Taxing sales of digital products and services

This is an independent cost estimate of a budgetary measure contained in the federal government’s Fall Economic Statement 2020 (FES 2020). A list of the PBO’s cost estimates of components of the FES 2020 can be viewed on its website.

This measure would require foreign-based vendors selling digital products or services to consumers in Canada and digital marketplace platforms to register for, collect and remit the GST/HST on their taxable sales to Canadian consumers.

The Canadian revenues for digital products and services, that do not already collect GST/HST on their sales, were estimated using annual company reports, Statistics Canada data, and various external sources.

The revenues were projected forward using various sources including PwC’s projected growth rates for different sectors. The GST tax rate was then applied to the projected revenues.

There is some uncertainty in the modelling approach and data quality as figures are estimated from external data (annual reports) and survey-based data. Moreover, there is a potential behavioural response of consumers switching to other digital products and services due to a potential increase in price, however, the amount of GST to the federal government remains the same. All digital platforms are assumed to fully comply with the policy.

• Estimates are presented on an accrual basis as would appear in the budget and public accounts.
• A positive number implies a deterioration in the budgetary balance (lower revenues or higher spending). A negative number implies an improvement in the budgetary balance (higher revenues or lower spending).
• “-“ = PBO does not expect a financial cost.