A logo for Netflix on a remote control is seen in Portland, Ore.,Aug. 13, 2020. Experts in taxation and media say a plan announced Monday by the government will ultimately add to the cost of digital services and goods sold by foreign companies. THE CANADIAN PRESS/AP-Jenny Kane

A logo for Netflix on a remote control is seen in Portland, Ore.,Aug. 13, 2020. Experts in taxation and media say a plan announced Monday by the government will ultimately add to the cost of digital services and goods sold by foreign companies. THE CANADIAN PRESS/AP-Jenny Kane

‘Netflix tax’ for digital media likely to raise prices for consumers, experts say

The government says Canadian companies already collect those taxes when they make digital sales

The cost of digital services and goods sold by foreign companies like Netflix will go up under a taxation plan the government wants to put in place next year, experts said Tuesday.

Ottawa said in its fiscal update released Monday it will require multinationals to collect GST or HST on digital products and services, which it said would add up to $1.2 billion over five years.

Sometimes labelled a “Netflix tax,” the measure would also apply to other services such as Amazon.com Inc.’s Prime Video or the Spotify audio streaming service, as well as digital products such as software applications.

The government says Canadian companies already collect those taxes when they make digital sales, so it’s only fair that foreign multinationals should do the same.

KPMG tax partner Joe Micallef said it’s likely Canadians will end up paying the taxes collected for the government by foreign multinationals.

“Right now, the way in which they’re delivering their services, they’re not responsible for the collection,” Micallef said.

“And so, effectively, it would mean that these charges would be appearing on (their) invoices.”

A regular monthly subscription for a streaming service that delivers video or music would be a simple calculation, with the tax rate applied to the purchase price.

But Micallef said it is be more difficult to estimate how much additional tax individual consumers, or businesses, will pay for other types of digital purchases, he said.

Something like gaming software might cost little or nothing itself, but offer the option for subsequent charges to add features that make the experience better.

“How many times? How many transactions? It adds up,” Micallef said.

Dwayne Winseck, a media industry researcher at Carleton University in Ottawa, also expects companies will add the price of the tax to the total sale price.

“I mean, this is really not a very substantial amount, when we’re talking about corporate finances,” said Winseck, who is a professor of journalism and communication.

He said that the term “Netflix tax” has become highly politicized and is often used as “code” for levelling the playing field between U.S.-based digital media companies and traditional Canadian broadcasters.

“And if the idea is to create a level playing field between those two services, then that by all means that makes great sense,” Winseck said.0

David Paddon, The Canadian Press

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

federal government

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Possible COVID-19 exposures may have occurred at Alexander Elementary School on Jan. 13, 14 and 15. (Google Maps)
Alexander Elementary in Duncan announces possible COVID-19 exposures

Exposures may have occurred on Jan. 13, 14 and 15

Seven streets in downtown Duncan, including Station Street, will soon have new native names added to their signage. (Submitted graphic)
New street signs in Duncan in English and Hul’q’umi’num

Seven streets to get additional native names on signs

North Cowichan to add three more off-leash dog areas in the new year. (File photo)
North Cowichan adds three new off-leash areas

Trial program runs through 2021, but not the summer months

Principal Marie-Claude Carrier has overseen the opening of the Cowichan Valley’s first francophone school. (Citizen file)
Registration now open for Duncan Francophone school

École francophone de Duncan opened last fall with six students

Reggie went missing in Duncan’s McAdam Park on Jan. 3 and owner Brittny Bukva is hoping for his safe return. (Submitted)
Have you seen Reggie? Dog went missing in Duncan’s McAdam Park

Have you seen Reggie? Dog went missing in Duncan’s McAdam Park

A woman writes a message on a memorial mural wall by street artist James “Smokey Devil” Hardy during a memorial to remember victims of illicit drug overdose deaths on International Overdose Awareness Day, in the Downtown Eastside of Vancouver, on Monday, August 31, 2020. THE CANADIAN PRESS/Darryl Dyck
B.C. paramedics respond to record-breaking number of overdose calls in 2020

On the front lines, COVID-19 has not only led to more calls, but increased the complexity

(Black Press Media files)
Transport Canada not budging on enclosed deck rules, despite calls from BC Ferries union

There have been at least 23 cases of the U.K. variant detected in Canada, four of which are in B.C.

The Elk Valley Hospital is adapting to meet the needs of patients in the Elk Valley.
One in five tests in Fernie area coming back positive: doctor

Dr Ron Clark of Elk Valley Hospital said one in five tests was returning positive for COVID-19

Throughout December, RCMP conducted CounterAttack road checks as police worked to keep roads free of impaired drivers. (BLACK PRESS file photo)
From the “You can’t make this stuff up” file – stories from the BC CounterAttack campaign

Amusing, yes, but a reminder impaired driving affects ability to drive and to make good decisions

(Thesendboys/Instagram)
Video of man doing backflip off Vancouver bridge draws police condemnation

Group says in Instagram story that they ‘don’t do it for the clout’

The RCMP are reminding drivers to find alternative ways home if they have consumed anything that impairs their ability to drive. (Black Press file photo)
Impaired Island driver flees road check twice on the same night

The officer issued the driver numerous violation tickets, and a four-month driving suspension

Inspection of bridge crossing on a B.C. forest service road. (B.C. Forest Practices Board)
B.C. falling behind in maintenance of forest service roads

Auditor finds nearly half of bridges overdue for repair

(Black Press Media files)
Woman steals bottles of wine after brandishing stun baton in New Westminster

Police say the female suspect was wearing a beige trench coat with fur lining

Toronto’s Mass Vaccination Clinic is shown on Sunday January 17, 2021. THE CANADIAN PRESS/Frank Gunn
Canadian malls, conference centres, hotels offer up space for COVID vaccination centres

Commercial real estate association REALPAC said that a similar initiative was seeing success in the U.K.

Most Read