March 16, 2017
The online shopping giant E-Bay is at the forefront of a growing movement to increase the Canadian de minimis amount for taxing and applying duties to imports, including cross-border purchases made online.
Outdated standards inconsistently applied?
The current value threshold for imposing a cross-border tax on imports to Canada is $20. It was established in the 1980s and has not been adjusted since. Other countries have much higher limits, with Australia at $1,000 AUS and the E.U. at 150 Euros. The United States recently raised its threshold from $200 to $800.
Complaints about the treatment of imports to Canada by mail and courier are nothing new, and with the rise of e-commerce and cross-border shopping, many consumers began to complain about the $20 threshold.
The requirement to assess shipments for applicable taxes can also apparently be haphazard, with some cross-border shopping allegedly finding its way to a Canadian destination unopened and untaxed.
How the $20 de minimis threshold for charging cross-border tax hurts Canadian businesses
Canadian small businesses are struggling to compete in an increasingly international marketplace that demands retailers engage in cross-border and online commerce.
The argument against raising the threshold is simple: Canadians would respond by increasing their cross-border shopping, at the expense of local businesses and workers. Furthermore, it would result in a loss of revenue for the federal government.
In addition to being a burden for consumers, proponents suggest that Canadian small businesses suffer disproportionately under the current regime. While larger, multi-national corporations can access customs pre-clearance systems for their goods, small Canadian sellers ship their products one or two items at a time.
Where an American business could import up to $800 worth of goods without taxes, a Canadian business cannot do the same, and is placed at a relative disadvantage. The status quo can also create perverse results, for example, Canadian companies that end up paying duties on goods returned from US buyers.
Although there are mechanisms in place to claw back some of the duties paid in the above scenarios, small businesses have limited resources and manpower, and are often unable to do so.
Legal advice and cross-border corporate services for existing and expanding businesses
At Feigenbaum Tax Law, our team of cross-border specialists can provide legal advice on a range of services for companies that operate in the United States, or that are considering expanding their operations. If you have any concerns about cross-border taxes or operations, you can rely on our knowledge and experience to minimize your overall tax burden and ensure corporate compliance.
Contact us online, or toll free at (877) 275-4792.