On June 20, 2024, Canada’s Digital Services Tax Act was enacted and on June 28, 2024, the Canadian federal government officially implemented the Digital Services Tax (DST). The DST will take three per cent of revenue collected from major streaming services including Netflix, Spotify, Apple Music, YouTube, and Disney+. According to Frank Mathieu and Geneviève Beebe, “The purpose of the DST is to ensure that revenue earned through online services in Canada is subject to Canadian income taxation at the federal level.” As of right now, the provinces have yet to declare and implement their own fees going forward, and the tax remains at the federal level only.
The DST will be “derived from the engagement, data, and content contributors of Canadian users.” Mathieu and Beebe add that “the DST will only be applied to the amount by which digital services revenue of the business or Consolidated Group exceeds C$20 million.” According to the Government of Canada’s website, the four categories of in-scope revenue are: online marketplace services revenue; online advertising services revenue; social media services revenue; and user data revenue.
The goal of this new tax is to help support the Canadian Radio-television and Telecommunications Commission (CRTC) and content produced in Canada by taxing streaming companies without ties to a Canadian broadcaster. The taxed funds would be used to contribute to underfunded areas of Canadian broadcasting including local news, French language content, and Indigenous content. However, with the introduction of Bill C-18 in 2023, Canadians still don’t have access to the vast majority of news content on social media platforms like Meta, where the majority of Canadians get their news from.
For those unacquainted with Bill C-18, the phrase “People in Canada can’t see this content” may sound familiar, as it has been “one of the most seen phrases on social media.” The controversial act was enacted in June of 2023 and resulted in Canadian news being blocked on Meta platforms Facebook and Instagram. The decision to remove Canadian news content was headed by Google and Meta, and it came in response to the law that required large tech companies to give compensation to Canadian news organizations in hopes to sustain Canada’s quality of news. Despite those hopes, Bill C-18 has disrupted Canadians’ access to certain news at all.
Journalist Stephanie Swensrude expressed how “Bill C-18 puts big tech in power and Canadian journalists at a disadvantage.” Now, with the aim of the DST being to provide compensation to broadcasting organizations, there is federal support being put behind Canadian media industries once again.
However, University of Ottawa Professor Michael Geist wrote how the DST could “increase the chance the company complies with Bill C-18 by following the Meta model of removing links to Canadian news and cancelling existing news deals.” Thereby leaving Canadian news outlets, the ones hoping to profit from this new tax, to suffer from the costs.
This could impact Canadian consumers by requiring them to pay higher prices following these streaming giants being told to invest in Canadian content. Digital Media Association President and CEO Graham Davies added that “the move will only worsen the ‘affordability crisis.’” It is difficult to imagine that businesses of this enormity will hand over hundreds of millions of their earnings to the government willingly and without any consequences.
In 2018, a similar situation occurred when there was pressure from the NDP to tax streaming services. At that time, Prime Minister Justin Trudeau responded by stating, “The NDP is claiming that Netflix and other web giants are the ones who will pay these new taxes. The reality is that taxpayers will be the ones to pay those taxes.” It is unclear whether Canadians will indeed have to pay for this decision, but according to Trudeau’s 2018 statement, we will be the ones footing the bill.
Geist explained to Global News why this tax could be risky. “If we take a look at how [the United States] reacted to similar taxes from other countries in the past,” he said, “they’ve used tariffs to try to make up for what they perceive to be lost revenue, or to almost punish other countries for moving in that direction.”
Chrystia Freeland, minister of finance, responded to the matter of how the United States will react, given that many of the newly taxed companies are based there. She said that “Canada acted collaboratively with the U.S. and continues to engage with the United States over the issue.” Freeland further addressed the controversy surrounding this tax by explaining how countries like the U.K. and France have DSTs, the revenues of which are used to invest in their countries.
Ultimately, the question of what this could mean for Canadians in the future still remains unclear, but knowing the potential risks along with the benefits is a start.
