Month: April 2019

OTTAWA — A Liberal-dominated House of Commons committee is calling on the Trudeau government to make internet giants like Netflix collect and remit sales taxes as part of a series of recommendations to help Canada’s small businesses compete online.

The international trade committee’s report on e-commerce issues recommended the government apply sales taxes “on tangible and intangible products” sold through online platforms, and tax the profits from those sales.

It also calls on the federal government to cut red tape and create policies and programs that are agile enough to help domestic companies get a bigger cut of the trillions of dollars associated with the global online marketplace.

Benefits of e-commerce should extend to smaller Canadian businesses

Small and medium-sized businesses could lose customers to larger firms based in Canada and abroad, it warned, noting that the future success of such companies “partially depends on federal public policy.”

“E-commerce creates the potential for even the smallest local firm to sell globally and, in so doing, creates an environment in which the benefits of trade can be shared by all Canadian firms, and not accrue to just large multinational firms,” the report says.

The message is sure to resonate with corners of the Liberal caucus, particularly those from Quebec, who have been pressed by constituents about their party’s opposition to forcing companies like Netflix to collect and remit federal sales tax.

Companies without physical presence don’t collect taxes

Foreign-based streaming services without a physical presence in Canada don’t have to collect or remit sales taxes, leaving it up to consumers to pay the sales tax to tax collectors — something that, in reality, rarely happens.

However, Conservatives on the committee say they want Trudeau to honour his pledge not to introduce a Netflix tax, writing in a dissenting report that such a tax would only create additional costs for consumers and hurt Canada’s small businesses.

“We support the bulk of the recommendations in the main report, but must disagree on the tax recommendations,” Conservative MP John Brossard said in the House.

“The main report effectively recommends that Canadians be forced to pay a Netflix tax, to be taxed on every song they download on iTunes and every movie they watch on YouTube. We recommend otherwise.”

Prime Minister Justin Trudeau has been adamant his government wouldn’t increase taxes on online subscriptions, but his finance minister has suggested the Liberals want to ensure online firms pay their fair share of taxes.

Canada and other G7 countries have set a 2020 deadline to craft an international tax regime so companies based in one country can pay taxes for goods and services they sell in another.

New Democrats on the committee say the Liberals need to apply corporate income taxes on e-commerce profits earned in Canada by domestic and foreign sellers, provided the income exceeds a specific threshold. The Quebec government has vowed to enact a similar measure beginning next year and put a provincial sales tax on Netflix and any purchases from Amazon.

NDP heritage critic Pierre Nantel said the federal government was a laggard in taxing internet giants and asked the Liberals to act on the growing chorus of voices wanting online services to pay their fair share of taxes.

The committee is also calling on the Liberal government to better protect the personal data of Canadians who purchase and sell products online through enhanced cybersecurity, modernize federal e-commerce legislation, and come up with ways to fuel telecom competition to prod Canadians’ use of mobile devices to make online purchases and sales.

Previously On HuffPost:

TORONTO — The Canadian Imperial Bank of Commerce says it will raise its five-year fixed-rate mortgage rate Tuesday by 15 basis points.

Spokesman Tom Wallis says in an email that the rate will change from 4.99 per cent to 5.14 per cent.

Wallis says seven-year and 10-year fixed-rate mortgage rates will also rise 15 basis points, whereas one- and two-year rates will go up 10 basis points.

The Royal Bank of Canada and Toronto Dominion Bank announced last week that they would raise their benchmark mortgage rates.

The increases come as government bond yields rise. Fixed-rate mortgages tend to move with government bond yields of a similar term, reflecting the change in borrowing costs.

The top-tier housing markets in Toronto and Vancouver are headed in opposite directions, with fear driving Vancouver’s market lower even as optimism returns to Toronto’s market, according to Sotheby’s International Realty Canada.

The real estate agency released a new report Tuesday looking at the $1 million-plus segment of the housing market. In earlier eras, we could have called this the “luxury” housing market, but with the benchmark price of a detached home at $1.6 million in Vancouver, and just above $1 million in Greater Toronto, this is now just the pricier end of the “regular” housing market.

Sales of $1 million-plus homes in Greater Vancouver tumbled 19 per cent in the first half of 2018, compared to a year earlier — when they were already down from the year before that. Detached home sales hit a 27-year low this spring, according to numbers from the region’s real estate board.

Watch: Why strong economies spell bad news for Canadian mortgage rates (story continues below)

Sotheby’s Canada CEO Brad Henderson said a perfect storm of new government regulations — from a foreign buyers’ tax, to tough new mortgage “stress tests,” to Vancouver’s new vacant home tax — has made people apprehensive about the housing market.

“That has been a considerable amount of body blows to the confidence … around real estate,” he told HuffPost Canada by phone.

It’s not fading interest from foreign buyers that’s dragging down the market, Henderson said. “What’s dragging down the market is people’s fear that these (new government regulations) are going to further dampen the marketplace.”

Henderson believes the second half of the year will be equally as sluggish in Vancouver’s market, or even “potentially slower.”

Toronto, land of eternal optimism

Not so for Toronto, where “there is a much healthier view of the market and much healthier view of the future,” Henderson said.

The city has much more holding up its market than Vancouver does, Henderson noted: “It’s a much bigger source of higher-paying jobs, knowledge economy jobs. It’s the financial capital of Canada.”

To be sure, Toronto’s numbers look dismal compared to last year. Sales of million-plus homes are down a whopping 46 per cent in the first half of this year, from the same period last year.

But that’s not a good comparison, Henderson says, because last year marked the peak of the city’s housing “buying frenzy,” fuelled by a fear of missing out.

“You could argue that that was an anomaly, and it likely won’t be repeated,” Henderson said.

Compared to a more “normal” year, like 2015, sales above $1 million are up by 25 per cent in Toronto, and sales in the $4-million category, which still count as “luxury” even today, are up by 72 per cent.

In the second half of this year, “we will see an increase in activity in Toronto, more people returning to marketplace, more upward pressure on prices,” Henderson predicted.

Homebuyers could find themselves under a bit more financial pressure after Wednesday, when the Bank of Canada is expected to hike its key lending rate for the fourth time in a year. The rates on variable mortgages and home-equity lines of credit typically rise when the BoC hikes its rate.

“That will do an effective job of keeping people from getting irrationally exuberant,” Henderson said.

The Sotheby’s report also looked at two other top-tier housing markets, Calgary and Montreal. Here are its findings, in brief:

Montreal

Of the four cities Sotheby’s looked at, Montreal is the only to have seen sales of million-plus homes rise in the past year — up 25 per cent in the past year, a much stronger showing than average.

“The market has been driven by strong local demand, and has been undeterred by rising interest rates and new mortgage rules,” Sotheby’s said in its report.

That may have something to do with the record-low unemployment rates Quebec has seen in recent months, as well as growing interest from non-Canadian buyers in the wake of foreign buyers’ taxes in Toronto and Vancouver.

Montreal “has always been in the shadow of Toronto and Vancouver, but it has come out as a bright spot in the last little while,” Henderson said.

Calgary

Sales of million-plus homes fell by 11 per cent in the first half of this year, compared to the same period last year, when the city’s housing market seemed to be recovering from the oil price crash.

But that was “premature optimism,” Henderson said, “and now, because the oil slump has dragged on for so long … it is still not translating into more people looking for homes.”

“We are going to see continued downward pressure on prices and sales” in Calgary, he predicted.

OTTAWA — Neither Ottawa nor the provinces have really assessed the risks a changing climate poses to the country and have no real idea what might be needed to adapt to it, said a new audit released Tuesday.

The joint audit, conducted by federal environment commissioner Julie Gelfand and auditors general in nine provinces, looks at climate change planning and emissions reduction progress between November 2016 and March 2018.

It says while many governments have high-level goals to cut emissions, few have detailed plans to actually reach those goals, such as timelines, funding or expected results from specific actions.

Earlier:

The audit says assessments to adapt to the risks posed by climate change have been haphazard, inconsistent and lacking in detail, with no timeline for action and no funding.

The country’s emissions goals are also a hodgepodge of different targets, with no consistency in how emissions are measured or whether cuts will target overall greenhouse gas outputs or just those from specific economic sectors.

The auditors say that means there is no clarity on how Canada and the provinces and territories are going to measure, monitor and report on their contributions to meeting Canada’s international commitment to cut emissions by at least 30 per cent from 2005 levels by 2030.

As of 2015, the most recent year for which full statistics are available, Canada was nearly 200 million tonnes short of that goal, which is the equivalent of the emissions produced by about 44 million cars each year. That is twice the number of vehicles registered in Canada.

‘Hard things are hard’: McKenna

Environment Minister Catherine McKenna said it is the first time auditors have completed such a review of Canada’s climate change policies which is an important recognition of the priority climate change should have in government business. But she says the audit, as Gelfand herself notes, looks backwards and does not actually take into account the Pan-Canadian Framework on Clean Growth and Climate Change.

That plan was released in December 2016, after the audit’s scope was already established. It too falls short of reaching the 2030 goals however.

McKenna said the plan addresses many of the concerns in the audit, including outlining how certain policies will achieve specific emissions cuts.

“The previous government did nothing for a decade but we’re 100 per cent committed to our target,” McKenna said. “Hard things are hard, we have a plan and we’re already seeing measurable results.”

Catherine Abreu, executive director of the Climate Action Network, said this audit looks at what progress was made to meet Canada’s existing targets including the 2020 commitment, which Canada has abandoned knowing it has no hope of meeting it.

That target was to be 17 per cent below 2005 levels by 2020.

Abreu notes that is the third international emissions target Canada has set and will miss and the Gelfand report points out the 2030 plan is at risk if Canada and the provinces don’t step it up.

All provinces but Saskatchewan are currently signed on to the pan-Canadian framework, which requires every province to put a price on pollution by the start of next year. The four biggest provinces already have one, Manitoba will add a $25-a-tonne carbon tax in September and every other province will either have to establish their own price or have a federal price imposed as of next Jan. 1.

Carbon pricing a key issue in provincial elections

There are potentially rough waters ahead. Saskatchewan hasn’t joined the framework and says it will sue if the federal government tries to impose a carbon price. Ontario and Alberta both have a carbon price plan in place — cap and trade for Ontario and a carbon tax system with hard caps on emissions from the oil sands for Alberta — but coming provincial elections could bring to power premiers who are running on a promise to end carbon pricing.

McKenna said not only is the clean technology industry developing in response to climate change an enormous economic opportunity, not taking climate change action will cost the government money.

“It is disappointing when you have politicians pretending that there is no cost to climate change,” she said. “Right now the cost to the federal government is in the billions of dollars to deal with the impacts of climate change, whether it’s floods, whether it’s forest fires, a melting Arctic, we need to be taking action.”

OTTAWA — The amount Canadians owe relative to their income crept lower for the second quarter in a row as mortgage borrowing slowed along with a cooler housing market.

Statistics Canada said Thursday household credit market debt was equal to 168.0 per cent of household disposable income in the quarter, its lowest level since the first quarter of 2016.

In other words, there was $1.68 in credit market debt for every dollar of household disposable income.

The result for the quarter compared with 169.7 per cent in the fourth quarter of last year.

“While the ratio generally tends to fall in the first quarter due to seasonality, the 1.68-percentage point decline marks the biggest improvement on record,” wrote economic analyst Priscilla Thiagamoorthy of BMO Capital Markets.

Watch: Why strong economies spell bad news for Canadian mortgage rates (story continues below)

“The steeper drop to start 2018 suggests we may finally be at a turning point as the one-two punch of stricter mortgage rules and higher interest rates slow household borrowing, while income continues to climb.”

The Bank of Canada has identified household debt as a key vulnerability for the financial system, but the central bank noted that risk has lessened in recent months along with worries about the housing market.

On a seasonally adjusted basis, households borrowed $22.2 billion in the first quarter, down from $25.4 billion in the previous quarter. Statistics Canada said mortgage borrowing fell $2.0 billion to $13.7 billion, the lowest level since the second quarter of 2014.

The slowdown came as tighter lending rules and higher mortgage rates helped cool the housing market in recent months compared with its torrid pace at the start of last year.

Royal Bank senior economist Robert Hogue said with growth in both mortgage and non-mortgage debt slowing, debt metrics should continue to improve in the near term.

“Developments in the last two quarters are unlikely to change the conversation about household indebtedness in Canada entirely though they are enough to alter its tone,” he wrote in a report.

Hogue noted as interest rates rise how Canadians manage their debt service costs will be important.

Debt payments remain stable

Statistics Canada said the seasonally adjusted household debt service ratio, measured as total obligated payments of principal and interest as a proportion of household disposable income for mortgage and non-mortgage debt, was relatively flat at 13.9 per cent.

“So far, the debt service ratio has remained stable at slightly below 14 per cent. Yet we expect that it will come under upward pressure in the period ahead,” Hogue said.

“In our view, this will be a key factor restraining household spending growth this year. It will also be an element keeping the Bank of Canada cautious about raising rates.”

The Bank of Canada has raised its key interest rate three times since last summer and is expected to raise the trend-setting rate again later this year.

Changes in the rate affect the prime rates set by Canada’s big banks that are used for variable-rate mortgages and other floating-rate loans.