The ongoing furor over Netflix taxes remains one of oddest and most poorly understood public policy debates in recent memory. Part of the problem is that a “Netflix tax” has long been used to mean different things to different people. When first raised by the Conservative government, the issue had nothing to do with sales tax. Rather, a “Netflix tax” was a reference to a mandated contribution to help fund Canadian content, a position supported by various cultural groups and some provincial governments. The no-Netflix tax position took hold, however, and all three major parties adopted the position that they would not mandate contributions from online service providers such as Netflix.
More recently, the debate has shifted to Netflix tax as a sales tax with the goal of creating a “level playing field.” I tried to debunk the level playing field claims in this post and on Canadaland, but the claims of the need for a level playing field and sales tax continues. Yesterday, the NDP stated:
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After months of public consultation and debate, Canadian Heritage Minister Mélanie Joly will unveil the government’s plan for Canadian content in a digital world this week. Joly launched the digital Cancon consultation in the spring of 2016 by emphasizing that all policy options were on the table, but the choices have narrowed considerably in recent months.
My Globe and Mail op-ed notes that a potential Netflix tax was a non-starter due to a 2015 election campaign commitment, Prime Minister Justin Trudeau eliminated the possibility of an Internet tax in June, and the government has steadfastly (and rightly) defended net neutrality, meaning there will be no mandated prioritization of Canadian content on the Internet.
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The CBC’s report that the Canadian government is considering extending goods and services sales taxes to foreign-based digital services has sparked yet another round of articles and coverage of a possible “Netflix tax.” Some Conservative MPs were quick to pounce with claims the Liberals are pursuing a Netflix tax, yet the reality is a bit more complicated. At issue is not the culture contributions payment that is often called a Netflix tax. Despite calls for that form of Netflix tax, Canadian Heritage Minister Melanie Joly has been consistent in saying that the government will not extend mandatory Cancon contributions to Netflix.
In fact, this proposal is not targeted specifically at Netflix at all. Rather, it envisions the possibility of extending GST/HST to foreign-based digital services that are currently exempt from collecting and remitting sales taxes. While the law technically requires Canadian consumers to self-declare the sales tax they owe on those purchases, few are aware of the requirement and presumably even fewer actually do it.
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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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As Canadian Heritage Minister Melanie Joly’s consultation on Canadian content in a digital world nears its conclusion – comments are due by November 25th – the big issue remains how to pay for an ambitious culture agenda. Joly has emphasized the benefits of expanding exports, which she hopes will bring foreign dollars and more foreign investment in the sector. While a stronger global presence makes sense, many of the established cultural groups have voiced opposition to measures designed to attract greater foreign participation if it risks reducing the guaranteed Canadian role in productions.
For example, the CRTC’s decision to loosen some Cancon rules has elicited ongoing anger, despite the fact that the change would likely make productions with foreign entities more attractive, thereby enlarging the overall size of the industry in Canada. With similar opposition to market-based reforms designed to reduce dependence on the current system (pick-and-pay television channels, gradual reduction of simultaneous substitution), there is little reason to believe that Joly can count on support for expanded exports to pay the bills.
This post unpacks some of the cultural policy options that have surfaced in recent weeks. The post stems from a panel discussion at the University of Ottawa featuring a paper by Richard Stursberg and commentary from myself, the Globe’s Kate Taylor (who covered the panel here), and ACTRA’s Ferne Downey (Stursberg’s paper is here, full video of the event here).
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