Deloitte - Americas Regional Indirect Tax Interview (i)

Interview with Angela Grant, Partner, Tax and Legal, Deloitte Canada

What is the most significant change to your region/jurisdiction’s tax legislation or regulations in the past 12 months?

There have been significant changes over the past several years related to indirect taxes and the digital economy/online marketplaces. Over the past 12 months, the remaining provinces with retail sales tax regimes (Manitoba and British Columbia) followed suit and introduced legislation to tax sales made in certain online environments. These changes are very broad-reaching for non-resident businesses selling in these jurisdictions in Canada.

What has been the most significant impact of that change?

While all these indirect tax rules related to the new digital economy/online marketplaces have had a significant impact on businesses (both resident and non-resident), the new online marketplace facilitator rules in British Columbia may have had the most significant impact. These rules include having British Columbia retail sales tax apply to many services that have never been subject to tax in the past. Furthermore, this is the only retail sales tax regime in Canada to expand the tax base in such a way.

How do you anticipate that change impacting your work and the market moving forwards?

The changes in the indirect tax rules related to the digital economy/online marketplaces have brought substantial change for our clients, and the impact for our practice has been to find innovative ways to help our clients through this transition. It includes working to anticipate what the future may look like, in order to help our clients be prepared for this continued indirect tax evolution.

How has this changed the way you offer tax advice?

This has changed the way we offer tax advice as it has changed the type of advice we provide. We assist clients not only by offering advice on the impact of the new legislation but also by providing technology solutions to address the complexity of these very wide-reaching rules. We have also helped clients with the actual implementation of these rules in their systems.

What potential other legislative/regulatory changes are on the horizon that you think will have a big impact on your region/jurisdiction?

The indirect tax legislative rules related to the digital economy/online marketplaces are likely to continue to develop as the jurisdictions adapt to new and evolving digital worlds. For example, how indirect taxes will apply in the metaverse is something we can expect federal and/or provincial legislators will consider.

What are the potential outcomes that might occur if those changes are implemented?

Should the federal and/or provincial legislators introduce rules to tax the digital economy even more (for example, the metaverse), the outcome could be that certain intangible “assets” would be taxed where they have never been taxed in the past, certainly from a provincial retail sales tax perspective. This could lead to a very significant shift in retail sales tax regimes.

Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?

The impact would be positive from the perspective of the type of advice that our clients will need and the innovative solutions that we will be required to generate. We will be driven to create value for our clients in the advice and implementation services that we offer. Change always creates new opportunities.

Are there any regulatory/legislative changes you believe should be implemented in your region/jurisdiction?

The other changes that I believe should be implemented are related to the new online marketplace facilitator rules in British Columbia. As mentioned earlier, these rules include having British Columbia’s retail sales tax apply to many services that have never been subject to tax in the past. The scope of these rules has caused some uncertainty among clients in terms of compliance.

How do you believe those changes would help improve the tax landscape in your market?

If there were changes introduced (by regulations perhaps) to provide more direction to businesses that are impacted by these rules, it would improve the tax landscape in British Columbia. Businesses want to be compliant but it is very difficult when there is such uncertainty in the rules. In other words, it is hard to follow the rules when their intended operation is unclear.

How are issues surrounding the taxation of the digital economy affecting your work?

All of my answers in this interview are around the indirect tax changes in the digital economy. These changes have had some of the most significant impacts in the indirect tax landscape in Canada over the past 30 years. This kind of sweeping change has absolutely affected our work both in terms of how we assist our clients and the actual services we provide.

How would you describe the tax authorities’ approach in your region/jurisdiction?

Indirect taxes are inherently a set of rules on the application of tax on the supply of certain goods or services. For Canadian indirect taxes, I would describe the tax authorities’ approach as generally being one of referee rather than coach. What I mean by this is that the authorities tend to focus only on what is incorrect or what has not been done, like a referee would do. A coach, on the other hand, would help guide taxpayers on how to get to the correct answer so they can do the right thing. It is all about the approach to getting to the right answer.

^{This document has been prepared solely for the purpose of publishing in the 2023}

^{ITR World Tax Guide and may not be used for any other purpose. This document}

^{and its contents may not be reproduced, redistributed or passed on, directly or}

^{indirectly, to any other person in whole or in part without Deloitte’s prior written consent.}

^{Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited}

^{(“DTTL”), its global network of member firms, and their related}

^{entities (collectively, the “Deloitte organization”). DTTL (also referred}

^{to as “Deloitte Global”) and each of its member firms and related}

^{entities are legally separate and independent entities, which cannot}

^{obligate or bind each other in respect of third parties. DTTL and each}

^{DTTL member firm and related entity is liable only for its own acts}

^{and omissions, and not those of each other. DTTL does not provide}

^{services to clients. Please see www.deloitte.com/about to learn more.}

^{This communication contains general information only, and none of}

^{Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of}

^{member firms or their related entities (collectively, the “Deloitte}

^{organization”) is, by means of this communication, rendering}

^{professional advice or services. Before making any decision or taking}

^{any action that may affect your finances or your business, you should}

^{consult a qualified professional adviser.}

^{No representations, warranties or undertakings (express or implied)}

^{are given as to the accuracy or completeness of the information in}

^{this communication, and none of DTTL, its member firms, related}

^{entities, employees or agents shall be liable or responsible for any}

^{loss or damage whatsoever arising directly or indirectly in connection}

^{with any person relying on this communication. DTTL and each of its}

^{member firms, and their related entities, are legally separate and}

^{independent entities.}

^{© 2022. For information, contact Deloitte Global.}