News

Canada to collect 7 percent excise tax on interchange

June 16, 2002

TORONTO -- The Canada Customs and Revenue Agency will begin levying a GST (excise tax) of 7 percent on interchange, effective July 1.

While the government considers surcharge revenue exempt from taxation due to its inclusion in a financial transaction, it does not believe that Interchange falls within this category.

Under the revised guidelines, the excise tax will be levied at the financial institution level, the
processor level, the ISO/channel level, and again at the merchant level, according to Mischa Weisz, president and chief executive officer of TNS Smart Network.

Weisz has been fighting this decision with Canada's federal government for several weeks. "My belief is that the government has misinterpreted the purpose and place of the interchange fee, and that interchange, like surcharges, should be exempt from any taxation," he said in a news release.

Weisz added that he would not be surprised to see a rise in the surcharge rate to compensate for the additional cost of the GST.

According to Weisz, TNS, working with the support of its ISO base, plans to continue to fight
the ruling.