Canada’s goods and services tax (GST) and harmonized sales tax (HST) aren’t currently imposed on most services offered by Uber and other ride-share companies. That is expected to change as of July 1, 2017.

Prime Minister Justin Trudeau’s Budget 2017 reads, in part: “Amend the definition of a taxi business under the Excise Tax Act to level the playing field and ensure that ride-sharing businesses are subject to the same GST/HST rules as taxis.” This would be achieved by redefining ride-share firms as taxi companies.

Current law allows transportation network company (TNC) drivers to exempt the first C$30,000 of sales from tax. However, drivers working for traditional taxi companies can’t claim that exemption. A tax on ride-share services, says Finance Minister Bill Morneau, is “consistent with what Canadians expect.”

Instead of taxing ride-share services, Uber argues, the government should extend the tax benefit their drivers claim to traditional cab drivers. Ian Black, regional general manager for Uber Canada, says, “Federal tax laws already offers small business owners a break on collecting sales tax, but unfairly exclude tax drivers. The best way to support taxi drivers and level the playing field is to extend the same exemption to them.”

Morneau’s goal with the new budget is to “put Canadians to work, and to make Canada more innovative and more globally competitive.” Uber argues that a tax on its services is, in fact, a “tax on innovation.” Black said Canada should be working toward making “sustainable transportation more affordable, not more expensive.”

If the budget is adopted and commercial ride-sharing companies register for GST/HST and charge tax on their fares as of July 1, the government expects to bring in an additional $3 million in 2017–18.

Learn how tax automation software facilitates GST/HST compliance.