the tax system that are devoted to that type of local media and small newspapers. The limits on deductibility of advertising expenses set up to apply with respect to Canadian newspapers are unique to Canada.

[The Vice-Chair, Conservative, Larry Maguire]

Thank you, Mr. Samson. Because your colleagues were a minute short the first time, I let you go on for about nine.

That was a very good question, though.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

I knew you were a good person.

[The Vice-Chair, Conservative, Larry Maguire]

Thank you. I'll take that as a compliment.

I'll go over to Mr. Waugh, please. We'll do a round of five minutes.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Okay. It will be very quick.

I am going to pick up on Darrell's question. This week, Rogers laid off 87 people. We've talked about analog dollars and digital dimes, and in terms of their digital dimes, Rogers this week announced 87 layoffs coast to coast. How do we deal with this?

Their subscriptions may or may not be the same, whether they mail that out or do it digitally now, and that's what they've all gone to. It's cheaper, to be honest with you, to send it out by email than it is to go through Canada Post. We're seeing these massive layoffs in the newspaper industry, yet their cost for sending a magazine out is gone now, because they just hit “send” and it's gone. Can we have this payroll tax to support these small businesses? Can that be something that we look at?

We're looking at local media here. Rogers isn't small. That's the top of the food chain. At the bottom of the food chain are the humble journals and the small weeklies that, as we have heard here, are really struggling to keep their operations open.

[Darrell Samson, Liberal, Sackville—Preston—Chezzetcook, NS]

They're doing an exceptional job.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Yes.

[Sean Keenan]

I guess it's certainly not for me to say to the committee what can and can't be done. What I would reiterate is that from a tax policy point of view, when we look at a tax policy proposal, we're looking to see if it's the most efficient and effective way. Is that the best use of the tax dollars? Is the tax system as fair and as equitable as possible in the way it's applied? Is it an efficient way to generate revenues?

To the extent that we intend that certain other goals, cultural goals in this case, or media goals, are intended to be met, then we would have to examine proposals to see if the tax system or the proposals that come up are an efficient way to serve that purpose.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Getting back to Facebook and Google, in this country we see “Facebook Canada” and “Google Canada”. Those are their names. Does it not constitute a physical presence in this country when they actually have “Facebook Canada” and “Google Canada”...? They are here. They have to be paying some tax.

[Sean Keenan]

As Madam Laflèche mentioned, for confidentiality reasons, whether an individual company pays or doesn't pay tax, that's their business with the CRA. I will say, though, that when we look at the size of the retailing that goes on in the e-commerce world, and when we think about how much money is out there, it's complicated to estimate, because a lot of transactions that occur are business to business. Businesses would buy goods online and get an input tax credit for it. There would be no revenue collected.

A lot of foreign businesses are registered for the GST and the HST because they have operations in Canada. They have online components and in-store components. For us to look at all the data and say what is the total amount that could possibly be collected by the application is very difficult, because of the circumstances as to whether an individual company is actually a registrant. They might be. They might be the owner of some of the things that they sell, in which case they're required...or they might be acting as an agent for someone else. The industry is evolving all the time. We've talked to people and they've said that they charge tax on some things, but not on others. To determine an estimate is quite difficult.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Let me give you an example. If I have an account with Netflix, I have to pay with a credit card. Could these companies add the tax and remit it? O if it's a direct debit, the bank could add the tax and remit it. The banks and credit card companies are benefiting from these transactions, so could they be required to do this?

[Sean Keenan]

I would say in regard to the experience of other countries in terms of imposing a requirement on a foreign-based vendor to collect and remit the sales tax—the value-added tax in such cases—on sales to residents in those countries, that it is something that other countries have done. There have been some discussion of and some work done on whether using the financial institutions as a tax collector would be feasible.

Again, that's a different model of tax collection from what we have now, where the ultimate lead is to the vendor and the financial institution that is providing intermediary services is doing something different and may not know all of the information with respect to whether this is a taxable good. Essentially, they're getting an amount. Let's call it $100, for example, and what is that $100 is made up of? Is it made up of $50 that's taxable and $50 that's not taxable? There are just some complications that—

[The Vice-Chair, Conservative, Larry Maguire]

Thank you, Mr. Keenan.

[Sean Keenan]

Ultimately, the retailer might know more. I think we're a bit of a ways away from whether the financial institution could—

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Okay. I just thought I'd throw it out there.