The prospect of a “Netflix tax” will be back in the spotlight this week as Canadian Radio-television and Telecommunications Commission chair Jean-Pierre Blais unveils the CRTC’s latest round of rulings stemming from its review of broadcast policy. While it is unlikely that the commission will impose a new fee on Netflix subscribers to support the creation of Canadian content, it will not be for lack of lobbying on the issue.
Despite the fact that a Netflix tax would yield less than one per cent of the annual expenditures on Canadian television financing (about $15 million dollars in support for a sector that spent $2.3 billion last year), most content groups called for mandatory Canadian content contribution funding from online video providers during the CRTC’s TalkTV hearings. My weekly technology law column (Toronto Star version, homepage version) notes that amidst the clamour for new funding, there was one voice that attracted the most attention – the Government of Ontario.
Ontario’s public position on the need for a Netflix tax was premised on creating a “level playing field” with conventional broadcasters by expanding the regulation of new media services. After Canadian heritage minister Shelly Glover flatly rejected the Ontario proposal last September (“We will not allow any moves to impose new regulations and taxes on Internet video that would create a Netflix and YouTube tax.”), Ontario Minister of Tourism, Culture and Sport Michael Couteau tried to backtrack. In fact, a spokesperson claimed that “the [Ontario] government is not advocating any CanCon changes, or that any specific regulations be imposed on new media TV, until more evidence is available.”
Yet according to documents obtained under the Freedom of Information and Protection of Privacy Act, Ontario government officials spent months developing a submission in support of a Netflix tax. Work on the issue started in early 2014 as the government retained McCarthy Tetrault, a leading Bay Street law firm, to produce a report on policy options, and hired Rita Cugini, a former CRTC commissioner, to provide editorial services. By March 2014, an internal government presentation identified the government’s preliminary position as supporting expanded regulation of new media TV, including Cancon requirements and increased regulation of foreign online video providers.
Several months later, the Ontario position solidified with a recommendation that officials acknowledged “represents a significant change to the regulatory system.” The recommendation? Expand new media TV regulation, despite expectations that such a change would be opposed by virtual all non-creator stakeholders, including consumers and broadcasters.
Assistant deputy culture minister Kevin Finnerty presented the position to the CRTC in early September, resulting in a political firestorm that internal documents reveal left officials scrambling to engage in damage control. Initial drafts of speaking lines for Premier Kathleen Wynne sought to downplay the government’s position, stating that the minister had revised his position and was not advocating for any Cancon changes or regulations. Those lines were amended to state that the government was supportive of a separate proceeding on the issue.
However, the weakness of the Ontario government position could be found in one other speaking line, which stated “the ministry is recommending an approach that responds to the wants and needs of Canadian consumers while continuing to promote a wide variety of programming, programming services and Canadian content.”
Yet the reality is that the Ontario government spent months developing a position in which the interests of consumers were entirely ignored. Internal documents repeatedly emphasized support for more regulation, while admitting that consumers would be unhappy with change. This week the CRTC is likely to side with consumers, effectively rejecting an expensive Ontario government campaign to convince the regulator to establish a Netflix tax.
I don’t know why the government has to justify doing what they should have been doing all along, and that’s applying tax to streamed content. Netflix, and others doing the same, provide content for a fee. It’s a business and should be subject to the same taxes as my local cable bill. Will the total tax add up to a pittance? Maybe so but what’s that matter? We have to pay tax on most goods and services so why should Netflix and the ilk be exempt? As more and more content is delivered over the internet, all levels of government had better hurry up and put some concrete rules in place now. Oh, and enough with the “Canadian content” baloney. Just get on with business and that is to apply tax fairly to all services including Netflix and Google. It’s not about unfair advantage, it’s not about our sovereign content or any other gobbledygook, it’s about applying tax fairly to all.
I’ve always wondered why the $7.99 fee from Netflix which appears each month on my credit card statement is not subject to HST. I pay HST on my monthly internet services charge (and the separate Dry Loop charge because I don’t have landline phone service) and I consider those to be essential utilities.
Personally, I would have no issue if HST was added to my monthly Netflix fee.
My only concern would be that collecting HST from Netflix might create a regulatory opening for Canada’s telecom/broadcasting mega corporations to insist that draconian restrictions be imposed for their own self interests (blocking proxy services that allow me access US Netflix or BBC iPlayer, forcing me to use Bell Fibe or Rogers Cable with their download limits, mandatory bundling of Netflix with Shomi and CraveTV, etc.)
That’s because Netflix is a US company that has no presence or operations in Canada, and as such, Canadian law does not apply to it. The government is powerless to tax them or compel them to do anything. They’ve very deliberately avoided having any employees or assets in Canada, despite offering a service to Canadians.
The government likes to pretend that they have jurisdiction over Netflix and similar companies, which worked well enough until Netflix simply declared that they’re not subject to Canadian law, and refused to obey CRTC orders. Since this all happened in a real-time showdown between the chair of the CRTC and the Netflix representative, it was pretty dramatic stuff. You don’t normally see a company rep telling the CRTC chair to his face that they’re not going to obey his orders.
When will the industry start to understand how Canadian’s want to watch series, movies etc… instead of forcing people into this pre-21st Century service. It reminds me a lot of the recording industry’s refusal to step into the “Tech Century” instead trying to force people into paying for what they no longer want or need, then blaming falling revenue on pirates or people who steal… The Broadcast industry needs to get it’s head out of it’s butt and wake up to the opportunities that Netflix and others have taken advantage of…there is lots of room for competitors they just need to step into the game.
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I would like to know how much ‘revenue’ Bell, Rogers and Shaw receive from the Federal and provincial governments and their corporations, agencies, etc. that are disguised as advertisements, cable and periodical funds, grants, etc. and all the other hidden ways money is funneled back to these private corporations. The OLG for example, spent about 1.5 billion dollars in three years on ‘marketing’ most of which was no doubt done on media owned by these companies. This is a massive subsidy that warps the playing field yet no one seems to notice. I would be happy to pay a ‘Netflix tax’ if these companies would be willing to return those monies back to Canadians so I could afford to pay the tax.