Canada duty and tax regime to change?

The Liberal government is considering changes to Canada’s strict import rules to exempt more goods purchased online from duties and sales taxes.

Under the current system, duty and taxes apply to shipped products valued at $20 or more, the “de minimis” threshold that hasn’t been updated since 1985.

The government is under pressure to raise the threshold, with online retailers eBay and parcel shipper UPS actively lobbying to make it cheaper for consumers to buy products from vendors abroad.

Import duties do not apply to all online purchases; electronics, for example, are already exempt. But they do attach to popular online purchases such as clothing, shoes and sporting goods, among other items.

For example, a $100 pair of women’s pants bought from Europe and shipped to Ontario would cost an extra $33.34 in duty and HST. A Chinese-made bicycle valued at $400 and imported to Quebec would cost an additional $117.54 in duty and tax.

 

Markets Insight

Given the volume of e-Commerce parcel traffic into Canada, particularly from the USA, relieving the burden of the administration of such a low deminimus value is a key concern. Although revenue from processing these parcels may be reduced, a higher threshold is likely to encourage shoppers to spend more, and thereby increase average order values – which in the long run will lead to higher gains, particularly for the local delivery infrastructure.

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