The Canadian government should not tax US online streaming giant Netflix, a Finance Ministry source confirmed to Radio Canada.

Netflix will not be affected by the 3% tax on digital services announced in the latest federal budget.

Catherine Koblenkas, press secretary to Finance Minister Chrystia Freeland, told Radio Canada that online broadcasters will be subject to another tax.

She explained that it is “Goods and Services Tax (GST) or Harmonized Sales Tax (HST) for foreign suppliers who sell digital products or services.”

Concretely, in the case of Netflix, this tax can only be charged on subscriptions. This is equivalent to charging these taxes to Canadian consumers, rather than the video streaming service.

In its Fall 2020 Economic Statement, the Canadian government announced that it is “moving forward with a tax on businesses that provide digital services.”

The move builds on the changes to ensure “taxes are applied fairly and efficiently to the growing digital economy.”

New Democratic Party Deputy Leader Alexander Polres Photo: The Canadian Press / Adrian Wilde

Canada says it strongly favors a multilateral approach to this issue. Work is underway to reach a multilateral agreement on cross-border digital taxes by mid-2021. He is optimistic about progress this year.

The government made it clear in the budget that GST and HST will be implemented from July 1, whether or not there is agreement after multilateral discussions that have been going on since 2013.

The 3% tax applies to revenue “derived from data-driven digital services and content contributions from Canadian users” such as Internet advertising or sales, among others.

It will apply, effective January 1, 2022, to web giants such as Amazon, Google, Facebook and large corporations with total revenue of at least C$1.1 billion.

The Canadian government estimates that this tax will generate $3.4 billion in revenue over five years, starting from 2021-2022.

For NDP Deputy Leader Alexandre Poliris, “In the eyes of liberals, Netflix subscriptions aren’t enough to justify these people paying their taxes on the income they earn here in Canada. It’s scandalous. It’s two scales.”

“When the liberals tell us that web giants have to pay their taxes, they assure us that not all web giants will be there. “Netflix won’t be there,” he added in an interview with Radio Canada.

With information from Radio Canada and the Government of Canada