The parliamentary budget officer estimates the Trudeau Liberals’ pledge to collect federal sales tax on some goods sitting in Amazon warehouses could net Ottawa just over $600 million.
The extra tax revenue is spread over five years, starting this year and ramping up every year thereafter for a total of $604 million over that time.
The proposal would try to close a loophole for unsold goods foreign-based sellers ship to Canada, then house until they are sold and shipped domestically to local buyers.
GST is collected on the wholesale value of the goods when they come across the border but the federal sales tax isn’t always collected by sellers when the goods are sold to consumers.
That creates a gap the Liberals want to close by either making sellers registered to collect the GST do so on the final sale price, or making platforms like Amazon responsible for it instead.
The Liberals are promising to have the policy come into effect on July 1.
There are sources of uncertainty within the estimate crafted by budget officer Yves Giroux’s officials, including how much of the shift to online shopping caused by COVID-19 will remain when the pandemic recedes.
The report was one of two released by Giroux’s office on Thursday as it continues to cost out promises the Liberals made in November’s economic statement.
The second report estimated that a crackdown on tax cheats could yield close to $800 million in new revenue over a five years.
Collection is likely to start slow by the budget office’s forecasts, beginning with just $1 million in tax revenue this year, and rising each year thereafter.
By 2026, the budget office suggests federal coffers could collect $782 million from Canadians using offshore tax havens or aggressive plans to reduce the amounts they would otherwise have to pay.
To get there, the government will have to spend $606 million over the same period to boost the audit capacity at the Canada Revenue Agency to focus on those most likely to use such schemes, including wealthy Canadians.
The report warns it is difficult to predict with certainty how much more spending will lead to the collection of extra tax revenue.
Giroux’s experts also write it is difficult to predict how taxpayers will respond to the beefed-up audit capacity at CRA, noting some may declare more of their offshore holdings, while others may find new ways to evade taxes that are harder to detect in audits.
The report also said the extra audits could lead to more appeals, delaying when taxes are collected.
The government suspended its audit activities for part of last year because of the pandemic and the Tax Court of Canada did not sit. The PBO report made note of those issues, pointing to comments from the court’s chief justice, in a webinar earlier this month, warning of a deluge of appeals likely to be filed later this year.
The Canadian Press
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