CRTC Finalizes Controversial Decision to Impose 5% Tax on Platforms

Things are set to get a whole lot more expensive for Canadian consumers who use platforms. The CRTC has finalized a 5% tax on platforms.

We haven’t seen much in the way of developments from the almost universally condemned Online Streaming Act (Bill C-11). That’s because it is going through a rather slow regulatory process at the CRTC complete with consultations and decisions. Because of that, it is easy to assume that the controversy and the concerns might have been overblown. The problem is that the issues never went away and the concerns about mass internet censorship and new taxes on consumers were all very real.

One of the hugely controversial aspects about the Online Streaming Act was the provisions that say how a massive new tax hike is being imposed on platforms. It’s controversial on a number of fronts. For one, it is a tax being imposed on the platforms that would invariably be up to consumers to shoulder that burden. For another, that money would be siphoned off onto cultural elite and news organizations to continue to produce crappy programming no one wants to watch.

Mainstream media and mainstream content producers have been shedding audiences for years now and, rather than adapt their business models to keep up with the times, they’d rather get showered with free money so they don’t have to go through the process of actively seeking an audience, leeching money off of others in the process. So, in short, they becomes vanity projects for those producers and broadcasters, immune to market forces for the foreseeable future. Given the media’s obsession to talk about how they are credible and vital to democracy because they say so, constantly justifying their own existence, it is almost fitting in a weird way.

Earlier this year, the CRTC announced that they would be imposing a 5% tax on platforms. The announcement was hugely controversial because it signalled that consumers are going to be set to see a price hike. I have been remarking all along that platforms should create a separate line in their respective bills and calling it something like the Digital Services Tax when it comes to fees imposed by the government. At the time, it was in response to the Digital Services Tax, but the same can be applied here as well. That would not only showcase a level of transparency, but also tell Canadians who they should be blaming for the rate increases. Here’s my comments at the time:

As I’ve suggested all along, I think a brilliant move on the part of platforms would be to insert the cost of the Digital Services Tax as a separate line item on people’s bills afterwards. Not only would this be an exercise in transparency, but Canadians will know exactly who to blame for that item in the first place.

Some dismissed these predictions and insisted that the money is just coming from the vast wealth platforms have accumulated over the years. This with precious little justification for why platforms would choose to go that rout in the first place. Streaming organization, DiMA, however, added credibility to those warnings by pointing out that the additional taxes will worsen the affordability crisis. The government, however, did what it does best and ignored those credible warnings and moved forward anyway, consequences be damned – a habit they have had since the very beginning of the debate.

Earlier this month, in response to the Digital Services Tax, Google announced that it would be passing the costs onto consumers. This lends further credibility to the idea that platforms could very easily do the same with the Online Streaming Act. If Google will do it with the Digital Services Tax, why not do it with the Online Streaming Act? It would be a consistent response from platforms at the very least.

Today, we learned that the CRTC has now finalized that decision to impose a 5% tax on platforms and, ultimately, consumers. From the CRTC:

Condition of service relating to base contributions applicable to online undertakings carrying on audio-visual broadcasting activities

Commencing in the 2024-2025 broadcast year, the operator of an online undertaking providing audio-visual services shall, by 31 August of each broadcast year, devote not less than 5% of its annual contributions revenues derived from its audio-visual broadcasting activities from the previous broadcast year to the support of Canadian and Indigenous content, to be allocated as follows:

(a) not less than 2% to the Canada Media Fund. The operator may deduct certified Canadian content expendituresFootnote 27 (productions or acquisitions) of up to 1.5% of the contribution for this initiative. Of that 1.5%, a maximum of 60% of these expenditures can be allocated to English-language productions and a maximum of 40% to French-language productions;

(b) not less than 1.5% to the Independent Local News Fund;

(c) not less than 0.5% to the Indigenous Screen Office Fund;

(d) not less than 0.5%, at the discretion of the operator, to any or a combination of the following funds:

(i) Black Screen Office Fund,

(ii) Canadian Independent Screen Fund for BPOC creators, and

(iii) Broadcasting Accessibility Fund; and

(e) not less than 0.5% to any or a combination of identified Certified Independent Production Funds (CIPF), other than the Indigenous Screen Office Fund, the Black Screen Office Fund and the Canadian Independent Screen Fund for BPOC creators, that demonstrates a dedicated funding envelope for producers from official language minority communities and producers from diverse communities, as approved by the Commission. This contribution shall be held by the operator until the Commission publishes the list of eligible CIPFs or indicates that there are no eligible CIPFs. Should no CIPF be deemed eligible, the 0.5% contribution shall be directed to the Canada Media Fund.

Condition of service relating to base contributions applicable to online undertakings carrying on audio broadcasting activities

Commencing in the 2024-2025 broadcast year, the operator of an online undertaking providing audio services shall, by 31 August of each broadcast year, devote not less than 5% of its annual contributions revenues derived from its audio broadcasting activities from the previous broadcast year to the support of Canadian and Indigenous content, to be allocated as follows:

(a) not less than 2% to FACTOR and Musicaction, of which 60% is to be allocated to FACTOR and 40% to Musicaction;

(b) not less than 1.5% to the Canadian Association of Broadcasters, to be allocated to a temporary fund supporting local news production by commercial radio stations outside of the designated markets of Montréal, Toronto, Vancouver, Calgary, Edmonton and Ottawa-Gatineau;

(c) not less than 0.5% to the Canadian Starmaker Fund and Fonds RadioStar, of which 60% is to be allocated to the Canadian Starmaker Fund and 40% to Fonds RadioStar;

(d) not less than 0.5% to the Community Radio Fund of Canada;

(e) not more than 0.35% to Canadian expenditures on initiatives supporting Canadian or Indigenous content, in the following categories:

(i) songwriting camps specifically developed for Canadian and/or Indigenous artists;

(ii) support for the production of sound recordings by Canadian and/or Indigenous artists; and

(iii) support for Canadian events (award shows and festivals) exclusively featuring Canadian and/or Indigenous artists;

Any remaining amount is to be allocated to any or a combination of funds among the Canadian Starmaker Fund, Fonds RadioStar, the Community Radio Fund of Canada, and the Indigenous music fund identified in (f) once in operation; and

(f) not less than 0.15% to the Indigenous Music Office (IMO) for a new fund to support Indigenous music. For the 2024-2025 broadcast year, 0.05% shall be directed to the IMO by 31 December 2024, to allow the IMO to conduct consultations and develop an operational plan for an Indigenous music fund. The remaining 0.10% for that broadcast year shall be held until the Commission approves the fund.

Some readers out there might be mistaken and think that if that money is being distributed to Canadian production companies, then maybe they can get in on the action. After all, if you are a Canadian and produce content in Canada, then you should be able to get something out of that, right? Well, as of now, the rules are very explicit that this is for the large legacy players and not some random YouTuber. This is something that I went into great detail back in 2022. There’s very specifically written rules to ensure that smaller players remain out of the system and if you are a solo YouTuber, TikToker, or Twitch streaming, 99.9% of the time, your content is not going to qualify as “Canadian content”.

Some might have caught the news about how the Canada Media Fund is setting aside money for online producers. The problem is, as I noted last year, the rules are so ridiculously onerous, almost no one would qualify. So, for instance, you don’t qualify if you produce content that has a sponsorship or produce content that is review content, play video games, vlogging of any kind, interviews, news reporting, DIY, how-to, cooking, contests, competitions, compilation videos, music, fundraisers, award shows, and more. The list goes on, but it goes to great lengths to ensure pretty much anything you can think of to producing content online doesn’t qualify. To add insult to injury, the CMF only set up $500,000 to fund all online operations that do somehow manage to jump through the obstacle course of rules as well, so even if you do go through the effort, you won’t get much of anything at the end of it anyway. Ultimately, they ensured that it isn’t worth it.

Make no mistake, this is about siphoning off a huge amount of revenue and pumping it directly to legacy media players – producers who produce content that would disqualify online creators in the first place.

The tax is expected to hit this Saturday (August 31st). Platforms are expected to remit that money by August 31st of every year moving forward. There is, of course, still that possibility of trade retaliation and legal challenges that could very easily delay things, but ultimately, the next move on this front is going to be on the platforms part at this stage. It would be a huge surprise if the platforms simply choose not to challenge this at all on any level.

At any rate, things are set to get a whole lot more expensive for Canadian consumers. After all, that money has to come from somewhere.

Drew Wilson on Mastodon, Twitter and Facebook.