tax

The Taxman Cometh

The Canadian government is again considering a digital services tax on foreign services like Google Play, Netflix, Prime Video and Spotify, whose operations are not based in Canada.

Unlike Cineplex and Apple/iTunes, these companies are not compelled by law to collect taxes on their services because they have no physical presence in the country, no Canadian subsidiary, and simply broadcast services to Canada.

The CRTC had ruled against a Netflix Tax in March 2015 and in June 2018 the federal government had passed on implementing the tax. But the provincial governments of Quebec and Saskatchewan have collected provincial sales tax on these services since January 2019 and British Columbia followed suit in July 2020, setting a precedent that could ease the introduction of a federal tax.

Monthly subscriptions could get costly for some but I suspect these services will continue offering incentives and promotions to keep their clientele.

Discounts and bonus rewards are usually offered on gift card purchases throughout the year, some of which are considerable.

For example, Shoppers Optimum points users will get 7500 points when they purchase $50 iTunes cards from select Shoppers Drug Mart stores until December 11th, 2020. And the same offer will be made available to some users who purchase $50 iTunes gift cards at select Real Canadian Superstore locations from December 10th to December 16th, 2020.

I occasionally encounter similar offers for discounts and bonus points for Google Play, Netflix and Spotify gift cards. And in regards to Prime Video and Prime Music, these services are made available free to Amazon Prime members.

Apple TV is also offered free for a year on new Apple product purchases so some relief can be had on some digital purchases and subscriptions. But I don’t think the tax will be implemented for some time.

The provinces that have yet to implement a provincial sales tax on these services will likely wish to discuss the possibility of a Harmonized Sales Tax so I suspect our foreign digital services won’t be taxed until July 1st, 2021 or January 1st, 2022.

Update – Response on Netflix/Internet Tax

From my local Member of Parliament, Karen McCrimmon (Dated June 13th, 2018) :

“Hello Rob,

Thank you for taking the time to share your ideas with me.

Our government understands the importance of supporting our artists and creators. We also know that the way Canadians access content is changing. That’s why we have made historic investments of $3.2 billion, to support our artists and creators. It’s also why we will be modernizing our laws and programs to better support our artists in the digital era.

Netflix’s investment is a part of the transition. It secures 5 years of investments for our creators, as we modernize our laws and programs.

We, as a government have decided not to introduce a Netflix tax because we don’t want to raises taxes on the middle class, we want to lower them. We will always look at ways to strike the balance between a fair tax system and the investments we need in our culture, but in doing so, we’re not going to be raising taxes on the middle class through an internet broadband tax.

I will share your ideas with my fellow colleagues, including the Minister of Finance, Bill Morneau.

Thank your again for your engagement as a constituent.

Kind regards,

Karen”

I had suggested that if taxes on streaming services are absolutely necessary that they consider forwarding a portion of the federal taxes collected from these services to Canadian Content initiatives, instead of introducing an independent levy for that purpose.

As i’ve mentioned in a previous entry, these services will be taxed on New Years Day in Quebec and the Canadian Radio & Telecommunication Commission had made a proposal of their on in regards to levy to fund Canadian Content.

The publics views have been made clear by a February 2017 poll conducted by Innovative Research Group earlier in 2017. But I had thought to send my opinion and suggestions to my local MP and Heritage Minister Melanie Joly in response to the CRTC’s recent proposal.

If you wish to contact your local Member of Parliament on this issue, you can do so via the MP database by clicking here.

I will of course update this blog if the situation changes.

Thank you.

No to Internet Tax !

Apparently Canadian Heritage Minister Mélanie Joly is considering an Internet Tax to fund Canadian content, according to University of Ottawa professor Micheal Geist. And unfortunately for Canadians this tax may make internet access more expensive.

There are currently two taxes being considered ; One on content providers like Netflix and iTunes and another general sales tax on internet access. And although the previous tax may sound better than the latter, one has to wonder if all music, television programs and films purchased or rented online would be subjected to this tax, including those that are made available through the internet television providers.

SiriusXM subscribers are already subject to taxes and a “Music Royalty and Regulatory Fee of 14.2%”. But would the service also be subjected to this additional tax ? Will Apple Music subscribers need to pay for this additional tax ?

We currently pay nothing to listen to radio and to watch television offline. We also already pay taxes on compact disc, DVD and blu-ray purchases, which would not be subject to this new tax. It therefore makes no sense to charge people more taxes for the same content, especially when it involves the streaming of purchases matched or uploaded to a Cloud service.

Why does the government not fund Canadian Content by taxing Canadian broadcasters that run adverts online, when they stream foreign content ?

I’m sure Rogers and Bell would likely oppose this because they’d likely rather see the foreign services taxed instead. But the foreign services have no legal obligation to collect these taxes and the Trans-Pacific Partnership Agreement would disallow this requirement, if passed.

We also currently pay taxes on our internet provider subscription fees so any additional tax would simply make it unaffordable for many Canadians.

Canadians spent on average $203 per month on communication services in 2014, according to a CRTC Report released in 2015, an increase of approximately 6% from 2013 ($11.92). And according to CBC News, there was a 10% increase on wireless and internet services specifically from 2013.

To dissuade use of foreign services like Netflix and iTunes, Canadians are also already subject to data caps and the proposed tax would simply make the unlimited internet plans less affordable.

Many Canadians also still pay a “Digital Services Fee” on their cable, satellite and television subscriptions, a fee that cannot be justified now that an analog service has been fazed out.

Could the government not demand this fee be replaced with a Canadian Content Improvement Fund fee instead ? Or will this obsolete fee be buried like that of Bell’s $2.80 Touch-Tone fee, which netted Bell $80 Million in 2013 according to CBC News ?

At the moment Bell is claiming the Digital Service Fee is collected to improve their services. But isn’t that what their investors are paying for ? Why their customers are being asked to pay more per month for television ?

Prior to September 2014, cable and satellite television subscribers in Canada paid a monthly 1.5% fee to the Local Programming Improvement Fund, which netted $106 million in 2011 for television stations in markets smaller than a million. And although this fee was discontinued, these subscribers barely noticed because they were asked to pay more for their television subscriptions shortly after.

The average monthly rate for television services paid by Canadians climbed from $65.25 in 2014 to $66.08 in 2015, according to CBC News ; A difference of 83 cents per month when the average monthly rate for Canadians for the Local Programming Improvement Fund was 50 cents. And with the mandated “skinny package” changes some have seen their monthly rates rise significantly since the spring of 2016.

I believe it makes more sense to apply a Canadian Content fee of a dollar or two to the sale of television antennas, digital converter boxes, digital television receivers/set top boxes, satellite/internet radio receivers and streaming media players in Canada, although some members of the public would likely not enjoy the prospect of paying it in addition to a Provincial environmental handling fee and having both fees taxed.

Perhaps a monthly fee of 1.5% on unlimited internet packages or bundled packages over $150/month would be the path of least resistance because it would likely be negligible to the subscribers of these specific bundles or packages.

Warning – Gift Card Scam

The Canada Revenue Agency does not accept or solicit iTunes gift cards as payment.

Apparently the scammers now ask for payments using iTunes gift cards, that they resell online using legitimate services.

If you receive a call instructing you to pay back taxes in gift cards, bitcoin, prepaid credit cards or prepaid debit cards, hang up and call 1-888-495-8501 from 8:30 a.m. to 5:00 p.m. Eastern time, Monday to Friday.

What Netflix Tax ?

It should be noted that the CRTC ruled against a “Netflix tax” in March 2015, as stipulated in a March 12th, 2015 thestar.com article. And that all of the major parties have categorically denied wanting such a tax.

Apparently the only major proponent of this tax was the provincial government of Ontario. But they have since changed their minds according to University of Ottawa Law professor and internet columnist Michael Geist. His March 10th, 2015 blog entry on this issue can be found by clicking here.

Excellent News For Music Fans

I have just received word that the “Tour Tax”, a prohibitive fee that international artists were subjected to when performing in Canada, has been scrapped.

This counterproductive fee kept newer artists out of Canada, especially independent and unsigned artists, and has caused many clubs to stop featuring live acts altogether. 

Over 143,000 signatures had been registered on a change.org petition promoted on this blog in 2013, which was presented to Jason Kenney, Canada’s Minister for Multiculturalism.