Is Canada's 'Netflix tax' worth the hassle it's getting from the U.S.?

When she was growing up in commonwealth of australia, Carla de erica jong remembers watching the iconic canadian river TV demo Degrassi — which at the clip was airing on Australia's public broadcaster.

"I love the example of Degrassi, which is a wonderful Canadian series…. And it showed me as an Australian teenager what it meant to be a Canadian teenager," de Jong said. "And that really helped me understand what the values were of being Canadian."

Now a dual Australian-Canadian citizen, de Jong is head of co-production and international partnerships for Sinking Ship Entertainment, a Toronto-based production company specializing in children's shows.

She's tasked with creating more Canadian content for young kids. But over the years, de Jong said, there are fewer doors for her company to knock on.

"The Family Channel and Family Junior closed last year," de Jong said. "We don't have the doors we did at Corus anymore with Treehouse TV and YTV. That pool of people and platforms that can help fund Canadian content for kids is becoming smaller and smaller."

It's for this reason, among others, that the federal government implemented the Online Streaming Act three years ago.

The bill enabled the Canadian Radio-television and Telecommunications Commission (CRTC) to impose a rule ordering all streaming companies with at least $25 million in annual Canadian revenue to put five per cent of that into national funds that support the creation of Canadian content, including movies, television and local news.

One of those pools of cash, the Canada Media Fund, helped create the hugely succesful television show Heated Rivalry.

Today, the act is under heavy fire from U.S. Lawmakers, who label it a trade irritant. Last month, a Republican congressman proposed a bill requiring the U.S. Trade Representative Jamieson Greer to investigate the tax, and take retaliatory action if it's deemed an unfair trade practice.

The association also said the act "disadvantages American companies and undermines competitiveness" by requiring them to subsidize and promote Canadian content over their own productions through "discriminatory" obligations.

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Michael Geist, the Canada Research Chair in internet and e-commerce law at the University in Ottawa and a critic of the bill, agrees with the sentiment.

"This notion that somehow we've got these large U.S. Companies that don't contribute has just never been factual. The reality is these companies have spent hundreds of millions of dollars on film and television production in Canada," Geist said.

However, that spending may not fit the definition of Canadian content. Failing to meet the criteria bars these streamers from accessing the pools of funds they're paying into via the Online Streaming Act — money that is currently being held due to court challenges by streamers.

According to the Canada Media Fund's website, an applicant (generally the producer) must be Canadian "and have full creative and financial control over all aspects of the project, from development through production and exploitation."

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"In essence, to be certified, a Canadian production must be meaningfully and demonstrably owned by a Canadian," the website adds.

Under the Canada-U.S.-Mexico Agreement (CUSMA), there is an exception that allows Canada to "take measures to support and protect its cultural industries, without contravening the terms of the agreement," according to the federal government.

But Geist said invoking that exception opens up Canada to trade attacks, and the affected country can target any Canadian sector it likes in retaliation.

De Jong said that Netflix and other large streamers are great partners, but Canadian ownership of media productions can shield workers and businesses from outside disruptions, like the 2023 strike by the Writers Guild of America.

"Canadian businesses are deeply affected by that because the content is controlled out of the U.S. And not by the Canadian side," she added.

According to analysis from the Canadian Media Producers Association, which supports the Online Streaming Act, the media production industry contributed $11.04 billion to Canada's GDP in 2023-24, but total production volume declined by 18.5 per cent.

The association attributes that downturn to the labour strike and "a slowdown in commissioning of Canadian content, most notably in English-language television, as Canadian broadcasters caught up on dollars underspent during the pandemic period."

Its CEO, Reynolds Mastin, told The House that contributions to the Canada Media Fund "will just continue to decline" as more people cut the cable cord and consume content online. 

Maston added that "everyone sees that as inevitable. It's been going on for years. So that's going to put ever greater pressure on the system. And ultimately what it will mean is fewer Canadian shows."

De Jong said the Online Streaming Act "levels the playing field for everybody" and makes sure everyone puts a little funding back into Canada "so that we're able to make great Canadian content that will also play on those streamers and be offered to our audiences."

On the music side, former NDP MP Andrew Cash — now CEO of the Canadian Independent Music Association — said Canadian content funding has been vital to creating a vibrant Canadian music industry.

"There's really not a single musician that has not been impacted and affected directly or indirectly from the things that have flowed from [Canadian content]," Cash said.

"The question really is, do we want to own our own cultural sector or not? And C-11 — the Online Streaming Act — is one way of answering part of the question," he added.

Prime Minister Mark Carney has shown he's willing to rescind some bills in the service of easing trade tensions with the United States — as he did with the digital services tax after the U.S. President demanded it gone and cut off Canada-U.S. Trade negotiations.

Vass Bednar is the managing director of the Canadian Shield Institute, a think-tank focused on Canadian sovereignty and economic resilience.

She said the Online Streaming Act is a necessary piece of legislation and that Canada should not become "an algorithmic vassal state" where foreign digital companies decide what Canadians can pay for.

Mastin argued that large U.S. Streamers were involved in the creation of the act and there was much thought about how Canada can modernize its system in a way that works for the streamers as well.

"So I am hard pressed to see in that context when the Online Streaming Act was already the product of a political compromise — in part to reflect the concerns of U.S. Interests and U.S. Companies — how we could concede even more. And I think we should resist that temptation as a country to do that," Mastin said.

Geist said he's comfortable with regulations around discoverability, ensuring platforms better promote Canadian content, but ultimately he'd like to see the free market operate like a free market.

"We start with the question of what's broken and in need of regulation, not 'we need regulation, what are we going to try to regulate here,'" Geist said.

De Jong said one of the most important things to be protecting right now in the midst of global upheaval is Canadian values — and making sure children across the country see themselves represented in television.

"I think an important piece for us to remember as well is that our media shows who we are to ourselves, but it also shows who we are to the rest of the world," de Jong said.

Associate Producer

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