No “Netflix tax” in Canada. That was the word from Canadian Prime Minister Stephen Harper. Harper promised not to tax streaming services last week, saying, “I’m 100% against a Netflix tax — always have been, always will be.”
He warned, however, that his opponents might do just that, claiming, “Some politicians want to tax digital streaming services like Netflix and YouTube,” Harper says. “Justin Trudeau and Thomas Mulcair have left the door wide open to doing just that.”
Liberal spokesman Cameron Ahmad called Harper’s statement a “fiction” and a “distraction” to take away focus from the country’s economic situation. Ahmad says that the current administration is trying to shift focus from the fact that Canada has weathered a number of deficits and “is on the verge of a second recession.”
In the United States, Chicago made news when it imposed a 9% add on for the privilege of streaming entertainment, promptly dubbed the “Netflix tax.” Officials were quick to say that the tax wasn’t new, merely an interpretation of the city’s existing amusement being extended to “any paid television programming, whether transmitted by wire, cable, fibex optics, laser, microwave, radio, satellite or similar means.”
The tax in Chicago was widely criticized. However, the idea of taxing streaming services isn’t limited to the Windy City: the notion has been bandied about in many places – like Canada. Harper’s comments suggested that he is firmly against such a proposal in Canada but leaders in the Liberal Party say that’s not true. They point to last year’s budget when the Conservative Party (Harper is the Leader of the Conservative Party) encouraged an increased focus on collecting a “sales tax on e-commerce sales to Canadians by foreign-based vendors.” The U.S. based Netflix is an example of a foreign-based vendor.
It may sound like just a lot of back and forth. Only there’s a big piece of that discussion missing: Department of Finance Canada says that Netflix isn’t tax free. Yes, while the politicians are fighting about who hates the idea of the Netflix tax more, Canada, it would appear, already has one. And while Netflix doesn’t tack it onto their bills for users to pay (remember, they’re US based), Netflix subscribers should be paying it anyway. Similar to what we think of as a use tax, if the business doesn’t charge the applicable sales tax, the end user is responsible for remitting the tax.
So how much money is Canada missing out on? Quite a bit if estimates are correct. Michael Geist, the Canada Research Chair of Internet and E-commerce Law at the University of Ottawa, says that “Roughly 40 per cent of English speaking households [in Canada] subscribe to Netflix.” Chances are, very few of them are voluntarily paying the tax. That translates to millions of dollars going missing every year – from the very tax that Canada’s political leaders don’t seem to believe exists in the first place.
