Question Period Note: Foreign Online Video Streaming Services

Various stakeholders have called for the levelling of the playing field where foreign-based video streaming service providers that operate in Canada would need to contribute to the broadcasting system in an appropriate, equitable manner. Stakeholders have also called for the Government to apply its sales tax rules to foreign-based streaming service providers that operate in Canada. The legislative review panel’s final report, published on January 29, 2020, recommended that sales tax be applied equitably to media communications services delivered by foreign online providers as well as suggested requirements for online streaming services to invest in Canadian production and increase the discoverability of this content.

• The Government is committed to introducing a bill this year to ensure that all content providers contribute to the creation and discoverability of Canadian content.

• The legislation will consider our official languages, as well as additional cultural and linguistic communities.

• This will be a first step, followed by subsequent action to further modernize the broadcasting system.

• In Canada, as a result of the CRTC’s Exemption Order for Digital Media Broadcasting Undertakings, online video streaming companies are not required to contribute to Canadian programming either by quotas, expenditure requirements, or revenue contributions.
• Foreign-based video streaming service providers that operate in Canada are not required to collect federal or provincial sales taxes (with the exception of the provinces of Québec and Saskatchewan) on monthly subscriptions for Canadian consumers. Currently, it falls to consumers to fill out a form and remit the tax. However, in reality, few do so. The Quebec Government reported in June 2020 that it now has, through the 559 operators of registrant suppliers from outside Québec, collected a total of $128 million since the implementation of the new regime in January 2019. Saskatchewan, but that province has not yet released the revenue it earns from the sales tax it applied in 2019.
• Canadian private broadcasters complain that they do not compete on a level playing field with online video streaming services both because they charge sales tax and because of the regulatory requirements for financial contributions to Canadian programming noted above. Netflix has said that they would comply with any changes in federal legislation, as they have provincially.
• In June 2018, the Government asked a panel of experts to review the Broadcasting and Telecommunications Acts. The panel’s final report was published on January 29, 2020, and recommends that sales tax be applied equitably to media communications services delivered by foreign online providers in order to eliminate the disadvantage to competing Canadian providers. The panel also recommends requiring online streaming services that benefit from operating in Canada to invest in Canadian programming that they believe will attract and appeal to Canadians.
• The spring 2019 report from the Auditor General of Canada on the Taxation of E-Commerce found that the Government of Canada lost $169 million in potential GST revenues in 2017, on foreign digital products and services. On December 9, 2019, the Finance Minister reaffirmed that the Government will implement a 3 percent tax on digital giants. This tax was expected to take effect as of April 1, 2020, and would affect large digital companies that record more than $1 billion in international revenues. Both sales taxes and corporate taxes are a matter of taxation policy to be addressed by the Minister of Finance.
• While Covid-19 has been devastating to the global economy, online video streaming services have found themselves with ever increasing captive audiences.
Netflix
• In its submission to the panel, Netflix challenged its categorization as a “broadcaster,” submitting that it does not consider online services to be broadcasters, nor does it support the regulation of online services as broadcasters.
• On September 28, 2017, the Minister of Canadian Heritage announced the establishment of Netflix Canada, following a review under the Investment Canada Act. Key undertakings offered by Netflix include an investment of at least $500 million Canadian over five years in original productions in Canada, a CAD $25 million investment to support Canadian French-language content on the Netflix platform through a market development strategy for Canada, and promoting Canadian films and television shows on Netflix’s global platform. In September 2019, Netflix released an update on their production investment activities in Canada stating that it had “exceeded the minimum commitment of $500 million.”
• On February 19, 2019, Netflix announced it is renting a production hub in Toronto, Ontario involving leases for sound stages and spaces for office and support work at Cinespace and Pinewood Toronto Studios. Netflix said the commitment will provide jobs for up to 1,850 Canadians per year.
• On April 9, 2019, former NDP member François Choquette applied to the Federal Court for a remedy under Part X of the Official Languages Act against PCH. He wants a renegotiation with Netflix, so that a clause guarantees the production of content in French. The case is ongoing.

• Any questions related to tax policy fall under the purview of the Minister of Finance. The role of the Minister of Canadian Heritage is to ensure that Canadian creators have the tools necessary to thrive in the digital world.