Giants who pay nothing to the taxman

Netflix, Google, Amazon and Apple and other internet giants are masters in the art of tax avoidance

Every year, Google, Amazon, Facebook and Apple (sometimes called GAFA) make hundreds of millions of dollars in profits in Canada. But most of them do not pay tax or sales tax.

From 1 ^st January 2019, Quebecers will pay QST on entertainment services online as a result of the adoption of a law to this effect. But that does not solve the tax question.

"The problem is that the tax system was built at a time when sales were done in a store. With the digital economy, what can you do when the company and its servers are at the other end of the world? "Explains Lyne Latulippe, professor of international taxation at the Université de Sherbrooke.

Several countries and international organizations have proposed measures to force these giants to pay their dues.

The European Union is studying, for example, the possibility of imposing giants on 3% of their turnover in the member countries. A band-aid measure until the OECD and its 30 countries (including Canada) take a stand.

"Many countries are reluctant to act in order not to undermine their competitiveness. If Quebec is the only province to impose taxes on giants, there is a risk of consequences, "says Latulippe. It is not unthinkable, given the size of the Quebec market, that some decide to leave. Others could restructure their Canadian affairs to reduce their profits domestically, to pay less tax.

Quebeckers in favor

It should be noted that Quebec is a distinct society when it comes to talking about digital taxation.

A survey conducted by Research Co. in May 2018 showed that 54% of Quebecers were in favor of a tax on digital services, which would be used to finance Canadian television or film production.

This was the largest proportion of all Canadian provinces. Only 16% of Atlantic residents supported this measure, and 38% in Ontario.

SOME NUMBERS

• 3%: Percentage of GAFA revenues that Europe wants to recover in taxes, which represents 5 billion euros ($ 7.8 billion);
• 750: Number of multinationals targeted by the European measure;
• 11: A study conducted in 2017 showed that Amazon UK paid 11 times less corporate tax than British bookstores. Amazon does not pay taxes in Canada.

A "Google tax" in the UK ...

From April 2019, the UK tax office will apply income tax to sales royalties in the United Kingdom, when these royalties are paid in low-tax countries. The measure could yield 200 million pounds ($ 341 million) a year and add to other rules to fight tax evasion by the digital giants.

... and in Australia

Adopted in 2017, the Australian law targets multinationals with global revenues of at least AU $ 1 billion (CA $ 930 million), and those in Australia worth AU $ 25 million or more. These companies are taxed at a rate of 40% on all profits, 10% more than the usual rate. The goal: that the taxes paid by the giants correctly reflect their activities in Australia and prevent the diversion of profits abroad. Unfortunately, several companies, including Google, have restructured their business in anticipation of the law. The measure is expected to yield $ 100 million per year as of 2018-2019.

QUÉBEC 2018: WHAT THE PARTIES PROPOSE

Future Coalition Quebec

Not much for now. The CAQ deems "difficult" to determine the best way to impose the giants of the web and wants to "consult the Ministry of Finance and experts" before proceeding.

Quebec Party

Apply the QST (provincial) and GST (federal) to products and services sold on the web, force the giants of the web to pay the same taxes as local companies and introduce a "tax on profits diverted" by multinationals who make tax avoidance.

Liberal Party of Quebec

Introduce a bill to "ensure tax fairness" between Canadian and foreign companies. They would have to pay the same taxes and collect the same taxes as the companies here.

Solidarity Quebec

Forcing payment services - Visa, Interac, etc. - to levy the GST-QST on digital sales. Companies "having a significant digital presence" in Quebec who refuse to pay their taxes would also face penalties representing 50 to 200% of purchases made by Quebecers. Quebeckers and the political class agree on the need to force the giants of the web to pay taxes, but opinions differ on how to proceed. A multibillion-dollar issue essential for the next government.

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