A new report from The Star takes a look at the viability of a so-called “Netflix tax,” a tax that could potentially be levied on digital streaming services like Spotify, Amazon, and, of course, Netflix, paid for by consumers.
Since the foreign-operated streaming company has offered its services in Canada, it hasn’t been subject to any relevant sales taxes under current laws due to the fact that the company doesn’t have a substantial physical presence in Canada.
Now that the provinces of Québec and Saskatchewan have joined the growing list of jurisdictions now taxing the sale of digital streaming services like Netflix, the issue of whether they should be subject to a federal tax has once again taken headlines. The two provinces are following a global trend that has seen regulators in Europe and Asia introduce tax and content requirements for online broadcasters.
According to the report, these taxes have, “according to some estimates, resulted in hundreds of millions of dollars in lost revenue that would have gone into the Canadian economy over the years since Netflix first set up shop north of the border in 2010.”
This shift has caught the attention of legislators and tax authorities, many of whom are eager to “cash in” on the trend. Québec alone expects to raise $154.5 million CAD from that move over the next five years.
“It’s absolutely weird to me that Justin Trudeau adopted a talking point from Harper and ran with it,” says David Sparrow, national president of the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA). “It’s so ironic that we have to pay GST on all the services we receive, but the one that’s not collected is by a foreign service provider. This should have been a no-brainer. It makes sense that Netflix should collect the taxes like everybody else, but somehow it became this political football.”
While there hasn’t been much legislative movement on Ottawa’s end, Netflix has expressed that it will comply with any government regulation and will collect taxes if requested to do so.
“There was no agreement or special deal on taxation of any kind,” the company wrote in a filing to the legislative review panel. “We will comply with tax laws if and when they legally are extended to services like Netflix.”
The most vocal support for the “Netflix tax” has come from local broadcasters like Rogers and Bell, who think that the Canadian government inadvertently created an unlevel playing field by failing to tax streaming services. These local broadcasters are forced to collect the taxes, which, in turn, make their service comparatively more expensive and therefore less competitive.
Other, like law professor Michael Geist, defend the rights of digital streamings, claiming that these companies are making significant contributions to the country without regulation.
“Calls to regulate due to so-called existential threats, level playing fields, or European models ring hollow against an evidence that points to remarkable Canadian cultural success story without new taxes or regulation,” Geist wrote in a blog post.
The Canadian legislative panel is set to give its final recommendations next year, and, at that point, it will be up to the sitting government to decide the course of action.