REGULATION IN PRACTICE CANADA
FEDERAL GOVERNMENT
The principal area of jurisdiction for the federal government is in tax policy. The major issues are:
- Rental platforms that are operating in Canada without a "permanent establishment" are not paying corporate income tax on their profits. Such a limitation has not prevented other countries and jurisdictions (Australia, Japan, South Korea and the European Union) from imposing taxation on some digital service providers.
- Hosts with revenues with less than $30,000 are not obligated to collected and remit GST/HST. This exemption does not apply universally in the digital economy. For example, GST/HST is applied on the first dollar for revenue ride-sharing (i.e. Uber and Lyft).23
The Canada Revenue Agency does not require short-term rental platform companies to issue an information slip (i.e. the equivalent of a T4 slip from employers or T5 slips from financial institutions) as is the case in other jurisdictions. This would be a key instrument in achieving voluntary tax compliance. To date, the federal government has enacted no specific measures to address issues in their area of jurisdiction as it pertains to tax fairness in the short-term accommodation industry.
PROVINCIAL GOVERNMENTS
To date, only Quebec and British Columbia have established laws and regulations governing short-term rentals. Like the federal government, the provinces have jurisdiction over tax policy. They also take a lead role in civil, property and commercial law.
In early 2018 the Government of Quebec reached an agreement with Airbnb that required the platform company to collect and remit a 3.5 per cent lodging tax beginning October 1, 2018.24 The 3.5 per cent tourism levy is designed to promote the marketing activities of the hospitality industry. A prior regulation that required hosts to independently register and remit a lodging tax had achieved a compliance rate of less than five per cent.25 The Quebec government indicated it expects other home-renting companies to become part of the new system. It is worth noting that the March 2018 Quebec budget proposed that the Quebec Sales Tax (QST) will apply to all digital services beginning January 1, 2019 regardless of whether the supplier has a permanent establishment in the province or not.26
In early 2018, Airbnb agreed to collect and remit provincial and municipal taxes in British Columbia.27 The province expects to realize $16 million annually from its eight per cent tax while municipalities would receive an estimated $5 million from a three per cent destination tax. BC officials