U.S. Criticizes New Streaming Tax Favouring Big Canadian Firms

The United States has raised concerns over a new Canadian fee imposed on American streaming companies, arguing it “disproportionately” benefits Canadian interests.

This week, the Canadian Radio-television and Telecommunications Commission (CRTC) mandated that foreign streaming services, such as Netflix and Spotify, give 5% of their Canadian revenues to support local news and Canadian content.

Members of the U.S. Congress and trade organizations have expressed alarm over the move, claiming it discriminates against American firms. Some U.S. organizations are considering retaliatory measures.

The U.S. Embassy in Ottawa says it is paying close attention to the new Online Streaming Act. This fee was the idea of the current Liberal government.

“The United States shares Canada’s interests in robust audiovisual and news industries, but (the Online Streaming Act) appears to target U.S. companies to disproportionately serve the interests of large Canadian companies,” a spokesperson said in a statement to the Globe and Mail.

“We encourage Canada to consider U.S. stakeholder input as it implements this bill.”

The legislation given Royal Ascent a year ago, aims to create parity between tech giants and traditional broadcasters, who already invest significantly in Canadian content.

The new fee is projected to add approximately $200 million annually to Canada’s broadcasting system. That’s a big chunk of change.

However, Tiffany Smith, vice-president for America’s National Foreign Trade Council, argues that the Canadian federal regulator is underestimating the existing investment U.S. TV and film production companies already make in Canada, including technology transfers and educational contributions to Canadian cultural industries.

Now, U.S. companies are required to “fund the work of people in another country, which is one of our closest allies and trade partners,” said Smith.

“This really is a new world we’re looking at in terms of looking to foreign companies to underwrite programs that the Canadian government has traditionally funded,” fired back Smith.

Smith pointed out the Canada-U.S.-Mexico trade agreement contains provisions allowing the U.S. to seek compensation or retaliate if it chooses to do so.

Trade Minister Mary Ng has claimed throughout the legislative and regulatory process that the bill complies with trade agreements. That remains to be seen, from what Smith is saying.

Amazon wasn’t happy about the new Online Streaming Act. It said it was “disappointed” in the decision, saying to The Logic it was “concerned by the negative impact it will have on Canadian consumers. We are assessing the decision in full, but this onerous and inflexible financial levy will be harmful to consumer choice.”

Wendy Noss, president of the Canadian chapter of the Motion Picture Association, representing the likes of Disney and Netflix, called the CRTC regulations “discriminatory” and said they would hinder foreign streamers from working with Canadian creators.

Spotify previously said that any streaming tax could mean it would increase pricing. If the federal government thinks these American firms will actually pay the fee? They’re out to lunch. Canadians will end up paying the price when U.S. companies increase prices by 5%.

Canada continues to try to extract digital taxes from big tech giants. An upcoming digital services tax would also target big tech, with the U.S. also saying this is a unilateral law targeting American companies.