WhatFinger


“Canadians are tired of hidden fees… and they should not be charged more in Canada for identical goods that sell for less in the United States.”

Stop Punishing Consumers for "Buying Canadian"



This commentary first appeared in Thursday's edition of The Financial Post ​Do you remember the Harper government’s consumer agenda?
Stirring words in last October’s Speech from the Throne promised consumers a crackdown on all those greedy capitalists who gouge consumers. “Canadian families work hard to make ends meet, and every dollar counts,” the Governor General intoned. “While companies will look out for their bottom line, our government is looking out for everyday Canadians.” The government even promised to get tough on Canadian retailers whose prices are higher than those charged south of the border.

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“Canadians are tired of hidden fees… and they should not be charged more in Canada for identical goods that sell for less in the United States.” Bold words aside, consumers haven’t seen much in the way of lower prices yet. The Harper Conservatives do have a real opportunity to help consumers and boost the economy, especially since the federal budget is nearly balanced: They should eliminate sales tax — GST and HST— on digital downloads of books, music, television shows, video games and movies. Right now, entertainment downloaded or streamed from outside of Canada is already tax-free. Just take a look at your next invoice from iTunes or Netflix. Two of Canada’s cable companies, Rogers and Shaw have announced plans to compete head-to-head with Netflix, offering a big library of TV shows and movies online for $8.99 per month. But if you buy Shomi, this nearly identical product from the Canadian providers, you are going to pay anywhere from 5% to 15% more, depending on the province where you live — and it’s all tax. If you buy the identical product from a Canadian provider, you pay anywhere from 5% to 15% more, depending on the province where you live – and it’s all tax. Canadian consumers are punished for “buying Canadian.” The government is already looking into how it can “level the playing field.” But that’s not good enough for Canadian consumers. Some have suggested equality could be achieved by adding taxes to iTunes and Netflix purchases (among others). This might help reach the goal of ensuring consumers aren’t paying more for products sold in Canada than the U.S., but it’s not a viable longterm solution. And the federal government is right to reject these calls. Sure, massive U.S.-based companies like Apple and Netflix might be easy-ish to tax, but what about the small, off-shore companies that are popping up to sell these digital services? Trying to tax products that can be downloaded with a swipe of a finger on a smart phone, from a website based anywhere in the world, is a mug’s game. Another compelling reason for the Harper government to eliminate these taxes: They don’t bring in much revenue anyway. GST, HST and PST on books, movies, and music amounted to just $331-million across Canada in 2010 – that includes physical books, CDs and DVDs (remember those?). That’s about one half of one percent of total federal and provincial sales tax revenue. Since then, the number of Canadians with a tax-free Netflix subscription has jumped from 6% to one-third of the English-speaking market. And Apple’s tax-free iTunes music and movie service is busier than ever. The government can’t say, or won’t say, how much tax it collects on electronic, as opposed to physical books, movies and CDs, but both numbers have to be dropping steadily in the face of tax-free offshore competition. Even if you add in all the GST, HST and PST, collected on cable and satellite subscriptions, mobile phone plans and land lines, to tax revenue from books, music, TV and movies, the grand total in 2010 only came to $2.5-billion – roughly 4% of federal and provincial sales tax revenue. Governments like to tax things that are easy to tax: that’s why we pay through the nose at the gas pump and the liquor store. On the other hand, collecting income tax is a hugely expensive undertaking – one reason the Canada Revenue Agency has a $4.3-billion budget and 41,000 staff – roughly double the head count of the Royal Canadian Navy. So go ahead and tax the high-speed connection from the phone company or the cable company – the actual pipe that brings digital downloads or streams into our home. Go ahead and tax the wireless bandwidth that feeds our mobile phones. Governments do that already. But give Canadian consumers the same break for “buying Canadian” that our governments give for “buying American” – stop taxing digital entertainment in Canada. Gregory Thomas, Federal Director, Canadian Taxpayers Federation


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