Tax Fairness

Tax Fairness

While foreign-owned digital platforms like Airbnb continue to grow their presence in Canada and earn millions of dollars in revenue, the government has not taken the necessary steps to collect appropriate taxes from these companies.

Currently, Airbnb and other online short-term rental platforms operating in Canada do not pay any corporate tax on their Canadian earnings. Furthermore, they do not collect or remit GST/HST, nor are they required to provide tax information slips to their hosts. These online platforms have an unfair advantage over other accommodation businesses, like hotels, who pay their taxes and play by the rules. However, the real loss is felt by Canadians who end up paying more in taxes to cover the cost of important social programs.

Various studies have demonstrated that commercial operators on the Airbnb platform are growing exponentially, far outpacing actual home sharing activity.  Results have shown that approximately 7-in-every-10 units on the Airbnb distribution platform are entire-home rentals, with guests having complete and sole access of the entire unit during their stay. Between 2015-2017, the commercial side of Airbnb’s business – those renting multi-unit entire homes – grew by 108%. Entire home rentals as a whole, including multi-listing hosts, generated 83% of Airbnb’s revenues. It is clear that while these commercial short-term rental “hosts” may pretend to be hobby-like operations, many are substantial businesses that are escaping the corporate responsibilities and realities that other legitimate businesses face.

Jurisdictions around the world have modernized their tax laws to reflect a digital economy. For example, both the United States and Denmark have set up mechanisms to follow and track the income of Airbnb and its hosts in order to improve tax compliance. Further, the Australian Department of the Treasury is currently seeking views on the possible design characteristics of a reporting regime for the sharing economy.

Canada’s Airbnb sector alone has the potential to contribute almost $100 million per year in consumer taxes and fees to the Canadian economy. Canada should follow the lead of other jurisdictions in order to improve tax reporting and compliance in the age of the digital economy.