Ottawa signals plans to create Canada-wide child care system, collect digital sales taxes

Finance Minister Chrystia Freeland announced Monday the firststeps in a multi-year plan to build a Canada-wide child-care system to reduce costs for families andencourage more women with kids to join the workforce.

To pay for this proposed program and to collect more revenue to cover aballooning budget deficit Freeland also unveiledthe government's plan to levy sales taxes on digital companies.

Freeland said the government will createa new federal secretariat on early learningand child care that will work with the provinces and territories to design a new national system modelled on the one already in place in Quebec,where parents have access to child-care services for less than $10 a day.

"Just as Saskatchewan once showed Canada the way on health care and British Columbia showed Canada the way on pricing pollution, Quebec can show us the way on child care," the fall economic statement reads.

The finance minister said the next federal budget expectedsometime in spring 2021 will presenta more concrete plan on how Ottawa will provide "affordable, accessible, inclusive and high-quality child care from coast to coast to coast." The federal government is committing $20 million now to begin the work of crafting its new "child care vision."

The government says the need for such a national system is obvious now,given how the COVID-19 pandemic has demonstratedthe precariousness of work for many women.

Government data show thatmore women than menhave been forced to stay home from their jobs to care for their kids during this pandemic-induced recession,because of mounting child-care costs and a lack of available spaces.

"COVID-19 has caused a she-cession, rolling back many of the hard-won gains women have worked for over past decades," the economic statementreads, using a term coined to describe the dramatic decline in the numberworking women this year.

"Canada cannot be competitive until all Canadian women have access to affordable child care."

The fall economic statementtabled by Freelandincludes $70-100 billion in unspecified fiscal stimulus spending over the next three years, earmarked forjump-starting an economy hammered by lockdowns. The money to pay for a national child-care plan could be drawn from those funds.

While the details have yet to be worked out, the federal government will send more than $400 million to the provinces and territories starting in the next fiscal year to begin recruiting more early child-care educators ahead of a possible surge in new spaces.

NDP Leader Jagmeet Singh said the Liberal plan to launch a secretariat pushes a national child-careplan further down the line, when support is needed now to help careproviders struggling with staff shortages and spiking COVID-19-related costs.

"The Liberal government is nowhere near what is required to not only keep the existing spaces. They're nowhere near even expanding to get to universal child care. That's where we're at right now," Singh said.

"What that meansis families are making the impossible choice, saying, 'We can't find a place for our kids to go. I don't know if I can go back to work.' And that's a shame," Singh said.

Speaking on CBC'sPower & Politics, Freeland said she can't just "wavesome sort of a magic wand" and create a national child-careprogramovernight especially when there are federal and provincial jurisdictional responsibilities to consider.

"I can tell you, I'm really ready to put my shoulder to the wheel on this one," she said. "I personally believe so strongly and so passionately that thetime has come."

Feds to levy sales taxes on all digital products, services

Freeland also announced a plan to start levying digital sales taxes on consumers nationwide for the first time a new system that could raise as much as$1 billion over the next five years.

Under the current rules, foreign-based digitalbusinesses without a physical presence in Canada can sell goods and services without charging the GST or HST.

U.S.-based Netflix, for example, doesn't levy the GST or HST on its digital streaming services nationwide butApple, which does haveCanadian operations,charges all its iTunes customers the relevant taxes.

(Quebec and Saskatchewan already require Canadian and foreign digital service suppliers to register for and collect provincial sales tax on services like Netflix and Spotify.)

The government says the current regime is unfair to Canadian companies and "deprives the government of tax revenues that could be used to better the lives of everyone."

Freeland said sales taxes will apply to all goods and services consumed in Canada regardless of how they are supplied. It'sconsumers who will paythe tax, not the companies themselves.

While the federal government has long said it would coordinate any new regime with other Western nations, Freeland said Canada is now prepared to go it alone on taxing digital companies.

Former finance minister Bill Morneauhad said the government wouldpursue digital sales taxes onlyonce other G20nations and the Organisation for Economic Co-operation and Development (OECD) crafted standards that could be applied in all jurisdictions. That international work is still ongoing.

Some observers including Michael Geist, an internet law professor at the University of Ottawa have warned it will be difficult to create this new tax as there will besignificant administrative and enforcement challenges.

The government will consult with digital companieson how best to structure this new tax. Ottawa plans tostart collecting the funds in July 2021 andit expects to fetch $1.2 billion more in revenue over the next five years from the measure.

The decision to tax services offered by companies like Netflix is an about-face for this Liberal government. In the 2015 federal election campaign,then Conservative leader Stephen Harper promised a government led by him would never tax Netflix and the Liberals responded with a no-Netflix-tax promise of their own.

However, in the 2019 campaign, the Liberals, the NDP and the Greens all presented proposals in their platforms to tax multinational corporations that conduct their business online.

Singh said his party isn't satisfied with a plan to simply apply the GST to online business. He said he wants Canada to go much further andstart taxing the revenue of large digital giants that do business in Canada. "That's a concrete measure to actually make them pay," he said. "Applying aGST is really meaningless."

WATCH: Singh reacts to the government's fall economic statement

NDP Leader Singh says Fall Economic Statement shows future 'cuts to the help that people need'

4 years ago

Duration 4:18

Reacting to the Fall Economic Statement, NDP Leader Jagmeet Singh says the government should be more focused on generating revenue from wealthy individuals and corporations so that it can continue to invest in helping people in a sustained way

Singh said companies like Amazon and others he described as"pandemic profiteers" businesses that have seen salessoar duringthis health crisis don'tshoulder enough of the tax burden.

The leadersaidCanada should look to replicate France's plan to applya 3 per centtax on large tech companies' local revenues a revenue tool that was postponed in Januaryin the face ofU.S. threats of retaliatorytariffs.

New tax on short-term rental accommodations

Another new tax will be applied to short-term rental accommodations booked in Canada on sites like Airbnb and VRBO.

Airbnb does not collect sales taxes from its customers. It's up to individual hosts to add the GST or HST to therate they chargefor aspace but the tax is applied unevenlyand it's not required for hosts who make less than $30,000 a year in rental income.

With Freeland's new proposal, the GST and the HST will be collected on all stays and remitted by either the property owner or the companies that coordinate these digital bookings. It is estimated that thistax will increase federal revenues by $360 million over the next five years.

The government is also proposingmillions more dollars in funding for the Canada Revenue Agency (CRA) to continue its crackdown on tax avoidance.

The tax collector will receive $606 million over the next five years to fund new initiatives "targeting international tax evasion and aggressive tax avoidance."

Themoney will be used to hire offshore-focused auditors to target theCanadians who hide income and other assets overseas. The money also willgive the agency more capacity to audit "higher-risk tax filings" by high-net worth people, says the economic statement.

The government estimates that these measures will recover $1.4 billion in revenueover five years.

The cash injection follows a similar investment in 2016 that, the government said, is showing some positive early results an estimated $3 billion in additional federal tax revenues have been assessed since the government started sending the CRA some $350 million more a year in funding. It is not yet known how much of thatmoney owedhasbeen collected.