Problems relating to Trade and Investment on Canada
14. Taxation Systems |
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Issue |
Issue details |
Requests |
Reference |
| (1) Complex Accounting Work due to the Different Sales Tax by each Province | - Since 1 July 2010, Province of Ontario and Province of B.C. inaugurated harmonised sales tax (HST), by merging the federal goods and services tax with the provincial retail sales tax. However, HST rate is 13% in Ontario and 12% in B.C., while tax law on HST differs in two provinces. Programming of the accounting system and data input, together with all the necessary clerical works, had been made even more complex. Quebec sales tax was raised by 1% on 1 January 2011 and again on 1 January 2012, adding more complexity to the works involved all around. - Both federal sales tax (FST) and provincial sales taxes (PST) exist in Canada. While in 5-provinces (Ontario, Nova Scotia, New Brunswick, Newfoundland & Labrador, and Prince Edward Island), federal government collects both federal and provincial sales tax together as harmonized sales tax (HST). As to the remaining 5-provinces and 3-territories, federal government collects FST while each province collects PST. Thus, complexity arises from inability to unify book keeping with tax payments. |
- It is requested that GOC harmonises GST (HST) all across the Canadian provinces and territories.. - It is requested that GOC takes step to convert to systematic unification of federal and provincial/territorial consumption tax collection. |
- Federal/Ontario Province/B.C. Province HST - Provincial Retail Sales Tax, Quebec |
| (2) Withholding Tax Levied on Consideration for Service Rendered by Despatch of Instructors, Etc. | - GOC levies uniform 15% withholding tax (WTX) upon payment made by a firm in consideration for the service rendered for installation and test run by an instructor of an enterprise not registered in Canada. WTX levy deprives the firm of its competitive edge. | - In the case of other countries (such as the U.S.), tax is exempted for despatch of an instructor, etc. if the instructor's stay in Canada is within a certain period, beyond which corporate income tax becomes taxable. Likewise, it is requested that GOC repeals the tax levy. | |
| (3) Complex Payment Procedures of the Goods and Services Tax (GST) | - Payments for Federal GST (Goods and Services Tax) and Federal part of HTS (Harmonized sales Tax) made upon import customs clearance and made in the domestic transactions are not integrated. The dual payment requirements complicate the clerical procedure. | - It is requested that GOC integrates the payment periods of Federal GST and Federal part of HTS. | - Canada Border Services Agency Memorandum D17-1-5 |
| (Info) - Please refer to Canada border services agency website at: (http://www.cbsa-asfc.gc.ca/menu-eng.html). Also, as regards federal goods and services tax(GST)/harmonised sales tax(HST), please refer to Canada revenue agency website at: (http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/menu-eng.html). - Since 10 February 2015, 5-provinces (Ontario, Newfoundland, Labrador, New Brunswick and Prince Edward Island and Nova Scotia) have integrated PST and GST into a single tax, named harmonised sales tax (HST). |
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| (4) Complexity of Goods and Services Tax | - As the applicable rules for goods and services tax are quite complex, it takes much time and work in calculating and determining if taxable or not. In addition, it is extremely difficult to systemise. Largely varying rules employed by each province, increases the system maintenance cost, including its modifications. | - It is requested that GOC streamlines and simplifies both the goods and services tax system and, the procedures for filing tax returns and tax refund applications. | |
| (5) Obligations to Collect Non-Resident's Withholding Tax at Source | - Where a non-resident, such as a Japanese, an American, etc. provides service, etc. domestically in Canada, the employer owes obligations to collect from source the amount of withholding tax (WT) payable to revenue agency (RA) from the wage/remuneration paid during the corresponding period. Despite the fact that the amount of WT so paid to RA is refundable under the 183-days' rule, and as a result non-taxable, the employer is held responsible for collecting from source the withholding tax amount, and complete refund procedures by filing application to Canadian revenue agency. Its administration is not only vexatiously complex but costly to the employer. While the exemption clause for withholding tax collection at source exists, it takes much time for obtaining approval, while approved cases are rare, extremely small in number. | - Repeal of the withholding tax levy provision for a less than 183-days stay. | - Canada Income Tax Act Regulation 102 |
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