Digital media providers face calls for tax
CBC, media producers, actors repeat call for internet tax and Netflix tax
TORONTO — The Canadian Broadcasting Corporation, media producers and actors are once more calling for a tax on internet service providers and online streaming services such as Netflix Inc. to fund Canadian content despite Ottawa’s insistence it will do no such thing.
In submissions to the federal broadcast regulator, the CBC, the Canadian Media Producers Association and the Alliance of Canadian Cinema, Television and Radio Artists argued internet providers should contribute financially to the broadcasting system given Canadians are increasingly ditching cable packages to watch video online. The CBC also argued that internet providers should favour Canadian content — a tactic that could undermine net neutrality.
The submissions are part of the Canadian Radio-television and Telecommunications Commission’s consultations on future programming distribution models. Heritage Minister Mélanie Joly ordered it to report on potential models by June 2018.
Canadians may have assumed the issues of internet taxes and future content consumption models were closed with the Creative Canada strategy, which Joly released in September after more than a year of consultations on how to support Canadian content in the digital era.
But the strategy didn’t contain specifics on how Canadian content will be funded. Instead, Joly asked the CRTC to hammer out the details.
Under existing legislation, broadcasters must contribute a percentage of revenue to fund Canadian programming. The funds have declined as TV revenues stagnate. Netflix and other video streaming services were explicitly excluded from this regime with a digital media exemption in 1999.
Joly has repeatedly stated the government will not tax internet service providers to fund content, citing the need for affordable access. Nor does it plan to tax Netflix, which currently does not collect and remit sales taxes.
Joly did, however, sign a deal with Netflix to invest $500 million in production in Canada over the next five years. Some saw this as a boon for producers, but others were wary since Netflix does not have to follow the same strict Canadian content requirements that local broadcasters.
Creative groups want to get rid of different treatment for online content. Their submissions called for legislative change so internet providers and video streaming services must pay into the system outlined by the Broadcasting Act.
Submissions from all parties, including the country’s largest internet, TV and wireless service providers, agreed Canadians will increasingly use the internet to watch video and listen to music. No one disputes the internet is here to stay.
But fragmentation in new media has strained traditional business models of advertising and subscriptions, CBC submitted. At a minimum, it said the new rules should require streaming services, wireless carriers and internet providers to contribute to Canadian content like traditional cable and satellite players.
“This is essential to ensure a level playing field among domestic players and between domestic and foreign players,” CBC wrote.
It also proposed regulations to require service providers to enhance the visibility of Canadian programming, a proposal that could flout net neutrality principles that all content should be treated equally. Finally, it repeated a call for additional annual funding of $400 million in order to go ad free.
ACTRA, which represents 23,000 performers, noted that Canada’s film and TV industry is thriving despite the challenges. But it wants internet providers to contribute financially to Canadian content. Approximately two thirds of fixed internet traffic at peak times is used to watch video, according to the CRTC.
ACTRA also asked that online streaming services such as Netflix be required to pay GST or HST (Quebec is already taking steps to require this) and contribute 5 per cent of their gross revenue to Canadian content production.
In its submission to the CRTC, Netflix argued that regulating new media like legacy broadcasters won’t work. Content quotas don’t make sense since consumers choose what they want to watch, and foreign financing is already one of the top two sources of cash for English-language TV production, it said.
Consumer groups, academics and internet providers do not support an internet tax, but many believe Netflix should pay sales taxes like their Canadian counterparts.