Public Accounts Committee on Dec. 3rd, 2020

[The Chair, Conservative, Kelly Block]

You have two and a half minutes.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you.

Mr. Rochon, as I was just saying, in your speaking notes this morning, the third measure caught my eye. You said that individual property owners were renting out their homes or cottages through digital platforms, and that the government is proposing to apply the GST/QST to these individuals by 2023. It's staggering to be so proactive in going after money from taxpayers, when the GAFA companies have been a problem for years.

I would also refer you to a press release about the Coalition for Culture and Media, which welcomed Canada's decision to finally collect the GST for goods and services purchased over the Internet as of July 1, 2021. They have been asking for this for three years.

Quebec has been taxing Netflix for almost two years now and has also been taxing Amazon and Facebook. The province has therefore forged ahead, while the federal government, is still dragging its feet. How do you explain that?

[Paul Rochon]

As you know, these are government decisions. My role is to explain the policy decisions made by the government, and I believe your question should be put to a minister rather than to me. That's because it addresses questions that are essentially political.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Rochon, if I have understood correctly, your role is to advise the government. With the data I have in hand, what I'm trying to do is ensure that there's a level playing field for consumers and businesses in Canada. The figures speak eloquently. They say that $1.2 billion over five years could be collected if e-commerce were taxed. If that were to be done, it would be unnecessary to make cuts to other services.

Thank you for having sent a memo this morning from the department that provided various details. However, we have still not received an answer to the question about the 2017 estimate and the amount that could have been collected for the government coffers. I would be grateful if you could send us a reply from the department on this subject.

My next question is for Mr. Hamilton.

Mr. Hamilton, you were kind enough to quickly provide a number of details to the committee members following our meeting on November 17, and I would like to thank you for this.

In response to the question from my colleague Mr. Berthold, you admitted that the Canada Revenue Agency had not required the declaration of GST amounts on imports of digital services. Does this mean that you're going to allow the government to deprive itself of millions of dollars?

[The Chair, Conservative, Kelly Block]

I'm sorry. We are well over time. I'm wondering if we can come back to that question when Mr. Blanchette-Joncas has the opportunity to ask more questions. Thank you.

We will now move on to Mr. Boulerice. Thank you, and welcome here.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you very much, Madam Chair.

I would like to thank everyone who shared their expertise with us today about the very important matter of taxing products that enter the country, and also services delivered.

I represent a riding in downtown Montreal. In my own and neighbouring ridings, Airbnb rentals have become very problematic. They sometimes cause disturbances in the neighbourhood, such as excessive traffic noise.

These rentals are having an impact, even at the political level, because we are losing voters. There are fewer and fewer voters in our ridings. This is attributable to two things. First, there are a lot of foreign students, which is a very good thing, and also many people who have not yet acquired citizenship. Second, many housing units are being lost because they have become a permanent pool of short-term rentals, and this has rattled the entire hotel sector.

We know that owners of accommodation who use the Airbnb platform are not necessarily taxed and do not pay GST.

My next question is for Mr. Rochon, Mr. Hamilton, or Mr. Marsland.

What measures have been taken and what do you plan to do to collect the GST when housing units are in fact used for commercial purposes—virtually as hotels—rather than for private accommodation?

[Andrew Marsland]

Perhaps I might begin an answer.

Indeed, in the proposed approach, the third of the three measures that Mr. Rochon outlined is specifically addressed at ensuring that the GST/HST is collected when accommodation is let through a digital platform. It essentially ensures that regardless of the underlying supplier, when it is leased through a digital platform, the GST/HST will be collected in all cases on those supplies of accommodation.

That's the heart of the proposal. It's to ensure that there's an effective collection of the sales tax in those circumstances.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you.

What specific resources do you have to monitor rental services? Apart from Airbnb, there are many other Internet platforms and sites that regularly rent out houses or apartments.

Do you have enough staff to be able to monitor the whole situation, to find these people and to make sure they're paying their fair share of taxes? It's not just a matter of tracking one or two websites.

[Ted Gallivan]

Madam Chair, if you please, we can take that question.

In fact, I'll ask my colleague to go first.

[Bob Hamilton]

This is one of the challenges we will have to meet by June 1. I can assure you that we have a good procedure for managing the system and making observations. However, as I said, it will be important to make commitments, consult others in the industry and learn lessons from other countries that have already done something similar.

Mr. Gallivan, do you have any comments to add?

[Ted Gallivan]

Yes. As the Office of the Auditor General has already pointed out, we already have teams at work in these sectors. In the case of Airbnb, among others, we have acquired some experience, because we had to do audits on 10 to 20 houses for rent. The new measures will allow us to obtain more data so that we can target our research more accurately.

We're still working on risk assessment. We've now reached the stage of auditing platforms with 10 to 20 houses for rent. We'll continue this work until the message has been understood.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you very much.

In this week's economic update, it was announced that the web giants would be forced to charge GST to their clients or consumers. That, from our standpoint, is a good thing. We've been asking for this for years, because it levels the playing field and is fairer to businesses. Our small- and medium-sized enterprises have to charge GST, while others are exempt when the products or services come from elsewhere.

I have two questions about this.

How, concretely and physically, are you going to manage to do this as of January 1?

Are we talking only about commercial platforms that sell products, like Amazon, or are we also talking about digital content streamers like Netflix?

In other words, how is this to be done concretely, and is there a distinction to be made between products delivered after being packaged in a box and products streamed from a digital platform?

[The Chair, Conservative, Kelly Block]

I'm sorry; we have gone over time, so we will not be able to hear the answer, but I know Mr. Boulerice will have an opportunity to ask his question or just ask for an answer in the next round. Thank you.

We will now move to our five-minute round, starting with Mr. Berthold.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you, Madam Chair.

I have a lot of questions to ask. I would therefore request that the witnesses reply briefly.

First of all, I'd like to thank all the witnesses for being here with us today.

Ms. Hogan, I have a question about additional funds. What I understood from the government's economic statement is that it's a statement of intent. It all needs to be confirmed in the supplementary estimates (C) that will be tabled after the holidays. There is nevertheless an amount of $31 million to be allocated to the Office of the Auditor General for the 2020-2021 fiscal year.

Are you going to be able to use this entire amount?

[Karen Hogan]

That's also what I understood. It's a statement of intent, which will depend on what is voted in Parliament. The confirmation will also be included in the supplementary estimates.

If the vote occurs in February, we'll receive this money in March. And of course it should not be forgotten that the fiscal year ends in March. It would therefore be impossible to spend everything, or even half of it.

We're working very hard to be able to spend it in the following year. A lot of staff need to be hired, by which I mean 150 auditors. That will take several years.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Excuse me for interrupting, but I want to make sure about your answer. You're saying it's unrealistic to think that the entire $31 million would be spent, even if, as part of your duties as Auditor General, you've already begun to spend some of the money.

My second question is for Mr. Hamilton.

Mr. Hamilton, I'd like to thank you very much for the answers you sent to us about collection measures. My understanding with respect to digital services is that no collection action has been taken against Canadians.

I would like to return to a portion of my question about physical products.

For digital services, the amount to be collected would appear at first glance to be rather too small to make it worthwhile to take action against each of the citizens involved. However, to return to my microwave oven and higher-value products; that's the part of the question you haven't answered.

Are there collection measures for people who did not make a declaration?

[Bob Hamilton]

I would like to ask my colleague Mr. Gallivan to answer this question.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Could we have a written response instead, as you did for digital services?

I'd like an answer concerning all the collection measures for electronic commerce that have been taken by the Canada Revenue Agency. I think that would be very useful to the committee in view of the work to come.

Are you okay with that?

[Ted Gallivan]

Yes.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Mr. Rochon, in the economic statement we were given this week, there were proposals about taxing products. However, you made a distinction between products stored in Canada by the web giants and those that are not.

Have you done an analysis of the current percentage of products warehoused in Canada and those that are sent directly from these major suppliers without going through Canadian fulfilment warehouses? How many assessments of foregone revenue have been done?

My daughter and I—shame on her and just a bit on me—still order products on the Internet and still receive parcels directly from China without paying any tax. I may end up being one of the first targets of the Canada Revenue Agency, but I'm just using this as an example to illustrate my point.

Have you conducted any studies that could give us a better overview of the situation?

[Paul Rochon]

Mr. Marsland can give you a general answer to this question.

[Andrew Marsland]

Yes. It's an excellent question. I think it's important to be clear about what the proposal deals with, and it's a particular circumstance of a Canadian business, a business that has a presence in Canada, that is supplying products on behalf of non-resident, non-registered businesses. In those circumstances, while tax is paid at the border on the customs-declared value of those goods, it probably does not reflect, in most cases, the retail price.

Effectively, when those transactions are made, perhaps out of a fulfillment warehouse in Canada, they're technically and legally sales by the non-resident, fulfilled by someone with a presence in Canada. What the proposal is to do is to make sure that the tax applies on the final retail price—as it should—of those products. That's the proposal. It essentially addresses a weakness in the system that has arisen with the growth of that business.

We do provide estimates in the fall economic statement of the expected revenue pickup associated with that measure—

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Mr. Marsland, I'm sorry—

[The Chair, Conservative, Kelly Block]

I'm sorry, Mr. Berthold. Your time is up.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Ms. Chair, could I ask for a written answer about this, just as a general portrait of this situation, please?