Quebec ready to go it alone with tax on companies like Netflix

Quebec Finance Minister Carlos Leitao has proposed a co-ordinated effort to tax online businesses, however his federal counterpart says Ottawa "has no plans to introduce a new tax on middle class Canadians."

Finance Minister Carlos Leitao proposed co-ordinated approach, but Ottawa says it won't impose new tax

Quebec Finance Minister Carlos Leitao says the province is ready to impose a sales tax on online businesses, with or without the help of the federal government. (CBC)

Quebec Finance Minister Carlos Leitao is proposing a co-ordinated effort with Ottawa to tax online businesses that don't have a significant presence in Quebec.

If the federal government doesn't go for it, Leitao says Quebec is prepared to proceed with the move alone as early as 2018.

In a letter sent to federal Finance Minister Bill Morneau Tuesday, Leitao cites the rise of e-commerce transactions and the difficulty applying the Quebec sales tax (QST) on these types of purchases.

In the past, Leitao said, e-commerce tax losses were considered marginal, but now they represent more significant sums of lost revenue.

"The significant increase in the number of online transactions between local consumers and foreign suppliers represents a significant challenge for all countries imposing a value added tax," wrote Leitao.

Leitao said it's important both governments put forward a "co-ordinated Canadian approach" in order to simplify the collection process.

If a harmonized effort isn't possible, Leitao says, Quebec will go forward anyway. 

"The status quo is no longer possible. If we can't come to an agreement, Quebec will have no choice but to act alone," his letter reads.

At a news briefing at the National Assembly Wednesday, Leitao elaborated that Quebec doesn't require Ottawa's permission to impose a tax. However, he also suggested Quebec would not be able to force online companies based outside the province to pay up, saying collecting taxes would require the collaboration of those companies.

Last month, the federal heritage minister announced a half-billion-dollar deal with Netflix to finance Canadian productions in lieu of imposing a federal sales tax on its streaming services. (Matt Rourke/Associated Press)

While Leitao doesn't specifically mention Netflix in his letter, the recent controversy surrounding the federal government's decision not to tax the streaming giant has drawn criticism in Quebec.

After the federal deal with Netflix was announced, Leitao said that he thought it strange that Ottawa would exempt a company from paying a tax that all companies are expected to collect.

In early October, the National Assembly voted unanimously in favour of a motion demanding that all foreign web-based companies collect QST from their customers.

The Netflix deal

The idea of a Netflix tax first emerged before the last federal election, when Stephen Harper warned that Canadians needed to vote Conservative or face a tax on the use of the streaming service.

Federal Liberals rejected that idea outright, and maintain that position.
"We have been clear, our government has no plans to introduce a new tax on middle class Canadians," said Morneau's spokesperson, Chloé Luciani-Girouard, in an emailed statement, acknowledging receipt of Leitao's letter.

"Should the province determine they want to move forward on imposing a sales tax on Netflix, they can proceed."

In late September, federal Heritage Minister Mélanie Joly announced Netflix had agreed to spend at least half a billion dollars over the next five years to fund original Canadian productions.

Questions were raised in Quebec about how much of the money would be earmarked for French-language content.

Netflix has lobbied hard to avoid facing taxes as well as Canadian content requirements, such as those which traditional broadcasters in Canada are subject to.

​In response to a request for comment on Leitao's letter to Morneau, a Netflix spokesperson said, "Netflix pays all taxes where required by law."

With files from Radio-Canada