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“Even if the number is hundreds of millions a year in lost revenue rather than $1.3 billion, that would be significant for the provinces and the federal government and for Canada Post,” said Karl Littler, vice-president at the industry association Retail Council of Canada. He said the study’s methodology is sound and helps to substantiate widespread anecdotal reports about incoming e-commerce shipments.

“There is a vulnerability for Canadian merchants generally if a bunch of stuff is coming in tax and duty free, and for online merchants in particular. From our merchants’ perspective, that is an unlevel playing field.”

If consumers search for goods online and finds them priced cheaper at a foreign retailer than at a Canadian one, Littler said, they will be more motivated to buy internationally if they believe they do not have to pay taxes or duties.

Canada Post officials said in an emailed statement that the mail carrier “collects and remits all duties and taxes we are required to collect as instructed by the Canadian Border Services Agency (CBSA). As part of the global postal network, we’re proud to deliver mail and parcels to Canadians from around the world.”

Littler noted that the CBSA “sets an unofficial de minimis level in keeping with their capacity to process parcels. If it’s a $1,000 item you are almost certain to pay duties and taxes. If it is a $50 item, you are highly unlikely to pay duties and taxes. There is a greater incidence of collection the higher up the value scale you go.”

The study found that postal sales tax collection was higher (52 per cent) on more expensive items, averaging about $200 versus lower priced items, where it was collected on three per cent of items.

The CBSA said it would provide a comment when it has “thoroughly reviewed” the study.

Financial Post

hshaw@nationalpost.com

Twitter.com/HollieKShaw