Quebec ready to go it alone with tax on companies like Netflix

Quebec Finance Minister Carlos Leitao is proposing a co-ordinated effort with Ottawa to tax online businesses that don't have a significant presence in Quebec.

If the federal government doesn't go for it, Leitao says Quebec is prepared to proceed with the move alone as early as2018.

In a letter sent to federal Finance MinisterBill MorneauTuesday,Leitaocites the rise of e-commerce transactions and the difficulty applying the Quebec sales tax (QST)on these types of purchases.

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In the past, Leitao said,e-commerce tax losses were considered marginal, but now theyrepresent more significant sums of lost revenue.

"The significant increase in the number of online transactions between local consumers and foreign suppliers represents a significant challenge for all countries imposing a value added tax," wroteLeitao.

Leitaosaid it's important both governments put forward a"co-ordinated Canadian approach" in order to simplify the collection process.

If a harmonized effort isn't possible,Leitaosays, Quebec will go forward anyway.

"The status quo is no longer possible. If we can't come to an agreement, Quebec will have no choice but to act alone," his letter reads.

At a newsbriefing at the National Assembly Wednesday, Leitao elaboratedthat Quebec doesn't require Ottawa's permission toimpose a tax. However, healso suggestedQuebec would not be able to force online companies based outside the province to pay up, saying collecting taxes would require the collaboration of those companies.

While Leitaodoesn't specifically mention Netflix in his letter, the recent controversy surrounding the federal government's decision not to tax the streaming giant has drawn criticism in Quebec.

After the federal deal with Netflix was announced,Leitaosaidthat he thought it strange that Ottawa would exempt acompany from paying atax that all companies are expected tocollect.

In early October, the National Assembly voted unanimously in favour ofa motion demanding that all foreignweb-based companies collectQSTfrom theircustomers.

The Netflix deal

The idea of aNetflixtax first emerged before the last federal election, when Stephen Harper warned that Canadians needed to vote Conservativeor face a tax on the use of the streaming service.

Federal Liberals rejected that idea outright, and maintain that position.

"We have been clear, our government has no plans to introduce a new tax on middle class Canadians," said Morneau'sspokesperson, Chlo Luciani-Girouard, in an emailed statement, acknowledging receipt of Leitao's letter.

"Should the province determine they want to move forward on imposing a sales tax on Netflix, they can proceed."

In late September, federal Heritage Minister MlanieJolyannounced Netflix had agreed tospend at leasthalf a billion dollars over the next five years to fund original Canadian productions.

Questions wereraised in Quebec about how much of the money would be earmarked for French-language content.

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Netflixhas lobbied hard to avoid facing taxes as well as Canadian content requirements, such as thosewhich traditional broadcasters in Canada are subject to.

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In response to a request for comment on Leitao's letter to Morneau, a Netflix spokesperson said, "Netflix pays all taxes where required by law."