The "Netflix Tax" Is About to Make the Cost of Streaming in Canada More Expensive
A new tax will soon be placed on multinational companies like Netflix, Spotify, Disney and Amazon
Published Dec 02, 2020The cost for streaming services like Netflix, Spotify and Disney+ may be getting even more expensive in Canada, as the federal government is about to introduce the so-called "Netflix tax."
On Monday (November 30), Ottawa revealed its fiscal update, confirming the Canadian government will soon require multinationals to collect GST or HST on digital products and services, the Canadian Press reports. According to estimates, this could add up to $1.2 billion over five years, but experts are warning this soon will lead to a price hike across the board.
The "Netflix tax" would not only apply to Netflix but other services like Amazon's Prime Video and audio streaming like Spotify, as well as various software applications.
As CP points out, the government says Canadian companies already collect those taxes when they make digital sales, so the same rules should also apply to multinationals like Netflix.
As KPMG tax partner Joe Micallef explained to CP, this added cost to foreign multinationals will simply be passed on to Canadian consumers.
"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."
He went on to say that calculating to added cost would be no easy feat, and knowing how much more consumers might have to end up paying is equally difficult to know at this point.
Dwayne Winseck, a media industry researcher at Ottawa's Carleton University, also explained that companies will increase their prices as a result of the new tax. However, he explained that the term "Netflix tax" has become highly politicized in recent years, often with it meaning that it's creating a level playing field between U.S.-based digital media companies and traditional Canadian broadcasters.
As Winseck said, "And if the idea is to create a level playing field between those two services, then that by all means that makes great sense."