Thank you, Madam Chair and members of the committee, for the invitation to Andrew and me to be here today.
In the department, although we continue to be very focused on the immediate issues related to the COVID-19 pandemic, the department nonetheless continues to work on a full range of other important issues facing the country, as does this committee with its work on taxation of electronic commerce.
Your work on the taxation of electronic commerce reflects the fact that our lives are moving online more and more.
The Department of Finance has been engaged for a number of years in working to ensure that firms that engage in electronic commerce collect the appropriate taxes on their activity in Canada. This recently culminated in the announcement in the 2020 fall economic statement of a number of changes that would level the playing field between foreign and domestic vendors, by ensuring that the GST applies to goods and services consumed in Canada, regardless of how they are supplied, or who supplies them.
Your committee has specifically asked us for an estimate of the revenues that might have been generated in 2017 from the extension of the GST to digital goods and services supplied by non-resident companies. In the department’s initial answer to that question from your committee, I understand that we noted that revenues were likely to be broadly in line with the estimate produced by the Office of the Auditor General, and I'll come back to that in a moment.
In the course of briefing ministers and the government, the department, as you know, produces numerous and successive estimates of the revenues that might be raised from a wide range of potential policy actions, or as a result of economic developments that affect the tax system. These estimates are often for economic activity that is not currently subject to taxation, and for which there is little or no data available on the underlying economic activity itself.
As a result, the department's estimates often change and evolve over time, sometimes significantly. Estimates evolve as more and better data become available, and as the department and other agencies such as Statistics Canada come to better understand the nature, scope and prevalence of the underlying economic activity.
This was the case with the development of electronic commerce, and its implications for the GST system. The department has been analyzing this activity for several years, and the Office of the Auditor General's 2019 spring audit found “that the Department of Finance Canada conducted sound analyses” in that regard.
All that being said, most recently the department did prepare estimates of the revenue that would be generated for the period 2021-22 to the period 2024-25, resulting from a specific proposal for the taxation of digital goods and services that was set out in the 2020 fall economic statement. As part of its ongoing analysis, and using the specific model of the tax changes proposed in the economic statement, the department has produced an estimate of the revenues that would have been generated in 2017 from such a tax.
This estimate suggests that revenues from such a tax in 2017-18 could have amounted to approximately $160 million. As I said at the outset, it's an estimate that's very close to the Auditor General's, which I think was at $169 million, so essentially the same number. That being said, I do want to reiterate that the figure is only an estimate. With such an estimate, as with lots of figures published in the fall statement, it's also likely to change as the data on the current and past level of e-commerce activity are revised.
Madam Chair, I hope that this information is useful to the committee.
I want to reiterate that revenue estimates of this nature, where the underlying activity is unobserved or unobservable, can rapidly evolve and therefore lose meaning and value as more and better data become available.
Before I wrap up, I just want to say and I want to emphasize that we in the Department of Finance very much recognize the value and importance of transparency with this committee, hence our willingness to present that number to you today. By the way, if you want the numbers for subsequent years, we're happy to provide those as well.
We certainly recognize the importance of doing that, and we will endeavour to act in a manner consistent with that principle of transparency, recognizing, obviously, as we also do, the importance of our ability to provide confidential advice to ministers.
I think with that I'll stop. Andrew and I would be more than happy to answer any questions you might have.