A Montreal hotelier is calling on the government to crack down on online travel agencies.
“I think it’s important for everyone to have the same rules and people that are doing business in this country have to be apply the same rules that we have to apply,” Germain said.
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Two industry behemoths — Expedia and Priceline — control about 90 per cent of online travel booking. The two companies own almost all of the other online brands.
Expedia Inc. owns Hotels.com, Orbitz, Travelocity, Hotwire.com, Homeaway and several others.
The Priceline Group’s brands include Booking.com, Agoda.com, Kayak.com and Momondo.
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The Alberta Hotel and Lodging Association (AHLA) said by taking a 15 to 25 percent cut off all their bookings, online travel agencies are siphoning $300 to $400 million out of the country annually, without paying applicable taxes.
“Most people would be completely unaware that the dollars they’re paying in making this reservation, all of the appropriate levels of government aren’t being paid,” AHLA president Dave Kaiser said.
The Canada Revenue Agency (CRA) won’t divulge whether online travel agencies pay taxes on their services, citing privacy concerns. However, it does say online companies without brick-and-mortar operations in Canada don’t necessarily have to collect and pay taxes. It is the rule that led to the controversial deal with Netflix.
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The CRA said “foreign companies that do not have a physical presence in Canada and make digital supplies such as online services are generally not required under current legislative rules to register and collect GST/HST because those supplies are considered to be made outside Canada.”
Germain says she’s tried to find out whether online travel agencies are paying taxes and has gotten nowhere.
“We call them, and we ask them, and they say they have no comments to make,” Germain said.
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Global News reached out to Expedia and Priceline for comment but only the former responded.
Expedia spokesperson Mary Zajac wrote, “Expedia is a global corporation with operations in dozens of countries worldwide. We adhere to applicable tax laws in each of those countries, and believe that the various taxes we pay are appropriate in light of our operations.”
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Another big concern for many in the industry is transparency with one particular part of online reservations.
If a customer prepays for a hotel room with an online travel agency, they’re charged a rental fee. They’re also charged an extra amount of approximately 10 to 15 percent, depending on the province. That charge is usually called “taxes and fees.” The online travel agency only turns over the taxes on the hotel’s wholesale price to the hotel. It holds onto the extra amount that was charged on its commission.
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Critics argue that extra amount appears to consumers as a taxes.
“It’s revenues,” Germain said. “And the companies that are doing business in our country have to pay the taxes. Especially the ones they collect.”
The federal government now says it will be analyzing this issue in the new year.
Asked for comment by Global News, a spokesperson says “this is an issue that we’ll look at carefully during our pre-budget consultation.”
The Canadian Taxpayers Federation (CTF) says companies like Expedia appear to be exploiting a loophole. Its activities may be online but it does have several offices in Canada.
The CTF also says Canadians booking travel online should know what taxes are being paid.
“Vagueness isn’t a very good defence because you simply make it clearer,” Aaron Wudrick, CTF’s federal director, said. “A comply could make it clear upfront exactly what every line item is, what part is taxes, what part is fees. And by doing that, consumers would know exactly what they’re paying.”