Much has been written in the last six months about a large percentage of parcels containing taxable products ($20+) and going through Canada Customs without any tax being assessed. Different posters have different experiences but it would be nice to get the facts - if the information is available.
Today I wrote to my member of Parliament. You may want to do the same in different parts of the country and see if we get consistent answers.
"Good afternoon.
As we all know e-commerce is booming. Canadians buy more by mail through the Internet as ever before. Looking at companies like eBay doing over one billion dollar a year (purchases by Canadians mostly from the USA), it means substantial amounts of tax revenues (GST/HST) are no longer collected in Canada by Canadian merchants (and remitted to CRA) but assessed instead by Canada Customs and collected by Canada Post at time of delivery. We are looking at HUNDREDS OF MILLIONS OF TAX DOLLARS, MAYBE BILLIONS. That is big business and every dollar will help reduce the deficit and eventually lower the national debt.
My question to you today is: do you have information as to how many parcels arrive in Canada through the postal system every year from the USA and overseas and what is the total dollar value of these importations. Also, what is the total amount of taxes (GST/HST/PST) collected on taxable imported products coming by mail. Finally, as we all know, a large portion of postal parcels coming through Canada Customs are not assessed any tax despite the fact they are valued at more than $20 according to their Customs Declaration and tax(es) should be assessed and collected according to the law:
http://www.cbsa-asfc.gc.ca/import/postal-postale/duty-droits-eng.html
This leads to my final question: why are so many parcels ignored by Canada Customs? GST/HST registered merchants must account for every penny of tax collectables on their revenues. Otherwise they pay fines and interest. Why would Canada Customs be the worst offender when it comes to tax collection?
Hopefully you do have answers to my questions or know how to get them.
Thank you for your time."
If you really care about the issue and wish to contact your MP on the subject to possibly get factual information, feel free to copy any or all parts of my message.
Yes but government departments have been know to stall and delay (or even refuse) if they do not want the information released for whatever reason.
"The CBSA still must "inspect" each and every package,"
Must ????
Not quite. They should but they do not. If they did, taxes would be properly assessed on parcels with substantial value.
The tax laws where all Canadian businesses must collect and remit GST/HST apply to everybody but the federal government who refuses to the job required by law. All that to gain a few votes.
"businesses would take off and leave Canada in the dust."
???
Business does not care about tax being assessed. It makes no difference as all GST/HST paid at time of Customs clearance is refunded 100% through Input Tax Credits (ITCs). It does not matter if it comes by train, bus, air, truck or mail.
All GST/HST eBay sellers already know that.
Currently all forwarders such as UPS, Fed-Ex, DHL, Pitney-Bowes, etc... prepare and clear parcels through Canada Customs without delay in most instances. There is no valid reason for the same efficient Customs clearance not to be available when coming by mail. It is a matter of labour availability.
"businesses would no longer see any reason to trade with Canada."
That is the part that does not make sense.
Businesses do import by mail. Parcels do get processed by Canada Customs and taxes assessed and collected. Businesses do not leave Canada because the odd delay in getting parcels coming by mail cleared through Customs. If it were a real problem (it is not) importers (businesses) would use forwarders and couriers where Customs clearance is routine.
In my business I have imported millions of dollars - all assessed correctly by Canada Customs - by mail and couriers. Delays through one carrier would not be a logical reason to close shop and move the business elsewhere.
Hopefully I will get a reply to my inquiry (see original post) so one can discuss the situation based on facts - how many parcels... etc... etc... I would never assume that the proper assessment and collection of duty and taxes would result in so many delays as to effectively close the border - which is what you are suggesting. Life is not that bad.
"For Canada customs to inspect every package entering Canada would be impossible"
It would never ever cross my mind to suggest inspecting every parcel. Assessing taxes does not require to open every package.
"that is the purpose of NAFTA."
NAFTA has nothing to do with Canadians paying consumption taxes (GST/HST/PST). NAFTA deals for duty and tariff.
"If you want to support this program"
???
As stated over and over, I do not support GSP as currently offered. eBay blew it and you will find hundreds of posts in many threads explaining what is wrong with GSP.. This is not the subject of this thread.
"i do not believe in buying "Canadian" just for the fact i am supporting a local vendor."
I totally agree. However, in fairness, the Canadian government should not assist foreign retailers by giving them unfair advantage. Canadian retailers are forced by law to collect and remit consumption taxes (GST/HST/PST) as applicable. The federal government - through Canada Customs - has the same legal obligation.
The problem arises when a Canadian retailer needs to collect from a Canadian consumer and remit $13 on a $100 transaction (for example) and Canada Customs fails to collect the same $13 when the goods come by mail. The $13 tax is also collected by couriers. If Canadians can easily avoid paying consumption taxes because Canada Customs does not do the job it is legally required to do on postal parcels only, we face two results:
1) lower sales by Canadian retailers resulting in lower employment by Canadians in Canada
2) lower tax revenue collected by the federal and provincial governments resulting in increased income tax to make up the loss or lower services to Canadians.
"You then mailed out a check to Revenue Canada for all of the taxes that you collected on your eBay sales?"
???
Two types of taxes we have to deal with:
1) GST/HST
2) Income tax
As far as GST/HST is concerned, based on the amount of tax payable each year, GST/HST registered sellers may have to remit monthly, quarterly or annually. From the time I registered with GST back in 1991 (until I retired in 2012), I filed my GST reports annually since a large percentage of my sales were exported (zero rated). For GST registered sellers using a year end of December 31st (most convenient to most), the filing deadline is June 15th each year - although CRA will charge interest from April 30th if money is owed.
Now, many businesses will sell their products on a "tax included" basis. It does not change the requirement to remit tax payable at time of filing. For example, if you purchase a Canadian Stamp News and take a look at the many advertisements of major Canadian dealers, you may notice most of them sell on a "tax included" basis (we pay the tax for you). Different industries work differently.
As far as income tax is concerned, the net profit must be entered in the annual tax return as business income and added to other income (employment, investment, etc...) to reach taxable income. Many years ago, I prepared a sample P&L that can be used by eBay sellers in their tax preparation:
http://pierrelebel.com/lists/P&L-sample.htm
Typically, tax returns must be filed by April 30th each year. CRA may require quarterly instalments depending on your income level.
If you have specific questions about Canadian taxation, do not hesitate to ask.
