Statement From Bernard Gilles, Revenu Quebec

Mandatory billing
in the restaurant
sector
Forum on Modernizing Sales Tax Collection
New York State
April 6, 2016
AGENDA
Introduction
Mandatory billing in the restaurant sector
Results
Questions
REVENU QUBEC Modernizing Sales Tax Collection in New York State April 2016
QUBEC AT A GLANCE
Largest Canadian province
8.1 million inhabitants (23% of Canadas population)
79% native French speakers
GDP: $357 billion (20% of Canadas GDP)
1 Canadian dollar = 0.75 U.S. dollar
REVENU QUBEC
Under an agreement reached by the federal and Qubec governments,
Revenu Qubec administers the GST in Qubec in accordance with the
rules set by the federal government.
The goods and services tax (GST) and the Qubec 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 Qubec sales tax (QST), which is calculated at a rate of 9.975% on

the selling price excluding the GST.
LOST 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.
WHY CREATE THIS PROJECT?
To reduce annual tax losses in Qubecs 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 Qubec governments 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.
SCOPE OF THE PROBLEM

Revenu Qubec 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
NECESSITY 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.
A 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.
MANDATORY BILLING IN THE RESTAURANT SECTOR:

A FOUR-PART PROJECT
1
Obligation to
provide a bill
Obligation to
produce bills using
the SRM
4 measures
4
Public awareness
campaign
3
Inspection
activities
10
DATA FLOW
11
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 bills authenticity
creates standardized accounting records for all

restaurants in Qubec
produces sales summaries that must be sent to Revenu

Qubec each month;
collects data from all Qubec restaurants which is stored

in a central database and analyzed to help detect
attempts at tax evasion
12
LEGAL ASPECTS
We adopted new legislative measures, including incentives to comply, in the
laws and regulations Revenu Qubec administers:
Act respecting the Qubec sales tax
Regulation respecting the Qubec sales tax
Tax Administration Act
13
KEY 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.
14
RECOVERED REVENUE EXCEEDS EXPECTATIONS

On March 31, 2015, the Qubec
government had recovered over
$940 million in lost taxes.
By 2018-2019, Qubec will have
recovered
$2.1 billion
in
consumer and income taxes that
would otherwise have remained
unpaid by restaurant operators.
15
OTHER 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.
16
THE 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 Qubec government will recover $42 million in

lost taxes per year.
17
A 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.
18
THANK YOU! ANY QUESTIONS?
19

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Mandatory billing

the goods and services tax (GST), which is calculated at a rate of 5%

the Qubec sales tax (QST), which is calculated at a rate of 9.975% on

LOST TAX REVENUE

WHY CREATE THIS PROJECT?

To reduce annual tax losses in Qubecs restaurant industry, which were

$136 million of QST charged by restaurant operators, but not remitted to

To strive towards the Qubec governments goal of ensuring tax fairness;

To foster healthy competition in the restaurant industry.

SCOPE OF THE PROBLEM

This step was necessary to:

ensure the project was politically accepted

document how income was under reported

accurately evaluate tax losses

NECESSITY AND PERTINENCE A THE SOLUTION

on restaurant-sector employees (loss of social benefits)

MANDATORY BILLING IN THE RESTAURANT SECTOR:

SALES RECORDING MODULE (SRM)

sales in its secure memory

sales information required to print bills bearing a barcode and a unique

creates standardized accounting records for all

produces sales summaries that must be sent to Revenu

collects data from all Qubec restaurants which is stored

Act respecting the Qubec sales tax

Regulation respecting the Qubec sales tax

Tax Administration Act

KEY SUCCESS FACTORS

Demonstrate the existence and scope of the problem.

Demonstrate technological capability using prototypes to gain political

Conduct a six-month pilot project to evaluate the impacts the new

Create working committees and collaborate closely with various partners

RECOVERED REVENUE EXCEEDS EXPECTATIONS

THE BAR SECTOR

Annual tax losses in the bar sector are estimated at

The Qubec government will recover $42 million in

A SOLUTION FOR THE FUTURE

THANK YOU! ANY QUESTIONS?

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