This week my regular technology law column (Toronto Star version, homepage version) focused on the long election campaign and the prospect that digital issues might get some time in the spotlight. The column pointed to three broad themes – what comes after Bill C-51, the Trans Pacific Partnership, and a digital strategy 3.0. As part of the digital strategy discussion, I stated that questions abound, including “are new regulations over services such as Netflix on the horizon?”
Prime Minister Stephen Harper addressed that question yesterday with a video and tweet in which he pledged that the Conservatives will never tax digital streaming services like Netflix and Youtube. Harper added that the Liberals and NDP have left the door open to a Netflix tax, but that he is 100% opposed, “always has been, always will be.” Both opposition parties quickly responded with the NDP saying they have not proposed a Netflix tax and the Liberals saying they have never supported a Netflix tax and do not support a Netflix tax.
So is this much ado about nothing?
Not exactly. First, there are groups and provincial governments that support a Netflix tax or mandated contribution to fund the creation of Canadian content. These include the Ontario and Quebec governments along with many creator groups. Earlier this year, I obtained documents under the Ontario Freedom of Information and Protection of Privacy Act that showed that the Ontario government spent months working toward a recommendation to expand the regulation of new media, including Canadian content requirements and increased regulation of foreign online video providers.
Second, while the Liberals and NDP have not proposed a Netflix tax, they have called for requirements that online video providers disclose revenues, Canadian content availability, and subscriber numbers to Canadian regulators. This is a very soft form of regulation that Netflix and Google have rejected as beyond the power of the Broadcasting Act. Providing information to allow for more informed regulatory analysis does not seem particularly unreasonable, but the companies unsurprisingly fear that that analysis could ultimately lead to calls for more regulation or payments.
Third, the real Netflix tax is the prospect of a levying sales taxes on digital products such as music downloads or online video services. It was the Conservatives that raised this possibility in the 2014 budget, launching a consultation on the issue that garnered supportive comments from companies such as Rogers, which noted that Canadian-based online video services such as Shomi operate at a disadvantage since they collect GST/HST, but Netflix does not. With many countries moving toward some form of digital taxation (as I noted in a January 2015 column on the issue, the real challenge lies in the cost of implementation), it seems inevitable that Canada will do the same in order to level the playing field and recoup a growing source of revenue. The Conservatives would presumably seek to differentiate between a generally applicable sales tax and a tax or fee targeting online streaming services, though many may feel it is a distinction without a difference.
Given the context, I think discussion of a Netflix tax (whether the debate is about supporting Canadian content or taxation of digital services) is fair game. However, my concern is that it distracts from far more important digital policies. As I noted in my column, questions include what do the parties plan to do after Bill C-51? Where do they stand on specific provisions in the TPP? Are there more changes coming to the wireless sector to increase competition and lower consumer costs? Will the parties support programs that ensure both universal access and address affordability concerns that have left millions of Canadians on the digital sidelines? Do the parties have any policies planned to support Canadian content or to address the future of the CBC? Are reforms to the copyright notice-and-notice system that has resulted in Canadians facing thousands of demands for settlements forthcoming?
No shortage of questions that are not easily answered in a tweet.
I highly doubt employing a “Netflix” and “Youtube” tax are the first thing on the other political parties’ mind. This appears to be yet another desperate attempt by Harper to earn back people’s favour.
Not happening with me because he’s already caused too much damage with stupid bills like C-51 (i.e. spying on Canadians is now fair game as is restraining someone indefinitely without a trial if they are even “suspected” to be a terrorist) and C-59 (hope you don’t mind dealing with coughing and sneezing federal employees because their sick days are going to get capped at 5 days else they go on disability; if you work for the government, enjoy being fingerprinted and having a credit check run on you for no good reason). Why have people supported this second-rate leader for so long again?
I could see the Ndp not only saying they would bring in a streaming tax but make online sites have Canadian content rules in place as well this would win them a ton of votes.
As with bill c51 I don’t agree with it one bit but the extreme left is no better saying you should not be arrested on thought or threats but only on action.
Same opinion. I wanted to see this. 🙂
stylish Bedding Canada
“… comments from companies such as Rogers, which noted that Canadian-based online video services such as Shomi operate at a disadvantage since they collect GST/HST, but Netflix does not.”
This is an inappropriate comparison. Shomi is currently subject to HST because it is part of Rogers’ Canadian-based cable service.
When/if Rogers releases Shomi as an internet-based content service, independent of its cable delivery system, perhaps the question should be, why does “everything” deserve to be taxed to death in the first place?
This is an issue?
What a farce……Canadian Netflix is a waste of time…anyone with a serious need for netflix goes to the American or UK site through a proxy.
This stupidity has no place in the election, no does any discussion of C51……the only way to get around it now is Destroy Harper and reverse the bill.
Trudeau really screwed up agreeing to this bill…….cost him my vote.
PS, thoughts and threats are NOT actions….and the RCMP only re-act to situations…..they don’t and can’t act on what someone might do. AS IT Should be.
yes you are right
@ Jayme : it is possible to think something without actually doing it 😉 Far less possible to “undo” an arrest (and all the records that go with it) not to mention never being able to answer “no” to “have you been arrested for anything?” whether just or not…
Streaming Tax : Time to setup video streaming sites offshore 🙂 Is the Canadian government stupid enough to think transnational dot-com millionaires/billionaires can’t get beyond these petty gestures and the only people they limit the creativity of are the common man? Sucks for the class of society that can’t afford lawyers on a whim : makes it far easier for runts like me who see the ruling governments of North America as murderous pirates/invaders who proudly 🙁
Oh… for those that don’t have it already; I setup a US netflix proxy for my own use prepaid on an unlimited virtual server in the US ’til 2020 … http://media-magic.ca/netflix.pac is the “Proxy Autoconfiguration URL” : works across many platforms… feel free to open the file and reach which sites it redirects through my proxy server(s) ; I expect this to be around ’til at least 2020 if not longer …
I wondered why Netflix doesn’t charge GST/HST. I looked at the CRA website to understand why. First, I checked the Netflix corporate info on their site. It seems that they have no offices in Canada, which means they are not resident here.
A non-resident person who is carrying on business in Canada and making taxable supplies is required to register for GST/HST and collect it.
Looking at the GST/HST rules on when a person is carrying on business in Canada, it appears that the CRA’s interpretation of the rules is that Netflix and similar services are not carrying on business in Canada. http://www.cra-arc.gc.ca/E/pub/gl/p-051r2/p-051r2-e.html#P335_33511
Technically, a person subscribing to Netflix or similar services are importing intangible personal property and should be self-assessing GST/HST. I don’t see CRA or anyone else talking about enforcing that; I expect it would cost more to administer than they would collect if people voluntarily did that. Even more expensive to administer if they were forcing people to self-assess.
Pingback: Election issue – the Netflix tax, “much ado about nothing?” « Quotulatiousness
I would hope that the drivel provided by netflix to subdue the masses into a lull, taking their attention away from what is important in this world is not at the top of the list of issues for any party member. Hey, if your vote can be bought by telling you that you won’t have to pay a few bucks a year in tax, you need help. But I’ll tell you, many people I know would go into a murderous rage if you threatened to fool with their netflix “fix”. So sad. I’m looking forward to a new record in “are you kidding me?” elections. Junkflix of all things.
In any case, I see no reason whatsoever why this provider and all like them are not taxed. And for all those who want to whine, just remember when services are cut and taxes rise (for you), about how some don’t carry their fair share of the load. Pay too much gas tax? Would hurt so bad if some who don’t pay tax, did pay. But no one ever thinks of it that way. Enjoy staring at your screen.
There is a huge difference between paying a tax like everyone else and maybe Netflix should but what many are pushing for is more then a typical hst style tax they wanta tax in the area of 20-30% why so Netflix can’t compete and packs it up.