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Trudeau rejects new Internet tax to help fund media sector

Prime Minister Justine Trudeau shot down a proposed tax on Internet providers, calling it a tax on the middle class.

Fred Chartrand/The Canadian Press

The Trudeau government has quickly shot down a proposed tax on Internet providers that would provide new funding for Canadian culture, while promising to study other options to help the struggling media industry.

"We're not going to be raising taxes on the middle class through an Internet broadband tax. That is not an idea we are taking on," Prime Minister Justin Trudeau said on Thursday.

Mr. Trudeau was responding to a key recommendation from the Canadian Heritage committee of the House of Commons, which is calling on Ottawa to find a new funding model to "support Canadian journalistic content."

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Read more: Report details recommendations for sustainable funding of Canadian media

The speed with which the government rejected a "streaming tax" highlights the political dangers of imposing new consumer fees, despite the widespread calls for financial help from media companies.

The proposed tax on high-speed Internet providers was also panned by the Conservative Party, the Canadian Taxpayers Federation and various experts in universities and think tanks. On the other hand, it has the backing of a number of Liberal and NDP MPs, as well as advocacy groups such as Friends of Canadian Broadcasting and the performers' union ACTRA, which are calling for federal action to salvage Canada's media and cultural industries.

Heritage Minister Mélanie Joly is working on a widespread overhaul of federal cultural policies, and is facing pressure to help media companies that have lost advertising revenues and market share to the likes of Facebook and Google. She said she will never impose new taxes, but added she will study the other proposals in the committee's report.

"I've had meetings with all the big digital platforms, and I even launched an international conversation with my counterparts and the key executives of these platforms, to talk about how they can support and promote Canadian content," she said, promising to unveil her vision for a new cultural policy in September.

After months of study, the Heritage committee issued a report that called for tax breaks for media companies, as well as a tax increase ‎on Internet providers. The 5-per-cent levy on broadband Internet services would mirror the one that is already imposed on cable and satellite TV services; the money goes to the Canada Media Fund, which supports the production of Canadian content on various media.

The committee added that sales taxes should be imposed on Canadian advertising that is placed on American-based websites, in order to place websites such as Facebook on the same footing as Canadian media sites.

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Liberal MP Seamus O'Regan, who is a member of the Heritage committee, said the most pressing matter for the government is to ensure all players in Canada's media sectors are treated equitably. As more and more Canadians access their news on mobile devices, Mr. O'Regan said, Internet providers should be treated in the same way as cable broadcasters.

"Let me be very clear about what this report recommends: A level playing field," he said, stating all companies should be taxed equally. "Don't discriminate against television news providers and not online [news providers]. Don't discriminate between American news providers, i.e., Google and Facebook, but not Canadian [news providers]. It seems to me to be perverse that we tax Canadian [companies] but we don't tax American [companies]," he told reporters.

Bob Cox, publisher of the Winnipeg Free Press and chair of the national media association News Media Canada, applauded a proposal to broaden the number of organizations that would have access to the Canada Periodical Fund.

"You can't escape the need for something to be done," he said. "We've watched newsrooms shrink, TV stations close, newspapers disappear and all of it amounts to less capacity for Canadians to get reliable, proven facts about what is going on around them."

Conservative MP Peter Van Loan accused the Liberals of trying to impose a hefty new tax on consumers in a failed attempt to protect existing news organizations that have not adapted to technological changes.

"Applying the 5-per-cent levy to broadband distribution, that's a Netflix tax," Mr. Van Loan said, rejecting the need for a rescue plan for Canadian media. "Efforts to turn back the clock to an earlier era are doomed to failure."

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Michael Geist, a professor of law at the University of Ottawa, also slammed the proposal.

"An Internet tax to fund Canadian content is a terrible policy choice with exceptionally harmful effects on the poorest and most vulnerable households in Canada," he said in a blog posting.

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About the Author
Parliamentary reporter

Daniel Leblanc studied political science at the University of Ottawa and journalism at Carleton University. He became a full-time reporter in 1998, first at the Ottawa Citizen and then in the Ottawa bureau of The Globe and Mail. More

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