Joly says it’s up to Morneau, not her, to decide whether to tax Netflix

There were no taxes on streaming services as part of the cultural policy that Melanie Joly unveiled in late September. Instead, the policy unveiling had at its centre a $500-million pledge by California-based Netflix to set up a Canadian office and fund original homegrown content. (Photo: Mélanie Joly/Facebook)

MONTREAL — The federal heritage minister says she never agreed to exempt online streaming giant Netflix from any sales tax on its service as part of a deal that has been a political nightmare in her home province of Quebec.

There were no taxes on streaming services as part of the cultural policy that Melanie Joly unveiled in late September. Instead, the policy unveiling had at its centre a $500-million pledge by California-based Netflix to set up a Canadian office and fund original homegrown content.

The ensuing weeks have seen the provincial government in Quebec vowing to tax foreign online businesses, including Netflix, if Ottawa didn’t do so, and outrage from artists and producers who slammed the Trudeau Liberals in an open letter earlier this month.

Pressed about why the Liberals decided to exempt Netflix from federal sales tax, Joly appeared to leave the door open to some sort of tax on Netflix in the future.

“I’ve never negotiated any sales tax exemption in the context of the (Netflix) deal,” Joly told reporters.

She said that anyone with concerns about the lack of federal taxes on online streaming services should voice their opposition with Finance Minister Bill Morneau, redirecting any provincial unease in his direction.

“I’m in charge of culture,” Joly said in Montreal. “Mr. Morneau is finance minister and in charge of taxation.”

In reality, even Morneau likely has little control over the matter, given that Prime Minister Justin Trudeau himself has repeatedly and categorically ruled out a Netflix tax, including during the 2015 election campaign.

Joly’s comments underline the tension within the Liberal caucus, where Quebec MPs have been unhappy about defending the government’s position that Netflix shouldn’t be taxed.

Joly said she has heard the concerns from her constituents and put them to her cabinet colleagues, saying that as a Quebecer she understood the importance of culture in the province.

Since Netflix doesn’t have a base in Canada, it doesn’t have to collect and remit sales taxes to the government. Instead, consumers are supposed to declare the issue to the Canada Revenue Agency, but few, if any, actually do so.

There are also concerns that online services aren’t subject to the same Canadian programming and content quotas as traditional broadcasters. The Liberals have said they plan to respect net neutrality, a position that Netflix promoted in its submission to the cultural policy review.

As part of the deal Joly signed, Netflix also committed to spend $25 million on strategy to develop the market for French-language content, although the fact it had no contractual obligation to do so came under heavy scrutiny in Quebec.

Joly said she would ensure the company keeps its side of the deal.

“What I hear in terms of the anxiety towards the fact that there’s not enough support for French production — that is my job to talk to the company to say that my intention and my expectation is that they invest in francophone content.”