Airbnb warns federal government about overregulation

As municipalities across the country try to figure out their regulatory relationship with Airbnb, the short-term rental service has asked the federal government to hold off on making rules that would affect its business.

Ahead of next year's federal budget, the company has sent a letter to the House of Commons finance committee asking for the government to "refrain from overregulation" and urging Ottawa to take a "forward-looking approach on any taxation measures it may be considering."

The letter, sent in part to educate and appeal to those drafting the 2018 budget, reads like a game of Liberal bingo, ticking off categories that match up with the government's platform: income for women, more time for innovation and support for the middle class.

"It is through this democratization of capitalism that Airbnb is empowering people and helping them combat wage stagnation and worsening economic inequality," reads the submission.

​Airbnb claims over the last year 3.5 million international visitors have used the services and more than four million Canadians have used it to travel domestically. It also says a typical host, someone who shares their home 37 nights a year, earns an extra $3,200 annually.

"These are people [who] have turned to it to share their home very, very casually and any kind of regulatory model should keep that in mind," said Alex Dagg, manager of public policy for Airbnb in Canada.

Last year's budget held an unwelcome tax for Uber and other ride-hailing services. The levy imposes GST/HST on fares, much like they are added on traditional taxi services.

"I wouldn't describe it as being afraid," said Dagg, when asked if Airbnb is worried about a similar surprise.

"What we've tried to do is say to the federal government, we're here, we're happy to engage, we're happy to have conversation with you."

Patchwork of regulations

So far, those who study the industry think the government is listening to the San Francisco-based company.

Sunil Johal, policy director at the Mowat Centre at the University of Toronto, said while he doesn't expect to see an Airbnb tax in next spring's budget, the federal government does have an interest in corralling regulations across the country.

It just doesn't look like Canada has its act together.- Sunil Johal

In August, the Quebec government reached an agreement with Airbnb that will see the home-rental website collect a lodging tax on behalf of its hosts. (A deal Dagg said Airbnb would like to replicate in other provinces.)

Meanwhile, Vancouver passed legislation regulating short-term rentals in November. The policy allows homeowners and renters to list primary-only residences on sites like Airbnb for a licensing fee of $49 a year and a one-time application fee of $54.

And just this week, Toronto city council approved regulations that cap home rentals to 180 days a year and limit short-term rentals to a principal residence only. On top of that, homeowners won't be allowed to list secondary suites, like basement apartments, for short-term rental.

Different rules and regulations in different cities isn't ideal for tourists or companies eyeing Canada for business, said Johal, co-author the report, "Policymaking for the Sharing Economy: Beyond Whack-A-Mole."

"The risk of just having dozens of sets of rules for these companies across the country is that it just doesn't look like Canada has its act together," he said.

"That's a very subtle but clear market signal that maybe Canada doesn't have its regulator act together."

Disadvantage for Canadian companies: report

While Airbnb has already been working with the Canada Revenue Agency to educate hosts on how to report what they make on their income taxes, a more radical conversation has been bubbling about how the government should tax the service itself.

Rosalie Wyonch, a policy analyst with the C.D. Howe Institute, is calling on the government to make changes to the tax system to capture foreign providers of online services, including Netflix, Spotify and Airbnb.

In her report "Bits, Bytes, and Taxes: VAT and the Digital Economy in Canada" she argues that Canada gives foreign digital companies an advantage over domestic ones.

As it stands, foreign service providers are generally not required to collect and remit sales tax, said Wyonch. Instead it's up to the consumer to pay GST/HST.

"It's not so much that they specifically should be more regulated in Canada, it's that they currently are less regulated than Canadian companies," Wyonch said.

Wyonch estimates if the federal government amended the Excise Tax Act it could be looking at between $3.7 million and $5.6 million annually on room-sharing remittance. 

But she's not holding her breath.

"I believe that the political appetite for doing what I'm recommending is actually near zero," she said

"Last year, the government made the choice to make a specific change [with the Uber tax] as opposed to a general change. And given their rhetoric over the last two or three months about Netflix I think it's clear that they are not likely to go the general route."

If Wyonch's report ever does land on Prime Minister Justin Trudeau's desk, Dagg said Airbnb is open to talking.

"We're willing to engage with Canada on any of those kinds of issues," said the Airbnb spokesperson.

"But you know we pay taxes wherever required to pay taxes. We'll continue to try to be good partners. We believe we should pay our fair share."