The rapid growth of Internet-based media, in particular over-the-top (OTT) services such as Netflix and Google, which includes YouTube, is transforming how we produce, distribute, and consume television, radio, films, music, news, and books.

While these online services are increasingly popular with consumers, their expansion has taken place in a regulatory vacuum in Canada, with significant consequences for Canadian producers, artists, traditional broadcasters, cultural policy, and the Canadian content regime.

Of special concern is that the mostly foreign-owned OTTs are not required to collect and remit value-added taxes (HST) and do not pay income taxes in Canada. Netflix alone is estimated to have 5.2 million household subscribers in Canada. At this number, this means with a fee of $9.99 a month, governments in Canada are deprived of around $80 million per year just for HST/GST/PST, as well as substantial income tax amounts.

This policy creates an uneven playing field that benefits very large foreign-owned companies, such as Netflix and Google while depriving the government of valuable tax revenues—money that could go toward supporting Canadian culture and media.

Canada has fallen behind the European Union as well as Australia, New Zealand and Japan and other countries, which now all make OTT providers pay HST-type taxes where their customers reside. But it is not only in collecting taxes where we are behind. We have also let Netflix, YouTube and others escape contributing the 5 per cent of gross revenue, which Canadian broadcasters have to pay, towards the creation of Canadian programming.

As well in May, the European Commission proposed that video-on-demand services “need to ensure at least a 20 per cent share of European content in their catalogues and should give a good visibility (prominence) to European content in their offers,” something Netflix for example is not required to do either.

Combined with the concentration of media industries, the decreased funding over the last three decades for the public networks of CBC and Radio Canada, and the relatively low level of funding for Canadian media production, the increase of the unregulated new media is another blow to Canadian culture.

Canadian Radio-television and Telecommunications Commission (CRTC) the broadcasting regulator, with its New Media Exemption Order, and the federal government (remember Harper’s famous “No Netflix tax “pledge) have systematically avoided the OTT issue — even when opportunities to regulate have presented themselves and studies have urged action.

As the Internet becomes the main delivery platform for all our media and most communications needs, it would be more egalitarian and beneficial to Canadian culture for the government to hold foreign-owned OTTs to the same rules as other major Canadian media companies when it comes to online broadcasting.

Toward this end, the new government and the CRTC should take the following actions:

The CRTC must remove the New Media Exemption Order for all OTT services and ensure that OTTs begin to comply with Canadian broadcasting regulations. It must ensure there are no more exceptions given to either foreign or Canadian online media services.

All electronic commerce services (above a determined sales threshold) that sell to Canadians should collect and remit GST/HST and PST amounts to federal and provincial governments. This should apply to all broadcast distribution companies or Internet and digital services (with over 2,000 subscribers) that consolidate programming and channels and distribute them in Canada.

These same e-commerce companies currently avoiding collecting and remitting value-added taxes on Canadian sales should pay income tax on monies they earn from products or services they sell or rent in Canada. This should apply to other e-commerce companies in other sectors, such as Amazon, Kinder, Uber, and Airbnb, as well as to the cultural and broadcast sector.

OTT companies that act as broadcasting distribution undertakings with more than 2,000 subscribers should contribute 5 per cent of their gross revenues from broadcasting-related activities to the creation of Canadian programming through publicly or independently administered funds.

The regulations on Canadian programming inventory should be applied to all foreign or domestic video-on-demand services.

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One of the best ways the government could ensure the development of Canadian culture is to increase funding for the CBC and Radio-Canada. The national broadcaster today receives roughly $1 billion a year in funding well below the British, French or most other countries per capita funding of public broadcasters. The federal government should double this contribution and at the same time limit CBC advertising revenues.

John Anderson is the author of the just-published study for the Canadian Centre for Policy Alternatives, An Over-the-Top Exemption: It’s Time to Fairly Tax and Regulate the New Internet Media Services.

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