Kobo exec bemoans ‘unlevel playing field’
From the Montreal Gazette:
If Canadians can buy digital books without paying sales taxes, Canadian e-book providers face a slippery slope, a Kobo Inc. executive says.
Daniel Budlovsky, Kobo’s vice-president of finance, was responding to an observation that Quebecers who buy e-books from his company pay about 15 per cent in taxes, while their neighbours, who buy through industry giant Amazon.com Inc., pay no taxes.
“That should be atrociously viewed by the Canadian public,” Budlovsky said from his Toronto office.
“And the Canadian government should look really closely, I think, at how resident taxpaying companies that employ Canadians … have to compete on an unlevel playing field.”
Then there is the different tax treatment within Canada of digital books and paper books, whereby provincial taxes are applied to the former but not to the latter.
. . . .
Strictly speaking, Canadians should pony up federal and provincial sales tax even if they are not billed for them by out-of-country companies, said John Bain, a partner in KPMG’s Indirect Tax Group in Canada.
“There is a mechanism to do it, but I would suggest to you that the compliance would be rather low,” he said.
No kidding. The taxing question of how to deal with digital books is a global issue, Budlovsky and Bain noted.
After signalling its intentions well in advance, France defied the European Union position by slashing its value added tax rate on e-books. That measure took effect Jan. 1.
Luxembourg followed France, also allowing e-books the same preferential rate accorded print books.
Link to the rest at the Montreal Gazette
Passive Guy is sick of all sorts of people who want to increase the price of books – electronic or paper.
Does Kobo Guy think Amazon will pay Canadian sales taxes? Of course not. Amazon’s customers will pay sales taxes, just like they do in those jurisdictions where Amazon has to collect sales taxes and just like they pay VAT where Amazon has to charge that.
PG can’t get on board the “books are too cheap” bandwagon of all the people who can’t wait for Amazon to start charging higher prices.
PG has no problem whatsoever looking for the lowest prices for books or, for that matter, anything else. If no sales taxation results in 15% lower prices, PG thinks that’s fine.
The idea that it’s a patriotic duty to pay as many different taxes as you possibly can doesn’t compute for PG.
If Kobo Guy wants to be patriotic, PG suggests he write a check to the Canadian Finance Ministry. $1,000,000 (Canadian) would help PG feel much better about Kobo Guy’s personal commitment to paying higher taxes.
, Amazon will pay Passive Guy a small affiliate commission on any of your purchases.
I didn’t have time to read the link, but is he, perhaps, pressuring the government to lower the taxes on e-books? That would be a great step forward, though I don’t know how realistic it is.
“The idea that it’s a patriotic duty to pay as many different taxes as you possibly can doesn’t compute for PG.”
I think I’m using the same algorithm you are, PG. It doesn’t compute for me, either.
Same algorithm here.
What confuses me is the assumption (which I’ve seen many places) that if Amazon buyers had to pay sales tax, they’d stop shopping there. I used to live where I didn’t pay tax on Amazon purchases, and now I live where I do, and guess what? I still shop Amazon, just as much as I did before. It’s still convenient, it still carries just about everything, and it still has good prices.
I’ve been paying VAT on all my Amazon purchases since the beginning (because you cannot evade VAT as easily as in the US and apparently Canada) and I still buy at Amazon. Why shouldn’t I? After all, I shop at Amazon for the great selection and besides, I’d have to pay VAT at every other retailer, too.
Though I believe that the same VAT rate should be charged on books and e-books, because the content is the same, only the delivery system is different.
It’s easier for Amazon’s competitors and haters to focus on a red herring than to do real a self assessment and figure out the actual reasons they are not being as successful as Amazon.
I don’t see where he’s saying that he wants people to pay more taxes…the way I read the Kobo finance exec’s statement was that he’s looking for the Canadian government to step in and create a more level playing field for a Canadian company and enable it to compete with Amazon. One has to charge sales tax, the other doesn’t. Isn’t he bemoaning the inequity there?
Erin – If Kobo Guy wants Amazon to collect sales taxes, he wants Amazon customers to pay more taxes. Regardless of the rationale – level playing field, etc. – he’s still pressing for readers to pay more for books.
I would have had much more respect for his position if he were pushing for the elimination of sales taxes on books.
I’m kinda with Erin on this one.
However (and it’s a big however), the CFO of Kobo knows darn well the Canadian government isn’t about to axe HST on books (DT or e), nor are the provinces which still collect their individual sales taxes (which ever ones collect tax on books — in many provinces they never used to, but there must be some which do, now) going to suddenly decide to forego that revenue.
So his comments are pretty much posturing.
I’m trying to remember the deal Amazon struck with the government regarding its Canadian distribution, but the details — and the preceding arguments — escape me. If I find a concise link, I’ll come back with it. It was pretty much along the lines of the kind of pressure tactics employed in the U.S., in states where they have distribution centres.
No concise links that don’t end up being a primer on Canadian cultural sovereignty policies under past and present government — sorry. (You all have enough politics of your own to be concerned with…)
Just to clarify, the 15% mentioned in the story is HST, a federal tax which is shared with the province of Quebec. In provinces which don’t participate, the tax is called GST, and it’s 5%. Those provinces (except one, which has no provincial sales tax) tack on their own sales tax at the till. Most if not all provinces have had a policy of no sales tax on DT books. Someone shopping online would only be charged any of these taxes if the internet seller was required by law (pretty much if they have a locus in the province) to collect them. Theoretically, you’re supposed to self-assess and remit on anything taxable which is used or consumed in the province by you if you’re a resident, as the KPMG guy mentioned. (Can you imagine?)
Amazon used to use Canada Post to ship into Canada, before it got the aforementioned Canadian distribution centre. In those days, Canada Post collected any applicable duties and sales taxes from the consumer when it delivered the parcel. So the whole thing is revenue neutral with regard to the federal portion of the sales tax. Usually if you order something from out of the country, you end up paying duty and taxes on it when the courier (e.g. Fedex) or Canada Post delivers it. (Sometimes something slips through — my son got a $240 pair of headphones from some eBay guy in CA, totally free of duty and taxes. But that’s the exception.)
All in all, that Gazette article is confusing. Maybe it was slapped together from a press release from Kobo plus some peripherally related story the reporter was working on, about the Amazon/books/taxes issue in Europe.
If Kobo is not able to compete with Amazon, it is NOT because of sales tax. Who really pays attention to sales tax when making small purchases? It’s almost incidental. Now if we were talking bigger purchases, in the hundreds or thousands of dollars, then the sales tax becomes significant. But for a $5 or $10 book? Please.
This sales tax bit is a red herring. The fact that so many people have bought into it and keep parroting it is, frankly, sad.
I’d have more sympathy if Kobo weren’t currently the e-tailer that’s annoying me most with screwups on a couple of my stories…