Government will not impose a ‘tax on the internet’

The feds won't adopt a recommendation from the House of Commons Standing Committee on Canadian Heritage for a 5% levy to fund Cancon.
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A new report from the House of Commons Standing Committee on Canadian Heritage recommends the 5% levy currently imposed on BDUs to support Cancon production should be extended to broadband services. But the government has refused to consider the proposal.

“Our [government's] objective was always to lessen the tax burden on middle-class Canadians, so we will not be introducing a tax on the internet,” Pierre-Olivier Herbert, press secretary for the Ministry of Canadian Heritage told Playback Daily.

The report, Disruption: Change and Churning in Canada’s Media Landscape, released Thursday, contains 20 recommendations for the government to help improve local and regional access to media as well as combat the negative effects of media consolidation and digitalization.

The Committee studied the issues for over a year and invited 131 witnesses to give testimony. A major target of those witnesses: Netflix.

Because the SVOD is not required to collect GST/HST, Canadian companies are at a disadvantage, many argued. A law professor even presented that requiring Netflix to collect taxes on Canadian subscriptions could have brought in close to $31.2 million for the federal government and $56 million for the provinces in 2016.

Canadian BDUs are required by the CRTC to contribute 5% of broadcast revenues to the creation of Cancon, at least 80% of which must go to the Canada Media Fund. Rogers, Friends of Canadian Broadcasting, Canadian Wireless Telecommunications Association, and Cogeco all called on the committee to recommend that Netflix be required to collect the same taxes as Canadian cos and contribute to Canadian content production funds.

ACTRA, the union representing Canadian actors, has already issued a statement in favour of the recommendation that internet providers be required to contribute to Cancon production and denounced the government’s decision.

“We want to see Canadian stories on our screens and read Canadian news in the morning. The government has to act. Instead the Prime Minister seems to be avoiding the crisis,” said ACTRA president David Sparrow. “Canadian broadcasters have been contributing to the production of Canadian film and television for generations. This change would simply ensure that corporations that profit from media distribution contribute to the making of it.”

The CMPA said it is currently studying the recommendations, but could not comment at this time.

The report, which largely dealt with issues concerning local news media and journalism standards, also recommended that the government tax foreign news aggregators that publish Canadian news, and that it create an initiative to support Indigenous journalists’ training, which would be embedded within APTN and financed by programs supporting Canadian programming.

The Committee also had two recommendations specifically for the CBC. Taking on the arguments from media companies, including the Globe and Mail and Torstar, that the pubcaster is competing for ad dollars online, the Committee recommended that the CBC eliminate advertising from its digital platforms.

It also recommended that the CBC/Radio-Canada prioritize the production and dissemination of local news and programming by expanding its local and regional coverage across all of its platforms.

Herbert said the government will deliver its position on this report, along with the many other recommendations it heard throughout its Cancon consultations, in September when Minister Joly releases her cultural policy framework.

With files from Val Maloney

Image: Shutterstock