Canadian Finance Minister Bill Morneau released his government’s 2017 budget today and while the spending promises may be underwhelming for some, the documents sets out an ambitious agenda for digital policy review. In fact, with changes to copyright, patent, broadcast, telecom, net neutrality, digital taxes, fintech, Canadian media, and Cancon all under consideration, the coming year will have enormous implications for the future of Canada’s digital policies.
The budget does include several spending promises, including $13.2 million over five years to support an affordable Internet access program, $50 million for kids coding programs, $29.5 million over five years for digital literacy, and $14.9 million for digitization of Indigenous language and materials. There is also new money for the growth of artificial intelligence sector and the much-anticipated revamping of innovation funding programs.
Yet the biggest digital implications may ultimately come from the policy reforms. First up may be new digital sales taxes. The budget includes a commitment to extend sales taxes to ride sharing companies such as Uber, a move that seems likely to ultimately lead to a broader extension of sales taxes to digital services such as Netflix.
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The Canadian Media Producers Association recently released its annual report on the state of screen-based media production in Canada. Despite the doomsayers who fear that the emergence of Netflix will result in less money for production in Canada, the report confirms that financing of Canadian television production continues to grow, reaching its highest point in the last five years. With $2.6 billion spent on Canadian television production, the sector remains healthy with support from licensing fees, tax credits and funding from a variety of sources.
More notable, however, is the growth of English-language Canadian television production, which has been backed with a major increase of foreign funding over the past three years. Foreign financing of Canadian English-language television production now exceeds all other sources of funding, with the exception of the combination of all provincial tax credits (both represent 18% of total financing). In other words, foreign financing now contributes more toward English-language television production than the licensing fees paid by private or public broadcasters, federal tax credits, Canadian distributors, and the Canadian Media Fund.
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The Canadian Heritage consultation on Canadian content in a digital world recently concluded and the department has now posted the responses. There are few surprises with many creator groups supporting Netflix and Internet taxes, while Internet providers and consumer groups oppose them (my submission can be found here). The Ontario government was the only provincial government to file a response. The Ontario Ministry of Tourism, Culture and Sport’s submission acknowledges that there is “no evidence of an overall Cancon policy failure that would justify revolutionary policy reform”, but leaves little doubt that the government is open to new Internet taxes to fund Canadian content.
The Ontario government previously worked toward a Netflix tax as part of the CRTC’s Let’s Talk TV consultation. Given the controversy that generated, it is a bit more cautious this time but its support is not difficult to discern. Its starting point is that all industry players in the Canadian media market be required to contribute to Cancon. The submission states:
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Canadian Heritage Minister Melanie Joly heads to UNESCO this week where, according to the Globe and Mail, she will be focused on making the case for a common approach on mandatory cultural contributions from companies such as Netflix. Joly states:
I’ve always said we are ready to have conversations with those companies and those platforms. We are already engaged with them, and will continue to do so. But on a general level, it is obvious that the more we are able to have a concerted approach among countries on this issue, the better we will be able to make sure it is a priority.
Joly’s goal would appear to be to develop a universal position at UNESCO that countries could then leverage to force companies such as Netflix to comply with local content regulations. I’m quoted in the article to the effect that efforts to harmonize sales taxes on digital services makes sense at a global level, but targeting companies like Netflix with new regulations or tinkering with the Internet in violation of fundamental net neutrality principles does not.
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Canadian Heritage Minister Mélanie Joly launched her surprise national consultation on Canadian content in a digital world last April with considerable excitement for the possibilities of revolutionizing policies born in an analog era. Joly spoke enthusiastically about the potential for Canadian creators to use digital networks to reach global audiences and for all stakeholders to rethink the cultural policy toolkit.
My Globe and Mail op-ed notes that submissions to the consultation closed last week and despite the hope for new, innovative thinking, many of Canada’s largest cultural groups placed their bets on extending a myriad of funding mechanisms to the Internet. Rather than overhauling older programs, the groups want those policies expanded by mandating new fees, costs or taxes on Internet services, Internet service providers, Internet advertisers, and even the sale of digital storage devices such as USB keys and hard drives.
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