Canadian Heritage Minister Mélanie Joly has energetically crossed the country emphasizing the economic benefits of the cultural industries. Yet as the government conducts a national consultation on Canadian content in the digital world, my Globe and Mail tech law column notes that new digital taxes may ultimately play a starring role.
Joly has opened the door to an overhaul of Canadian cultural policy, but the million dollar – or perhaps billion dollar – question is how to pay for it. The industry has resisted policies that might increase foreign-backed productions, arguing that lowering qualifying requirements for the number of Canadians involved will lead to lost jobs and less distinctive content. Their hopes appear to rest primarily with the possibility of a series of new digital taxes. While new taxes are never popular, the possibilities include the proverbial good, bad, and ugly.
The good involves proposals to divert revenues from spectrum licences to cultural funding (effectively a spectrum tax invisible to consumers) and to extend sales taxes such as GST or HST to foreign digital services. The bad would involve the introduction a controversial “Netflix tax” that requires online video services to contribute a percentage of their revenues toward the creation of Canadian content. Joly has previously rejected a Netflix tax, but the prospect of millions in new revenues may be too tempting to resist.
If a Netflix tax proves to be a non-starter, the government may turn to the ugly: a tax on Internet service providers. A levy on Internet service has long been the holy grail for the cultural industries, who argue that broadcast on the Internet is the functional equivalent of conventional broadcast and that both should face similar funding requirements.
To date, the law has not supported that argument with the Supreme Court of Canada ruling in 2012 that ISPs are not “broadcast undertakings” for the purposes of the Broadcasting Act. However, Joly’s legislative overhaul could involve changing the law to allow for the imposition of new fees on Internet services.
The ISP tax would come at an enormous cost to other policy priorities. Internet access in Canada would become less affordable, expanding the digital divide by placing Internet connectivity beyond the financial reach of more low-income Canadians. The increased costs would also be felt by the business community, potentially undermining the innovation strategy currently championed by Navdeep Bains, the Minister of Innovation, Science and Economic Development.
The full column can be found here.