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.
Netflix is the top target, as the streaming giant is on the receiving end of demands to extend sales taxes and implement a Cancon contribution tax on foreign online video providers. For its part, Netflix highlighted its investment in Cancon in its submission, noting that Canada is now one of the top three locations worldwide for its commissioned original productions and pointing to dozens of Canadian programs that it has licensed or helped finance.
Yet groups such as ACTRA, the Writers Guild of Canada, the Canadian Media Producers Association, and the Directors Guild of Canada remain unconvinced, arguing that the government should require Netflix to contribute a percentage of its revenues toward the creation of Canadian content.
If implemented, such a Netflix tax could have far reaching effects. For example, ACTRA recommends that any online video service that distributes broadcast content with more than 2,000 subscribers be required to contribute 5 per cent of its gross revenue toward independent Cancon creation funds. The proposal could mean that many services block Canadian subscribers to avoid the mandated payments, resulting in decreased online video competition in Canada. In fact, the Directors Guild of Canada wants even more, running into the hundreds of millions of dollars annually.
The rumoured demands for a new tax on Internet access also surfaces with many submissions calling for a new requirement on ISPs to contribute a portion of their revenues for Cancon creation. Groups play down the impact on the affordability of Internet access, with the WGC arguing that an additional 5 per cent cost on Internet services is “minor, bordering on insignificant for virtually all Canadian consumers.” Recent CRTC data reported that Internet access revenues was nearly $10 billion last year, suggesting that an Internet access tax could cost consumers at least $500 million annually.
Not only are new digital services the target of new tax proposals, but ACTRA also supports extending the private copying levy, whose origins date back to the cassette tape, to newer digital storage devices. The creation of an iPod tax was roundly rejected several years ago, yet the group asks Joly to apply the fees to iPods, USB keys, and hard drives when it next reforms the Copyright Act.
Joly opened the consultation by saying that “for a long time, politicians have been afraid to deal with these difficult issues.” As she now faces the unenviable choice of promoting new Internet taxes over the objection of companies and consumers or implementing new export-driven policies that fall short of the expectations of cultural groups, it may be easier to comprehend why previous politicians were reluctant to re-examine longstanding Cancon policies. The full column can be accessed here.