TO TAX OR NOT TO TAX
Although it has revived classics like Degrassi, Netflix does not pay into Canadian TV fund,
PASADENA, CALIF.— Netflix chief content officer Ted Sarandos doesn’t believe the change in Canada’s government will lead to any new taxes on his popular streaming media service.
“It now would be even more politically unpopular,” he told the Star during the just-concluded Television Critics Association winter press tour. “We’re so much bigger than when this came up last time.”
Available now in190 countries, Netflix reported major gains at home and abroad in its fourth quarter financial results this week, bringing its worldwide total to more than 74 million subscribers.
With more than four million of those subscribers in Canada, the SVOD service — available to new customers at $9.99 a month — is a money machine. In a struggling economy, it would seem to be a robust source of tax revenue. Yet few — if any — Canadians pay tax on the service.
That’s because Netflix, which is based in Los Gatos, Calif., has no physical presence in Canada. The Canada Revenue Agency has not required, under current laws, Netflix to register for GST/HST because their “supplies” are considered to be made outside the country.
During the recent federal election, Netflix had a powerful ally on the no-tax front — the Canadian government. The Harper Conservatives vowed not to tax Netflix. They also ignored cries from industry rivals to level the playing field and force Netflix to contribute to Canadian content funds.
“We’re investing a ton in Canada right now,” says Sarandos, whose service has revived famous Canadian TV brands such as Degrassi and the Trailer Park Boys. Still, the California-based company — unlike Canadian broadcasters and cable companies — contributes nothing to the Canadian Media Fund (CMF).
“We do better than that,” says Sarandos. “We produce shows in Canada and we don’t take any money from the fund. Everyone who puts money in takes money out.”
According to a spokesperson for the CMF, Sarandos is correct: Degrassi: Next Class is not a supported project and did not receive CMF funding.
Netflix does, however, benefit indirectly from other Canadian funding. DHX Media, the Halifax-based media company that produces Degrassi: Next Class, does receive federal and provincial tax credits as well as monies from cable funds.
“We receive no direct benefit from the fund,” maintains Sarandos, “and we hire all local talent, producers, catering — all local everything.” Sarandos says.
Hemlock Grove — a horror-thriller series shot in and around the GTA for three seasons — is the only foreign-produced series shot in Canada that also had its post-production work done in Canada. “We do everything
“We produce shows in Canada and we don’t take any money from the (Canadian Media) Fund. Everyone who puts money in takes money out.” TED SARANDOS NETFLIX CHIEF CONTENT OFFICER
soup to nuts in Canada.”
Netflix also has a co-production deal with City/Rogers for the sci-fi series Between. The Toronto-lensed series has been renewed for a second season. Sarandos says another, allnew Vancouver-based production will be announced shortly.
The streaming service has ramped up its children’s programming slate in the last year. As a result, Sarandos claims Netflix currently employs, “more animators in Canada than anyone in the world.”
Netflix is on a roll with the viral success of Making of a Murderer and critical acclaim for recent launches such as Master of None. Their global reach, in an era when TV content is rapidly becoming more and more of a borderless business, is driving much of Netflix’s explosive growth.
That and a perceived notion that it draws younger viewers — Netflix does not share viewership data, to the frustration of regulators and competitors — had Degrassi creator and executive producer Linda Schuyler knocking on Sarando’s door once Bell cut ties to Degrassi: The Next Generation last spring.
“We wanted to meet with Netflix because we knew that’s what the kids were watching,” says Schuyler.
Sarandos says his team “thought it was odd that ( Degrassi) got cancelled after all those years so we immediately pounced on it.”
The series launched a few weeks ago on DHX-owned Family Channel and days ago internationally on Netflix. Schuyler says she’s already felt the impact of that 190 country reach. The franchise has always been a strong export, but the Netflix launch had to wait while Next Class was dubbed into 17 languages.
“We’ve never done that many before,” she says.