CTV News has confirmed that, by mid-2019, both services will be charging the goods and services tax, which could result in a considerable tax revenue for the federal government. Last year, Facebook, which owns Instagram, announced that it would be moving to a “local selling structure” in countries where they have offices to support local ad sales.
The U.S.-based social media networks say the taxes will be applied by mid-2019 as part of their recent move towards supporting local selling structures in countries it operates in. The decision to charge the taxes could create a windfall for the federal government, which has long faced pressure to force foreign online services to charge GST to consumers
Prime Minister Justin Trudeau has been adamant the federal government won’t increase taxes on online services, but Canada and other G7 countries have set a 2020 deadline to develop an international tax plan to address companies that are based in one country but have the potential to pay taxes in another. In April the federal government’s international trade committee called on Trudeau to make online services pay the taxes so small and medium-sized businesses don’t lose customers to larger firms based abroad.
"This means that advertising revenue supported by our local teams will no longer be recorded by our international headquarters in Dublin, but will instead be recorded by our local company in that country," Facebook Chief Financial Officer Dave Wehner said.
"We believe that moving to a local selling structure will provide more transparency to governments and policy makers around the world who have called for greater visibility over the revenue associated with locally supported sales in their countries," Wehner said.
As first reported by The Logic, this move sets the two services apart from other foreign-based tech platforms. In a statement to CTV News, a spokesperson for Finance Minister Bill Morneau said that the government is working with digital providers to attract investment and is seeking clarity from Facebook and Instagram to “determine the way forward.” Spokesperson Pierre-Olivier Herbert said that the minister is "committed to ensuring that Canada's tax system is fair and supports an innovative economy."
With files from CTV News' Michel Boyer
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