Airbnb tax revenue projected to be less than federal estimate

Parliamentary budget officer releases estimated revenues from GST/HST on platform-based short-term accommodation

Airbnb tax revenue projected to be less than federal estimate

The federal government’s plans to levy taxes on rentals facilitated through Airbnb and other digital platforms will not yield as much revenue as it expected, according to new calculations from the parliamentary budget officer.

In a new legislative costing note, the PBO published his estimates of the federal GST/HST revenue from short-term accommodations booked through digital platforms.

“Estimated GST/HST revenue was comprised of the estimated revenue of short-term accommodation in Canada, the proportion of revenue subject to GST/HST, and the federal GST/HST rate (5 per cent),” the note said.

To derive his estimates, the PBO used revenue of private short-term accommodations as reported by Statistics Canada; historical growth rates of GDP attributed to accommodation services from Statistics Canada, projected forward using PBO’s economic and industry models; and data on revenue of multi-unit hosts as documented by the CBRE group.

Revenues consisting of fees transferred from the host to the digital platform were excluded from the calculations, since such fees aren’t subject to GST/HST. Those operating on digital platforms as a business, such as hosts offering multiple rental units, were assumed to be already registered to collect and remit sales taxes. Small operators, meanwhile, were regarded as not registered for GST/HST.

The calculations excluded GST/HST revenue eligible for reimbursement through input tax credits, which was based on the proportion of digital platform users who indicated that their travel purpose was business related. The calculations also included just the 5% federal portion of GST/HST.

Based on those assumptions and data sources, the PBO projected that GST/HST on platform-based short-term accommodation in Canada would produce an estimated $35 million in federal tax revenue over the 2021-2022 fiscal year; $54 million over the 2022-2023 fiscal year; $64 million in 2023-2024; $75 million in 2024-2025; and $86 million in 2025-2026.

All in all, the PBO estimates that GST/HST federal revenue from the digital tax would total $314 million over the next five years. That’s in contrast to the Liberal government’s fall economic statement, where it forecasted that plans to start taxing GST/HST to all digital platform-facilitated short-term accommodations on July 1 would bring in $360 million.

The PBO noted that the recovery path could differ dramatically from his estimate because of the uncertainty surrounding COVID-19, adding that the behavioural response “was determined to be immaterial for this estimate.”

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