Netflix Tax Could Yield $1.3 Billion in Revenue, Slightly More and Federal Government’s Estimate says PBO

A new report from the parliamentary budget officer says the government may be slightly underestimating how much revenue it could receive from taxing online services like Netflix.

Currently, foreign-based online services can sell their goods and services in Canada without charging federal sales taxes, leaving it to individuals to pay the outstanding amounts to the Canada Revenue Agency. But hardly anyone does.

The Liberals announced in November’s economic statement that they planned to make foreign-based services collect and remit the Goods and Services Tax or Harmonized Sales Tax, depending on the province.

The fall economic statement estimated that the government would reap revenues of over $1.2 billion over five years starting this year from the measure, which is sometimes labelled a “Netflix tax.” The levy would also apply to other digital services such as Amazon.com Inc.’s Prime Video or the Spotify audio streaming service.

The parliamentary budget officer estimates the bump in tax revenues could be over $1.3 billion over the same time frame.

The PBO report notes there is some uncertainty in the estimate because it based the figure on annual earnings reports from companies and survey data. The office also assumed all companies will comply with the policy.

The report goes on to say that consumers may change their habits if they start facing higher costs from newly taxed services, and switch to other digital products and services.

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