Canada’s hotels are asking the federal Liberal government to take a heavier hand with online rental services like Airbnb and force the platforms to collect and remit sales tax.
The Hotel Association of Canada has been lobbying the government for more than a year to make online rental services collect and remit sales taxes, estimating the cost of not doing so to be some $100 million in revenues annually from Airbnb alone, not including other rental services.
Two provinces and several Canadian cities have already taken steps to regulate such businesses.
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But while federal officials have been receptive to the idea and are “critically aware” that there is an issue they need to tackle, they are struggling to find ways to tax digital services, said association president Susie Grynol.
“The government has a responsibility to keep up with the times and other governments around the world have done so, so it’s time for Canada to take some action as well,” Grynol told a news conference Monday.
Pressure from domestic businesses has been building on the Trudeau government to apply sales taxes to online services providers like Airbnb and Netflix, arguing that different tax treatments create an unequal playing field.
Last week a Liberal-dominated Commons committee urged the federal government to make online service providers based outside the country collect and remit sales taxes on as part of a series of recommendations to help Canada’s small businesses compete online.
The international trade committee’s report on e-commerce issues recommended the government apply sales taxes “on tangible and intangible products” sold through online platforms, and tax the profits from those sales.
During question period Monday, Finance Minister Bill Morneau said Canada was working with other OECD countries to co-ordinate tax policies so internet giants are appropriately taxed.
Airbnb agrees to collect provincial taxes on short-term rentals in Quebec and B.C., and the company has previously said it would be willing to work with governments on further tax collection agreements.
In the rest of the country, it is up to hosts to collect sales tax and provide it to the federal government. The company has partnered with the Canada Revenue Agency to increase tax compliance, last year providing statements of earnings and educational materials to its more than 55,000 hosts.
Grynol said she would like to see the various platforms be proactive in either collecting sales taxes.
Ahead of this year’s budget, the company asked the Commons finance committee to recommend the Liberals “apply a light regulatory touch” to the online rental sector, noting that most of its hosts “are home sharing on an occasional basis.”
As for taxation, the committee submission asked the Liberals to take a “progressive and forward-looking approach.”
Airbnb spokeswoman Lindsey Scully said the company wants to pay its “fair share.”
“That’s why we work with the Canada Revenue Agency and H&R Block to ensure Canadians who homeshare have access to the information and tools they need to claim their annual earnings,” Scully said in an email.
“The big hotels should join Airbnb and focus on creating new and modern rules instead of engaging in self-interested attacks on everyday Canadians sharing their homes in an attempt to protect their profits.”