Statement from Bernard Gilles, Revenu Quebec

Mandatory billing in the restaurant sector

Forum on Modernizing Sales Tax Collection

New York State

April 6, 2016

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REVENU QUÉBEC ― Modernizing Sales Tax Collection in New York State – April 2016

AGENDA

• Introduction

• Mandatory billing in the restaurant sector

• Results

• Questions

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QUÉBEC AT A GLANCE

• Largest Canadian province

• 8.1 million inhabitants (23% of Canada’s population)

• 79% native French speakers

• GDP: $357 billion (20% of Canada’s GDP)

• 1 Canadian dollar = 0.75 U.S. dollar

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REVENU QUÉBEC

• Under an agreement reached by the federal and Québec governments, Revenu Québec administers the GST in Québec in accordance with the rules set by the federal government.

• The goods and services tax (GST) and the Québec sales tax (QST) are collected on sales or supplies of most property and services:

– the goods and services tax (GST), which is calculated at a rate of 5% on the selling price.

– the Québec sales tax (QST), which is calculated at a rate of 9.975% on the selling price excluding the GST.

5LOST TAX REVENUE

• The underground economy represents about 4.2% of the GDP.

• Losses in government revenue are estimated at $3.5 billion.

• The losses are concentrated in certain sectors of the economy.


6WHY CREATE THIS PROJECT?

• To reduce annual tax losses in Québec’s restaurant industry, which were estimated at $420 million for 2007-2008.

– $136 million of QST charged by restaurant operators, but not remitted to the government.

• To strive towards the Québec government’s goal of ensuring tax fairness; all taxpayers must pay their fair share to fund public services.

• To ensure that taxes paid by customers are remitted to the government and that restaurant establishments report all their income.

• To foster healthy competition in the restaurant industry.


7SCOPE OF THE PROBLEM

• Revenu Québec confirmed the scope of the problem using a representative sample of restaurants:

– Inspectors went into restaurants as clients and bought meals (10 times for each selected restaurant)

– They made unannounced visits to find the meals they bought in the sales recording systems

• This step was necessary to:– ensure the project was politically accepted – document how income was under reported– accurately evaluate tax losses


8NECESSITY AND PERTINENCE A THE SOLUTION

• We demonstrated the impact of the problem:– on government finances– on fair competition– on restaurant-sector employees (loss of social benefits)

• We showed the limitations of the methods that were being used by tax administration bodies to deal with the problem.

• We acquired the political support needed for the success of the project.


9A LARGE-SCALE PROJECT

• 3 years of implementation.

• 33,000 SRMs installed in close to 20,000 establishments over a period of 14 months.

• Implementation costs: $34.4 million.

• Subsidy program for restaurateurs: $53 million.


10MANDATORY BILLING IN THE RESTAURANT SECTOR: A FOUR-PART PROJECT

4 measures

2Obligation to produce bills using the SRM

1Obligation to provide a bill

4Public awareness

campaign

3Inspection activities


11DATA FLOW


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SALES RECORDING MODULE (SRM)

At the heart of the technological solution, the SRM: •records sales in its secure memory

•transmits sales information required to print bills bearing a barcode and a unique digital signature that guarantee each bill’s authenticity• creates standardized accounting records for all

restaurants in Québec

• produces sales summaries that must be sent to Revenu Québec each month;

• collects data from all Québec restaurants which is stored in a central database and analyzed to help detect attempts at tax evasion

13LEGAL ASPECTS

We adopted new legislative measures, including incentives to comply, in the laws and regulations Revenu Québec administers:

– Act respecting the Québec sales tax– Regulation respecting the Québec sales tax– Tax Administration Act


14KEY SUCCESS FACTORS

• Demonstrate the existence and scope of the problem.

• Demonstrate technological capability using prototypes to gain political support.

• Conduct a six-month pilot project to evaluate the impacts the new measures could have on restaurant operations.

• Create working committees and collaborate closely with various partners and organizations of the restaurant sector.

• Put in place a support team for restaurant operators.

• Develop good communications strategies.


15RECOVERED REVENUE EXCEEDS EXPECTATIONS

• On March 31, 2015, the Québec government had recovered over $940 million in lost taxes.

• By 2018-2019, Québec will have recovered $2.1 billion in consumer and income taxes that would otherwise have remained unpaid by restaurant operators.


16OTHER BENEFITS

• The cost to inspect a restaurant has decreased from $4,400 to $190 (a 96% reduction).

• An inspection that used to take 70 hours now takes only 3 hours.

• The number of annual inspections has increased from 120 to 8,000 and most of the work can be done electronically with minimal disruption to the business.


17THE BAR SECTOR

• Since February 1, 2016, all operators of bars and resto bars are also required to meet the same obligations.

• Close to 6 200 establishments.

• Annual tax losses in the bar sector are estimated at $76 million.

• The Québec government will recover $42 million in lost taxes per year.


18A SOLUTION FOR THE FUTURE

• This solution was developed in such a way that it could be applied to other sectors, such as the service and retail industries.


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THANK YOU! ANY QUESTIONS?

Documents

Statement from Bernard Gilles, Revenu Quebec