Thank you for having me.
My name is Susie Grynol and I am the president of the Hotel Association of Canada.
Thank you for inviting me to appear before you today.
The Hotel Association of Canada is proud to represent more than 8,200 hotels, motels and resorts, which encompass the $21.9-billion Canadian hotel industry in Canada. Our country's hotel sector directly and indirectly employs over 300,000 people in almost every riding in Canada. Hotels are a significant contributor to the Canadian economy, generating tax revenues estimated at $9.5 billion for all three levels of government.
I am here today to discuss the impact of short-term rental companies like Airbnb on the hotel industry and communities. Our message today is about fairness. Our ask is that you amend your tax laws to level the playing field for all accommodation players.
Nightly rentals on platforms like Airbnb have exploded across cities and communities in Canada. At issue is the fact that there are big developers and landlords hiding behind these rental platforms, running a comparably sized business to a hotel, but they don't have to comply with any of the same business responsibilities: taxation, health and safety standards, accessibility and zoning, to name a few. The impact of this rapid growth has delivered unexpected and quite serious consequences in communities, such as housing availability and crime rates, and we are now seeing cities like Toronto, Ottawa and Vancouver enact regulations to rein in the commercial use of rental platforms and put strict enforcement in place.
Recognizing that cities across Canada are grappling with this, we have developed a best practice guideline for municipalities and would be happy to share it with any of the members if the issue is of interest in your riding.
I want to make one thing clear. Competition is a good thing and the hotel industry welcomes it, but there needs to be a level playing field. To achieve this, all levels of government need to take action, but the tax fairness component requires leadership by the federal government.
Our sector was very pleased that during the recent federal election there was a consensus among all major political parties to take action to equitably tax digital companies like Airbnb in Canada. We have extensively researched this matter and can assure you that our three key recommendations, if adopted, will be effective, simple to administer and difficult to avoid.
Number one is a quick and easy win. Close the information gap. Our laws today already include a requirement for Airbnb hosts to pay income tax on their revenue, but Airbnb refuses to issues T4A slips that would promote voluntary compliance and also provide CRA with an audit tool.
Number two, we recommend that GST be charged at the platform level from dollar one, with much of the tax remitted to the government and the balance of it going back to the hosts in order to offset their GST-related business costs. This approach recognizes that hosts are running a business and should be getting a GST offset for their business expenses. Because it would be calculated as a fixed percentage of total revenue, there is no need to track the GST they pay, or to keep receipts. It is called “quick method” and it has been used by thousands of small businesses across many industries since the GST was introduced in 1991.
Charging tax from dollar one is another feature that is being used in the Canadian taxicab industry and it now applies to the ride-sharing industry. Here HST is charged through platform companies like Uber. We believe it should be applied through online platforms like Airbnb in the accommodations space as well.
Number three is that we recommend the government follow the example of France and Great Britain and impose a tax on the Canadian revenue of major international operators at the rate of 3% in lieu of corporate income tax. This solves the problem of trying to track down digital companies with no physical presence in Canada, and the issue of shifting profits to low or no-tax jurisdictions. It is simple to administer and hard to avoid.
This was the essence of the consensus of all major political parties in the last federal election. The implementation date could be pushed to allow the OECD the current calendar year to conclude a broader framework, but failing that, Canada should proceed with its own revenue tax.
These three recommendations are about fairness. Canadian hotel operators pay corporate income tax and must charge and remit HST at the point of sale, but digital players today get a tax holiday.
A 2017 research study revealed that Canada's Airbnb sector alone has the potential to contribute almost $100 million in consumer taxes and fees. That number is much likely higher today.
We are asking the federal parties to move on their election commitments in this next budget. Implemented together, we are confident that our three simple solutions can ensure fairness for all Canadians.
Thank you for your time.