Time to change the channel

Time to change the channel

Late last September, federal Heritage Minister Melanie Joly trumpeted her $500-million agreement with the streaming service Netflix to set up a Netflix Canada production house to invest $100-milliona- year for five years in original Canadian programming. The deal, she declared, would be the centrepiece of a new Creative Canada road map into our glorious cultural future. “By attracting new investment from foreign players and creating a strong domestic market that is adapted to our new reality,” she told reporters, “that’s how we’ll have a great Canadian system.”

And blah blah blah…

Except… There are questions about who this deal is really good for. And why our government agreed to it in the first place.

Start with the fact Netflix’s global content budget for last year was $6 billion, making its $100 million-a-year Canadian commitment chump change. (Netflix is apparently spending close to twice that to produce just one series, The Crown.)

Worse, it turns out that pre-Joly deal, Netflix was already spending that much on Canadian shows. In its submission to Joly’s 2016 cultural industries consultation, Netflix bragged, in 2016 alone, “we’ve commissioned hundreds of millions of dollars of original programming produced in Canada.” Meaning Joly had actually sweettalked Netflix into spending less than what it was already spending.

Think about that for a sec. And then this: Netflix’s promised program spending is about half of what Canadian cable and broadcast operators are legally required to spend on Canadian content as a condition of their licences.

But it gets worse, if you’re Canadian—and much, much better if you’re Netflix.

Conspicuously absent in the so-called Netflix deal was any suggestion the streaming service would be required to collect and remit sales tax to the government as any Canadianheadquartered company has to do. Or pay the usual corporate taxes that its Canadianowned and headquartered competitors must.

We’re not the first country to smack up against the internet-age dilemma of how to deal with global digital companies peddling “intangibles” across virtual borders into our domestic marketplace. The international Organization for Economic Cooperation and Development, for example, recommends “consumption be taxed in the destination country.” The European Union, Norway, Australia, Japan, South Korea, South Africa are all already taxing such cross-border digital transactions.

Now we are no longer talking chump change. There are close to six million Netflix subscribers in Canada. If the company was required to charge GST/HST on those subscriptions, Canadian governments would stand to gain $100 million a year. That’s just from sales taxes from one online streaming company doing business in Canada.

If we add in all the other tech giants— Apple, Amazon, Google, Facebook, Microsoft—who are also using our lax tax system to gain competitive advantage on Canadian companies while exporting profits to their elsewhere head offices, not to forget employing Canadian tax loopholes to encourage Canadian companies to advertise, tax-free, on their US-based online platforms… we’re giving up, without even a whimper, billions in government revenue that could help fund a Canadian cultural sector in crisis, or simply help fund government.

Why don’t we?

Let’s start with this related/unrelated bit of news. According to an investigation by Radio Canada, lobbyists for US tech giants Google, Amazon and Microsoft last year managed to line up more than 100, bend-your-ear meetings with influential Liberals, including Prime Minister Justin Trudeau (more than once) and his two chief aides, Finance Minister Bill Morneau and Heritage Minister Joly, along with her chief of staff, a former Google employee. And one of Microsoft’s lobbyists, it also happens, is a former staff member in Trudeau’s office.

Where should all this leave the rest of us? With even more questions for ministers Joly, Morneau and Prime Minister Trudeau. Starting with, why are they so willing to favour global tech giants over Canadian businesses and taxpayers?

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