Description: Canada’s new Auditor General, Karen Hogan, appeared before Parliament’s Public Accounts Committee on Tuesday to discuss her Office’s 2019 report on e-commerce. In a nutshell, transactions with foreign vendors are not being taxed correctly. Not only has this placed Canadian vendors at a disadvantage, it has cost our public purse $247 million.
Date: November 18, 2020
Source: nationalpost.com
Discussion points:
1) Have you engaged in e-commerce with a foreign-based entity? Do you know if the proper sales taxes were charged by the vendor?
2) What do you think Canada can do to fix this problem?
3) Chapter 10 in Wiley’s Financial Accounting: Tools for Business Decision-Making talks about liabilities for various taxes. What type of liabilities should these foreign vendors be setting up on their balance sheets if they start collecting these taxes?
Pushkaraj Jadhav, Su Young Kwon, Justin LeBlanc
1) Have you engaged in e-commerce with a foreign-based entity? Do you know if the proper sales taxes were charged by the vendor?
We have not engaged in e-commerce with a foreign-based entity. However, we are aware that every year approximately $170 million worth of sales tax on digital products from foreign companies including Netflix and Spotify gets uncollected
2) What do you think Canada can do to fix this problem?
Yes, we think that in order for Canada to fix this problem, the CRA will need to have more necessary legal powers to better fight corporations that go against tax laws. Also, there needs to be an update on Canadian tax laws so it can reflect the reality of increased online sales. In the article, Hamilton said that the agency has developed an action plan to monitor and assess the elevated risks on an ongoing basis including a new strategy by December which will help CRA better detect and combat tax crimes for GST, HST and income tax.
3) Chapter 10 in Wiley’s Financial Accounting: Tools for Business Decision-Making talks about liabilities for various taxes. What type of liabilities should these foreign vendors be setting up on their balance sheets if they start collecting these taxes?
The foreign vendors should set up a foreign tax expense account under the current liability on their balance sheets if they start collecting taxes.