"Netflix Tax" Proposal Rejected in Canada

Netflix generic - Getty - H 2020
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A landmark report instead recommends Hollywood streaming services be required to invest in Canadian programming without an "extra levy" imposed on local subscribers.

A new report on Canada's broadcasting and telecommunications sector has urged the federal government to require foreign streaming services like Canadian market leader Netflix to invest in local programming.

But a seven-member panel led by former cablecaster Janet Yale has rejected any direct tax to be aimed at internet giants like Google, Amazon and Facebook similar to "digital taxes" being considered by governments in Europe.

"We want to be clear that we are not recommending that Canadian content be supported by the so-called 'Netflix Tax' — charging consumers an extra levy on subscriptions to such services as Netflix," the report argued. Instead, the panel recommends the federal government compel online players to contribute an unspecified portion of their local revenues to Canadian content programming.

"It is more appropriate to establish a regime that requires such online streaming services that benefit from operating in Canada to invest in Canadian programming that they believe will attract and appeal to Canadians," the Yale panel report states.

The federal government is expected to act on the recommendations of the long-awaited Yale report by the end of 2020. The Canadian report diverges from Europe where France, for example, has passed a “GAFA tax” that targets companies including Google, Apple, Facebook and Amazon as it imposes a 3 percent levy on tech giants, based on their global and French market revenues.

Netflix and Google are unregulated in Canada, unlike local broadcasters and cable players that contribute a share of their revenues to subsidize local TV production. And U.S. streamers are increasingly making Canada their latest home away from home as they take advantage of local incentives, soundstages and production crews.

Allowing U.S. digital players to remain unregulated and untaxed appears to vindicate a 2017 deal between the federal government and Netflix that required the online video giant to spend at least $400 million on Canadian film and TV investment over five years, as it established a Canadian production hub in Toronto and Vancouver.

Netflix recently reported it met that spending commitment three years ahead of schedule and will continue to invest heavily on originals in Canada, while also commissioning or licensing local movies and TV series for its global network.

"We all have a role to play in supporting the future of film and television being created in Canada. We look forward to working with the government as it proceeds to modernize Canada’s broadcasting and telecommunications laws. The local industry is flourishing. We will continue investing in made-in-Canada productions and stories, bringing them to the world," a Netflix spokesperson said in a statement after the blue panel report was made public.

The Yale panel recommendations urge the federal government to similarly compel rival U.S. streaming services in Canada "to devote a portion of their program budgets to Canadian programs." The goal, the panel added, is increasing investment in local content, without seeing the cost of streaming subscriptions directly rise due to a consumption tax.

At the same time, the panel recommends that all foreign streaming services be required to collect a federal sales tax from their local subscribers, a consumption tax that Canadians pay on all goods and services.