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Sweeping changes recommended to digital rules

Ottawa pledges swift action after panel urges taxes on streaming giants, suggests ad-free CBC


Online streaming giants such as Netflix should contribute to funding Canadian content and pay sales taxes. Legislation should be introduced to address harmful online material. The CBC should be advertising-free. And a government tax credit to support local journalism should not just be extended, but also applied to broadcast media. Those were among the recommendations in a highly anticipated report released by a legislative review panel Wednesday.

In response, the government said it would move swiftly on the suggested reforms. Heritage Minister Steven Guilbeault said Prime Minister Justin Trudeau gave him direction to table legislation in the government’s first year and “we will follow through on this promise.

“Our goal is simple — to make the system more equitable than it is right now,” he said. “The technological changes that we have seen have made it so that our system doesn’t work anymore.”

Guilbeault said a measure like charging the GST on streaming services such as Netflix could be imposed soon, noting that Trudeau “talked about probably the next budget, so this is something we can move very quickly.” Currently, only Quebec and Saskatchewan require at least the provincial sales taxes to be collected on streaming services. The report urges that the GST/HST be applied “equitably” to services provided by foreign online providers, saying it “would eliminate the disadvantage to competing Canadian providers.”

The six-member panel was created in 2018 by the Liberals with a mandate to modernize antiquated broadcasting and media laws.

Its 235-page report, titled “Canada’s Communications Future: Time To Act,” contains 97 recommendations.

The report is infused with a sense of urgency.

“The need for this work has never been more urgent,” panel chair Janet Yale told a news conference.

“The pace of change is dizzying, the opportunities unprecedented and the risks — to our privacy as consumers, to our cultural sovereignty as a country, and to our economic competitiveness — are significant.”

The panel steered clear of the controversial taxes on digital platform providers such as Google and Facebook that are now the subject of international debate and even diplomatic tensions. France’s plan to impose a digital tax on the U.S. tech giants prompted Washington to threaten retaliatory tariffs. The Liberals’ election platform proposed a three per cent tax on the revenue that such companies generate in the country and Guilbeault said Wednesday that Canada continues to discuss that issue with other countries.

However, the panel did say that online streaming companies such as Netflix, Apple TV and Disney Plus should be required to contribute to Canadian content, a requirement that had long been sought by many Canadian producers and the media industry.

“Culturally, the framework must ensure that Canada’s creators continue to have the means for Canadian stories to be told and discovered in a world of so many choices,” the report said. “Netflix and other online streaming services would be required to devote a portion of their program budgets to Canadian programs.”

Yale doubted that the proposed requirement would drive up costs for the streaming services. “We do not think this is something that would be passed onto consumers or result in higher prices,” she said.

“If you benefit from operating in the Canadian system, you should contribute. It’s a simple principle.”

Significant recommendations include a remake of the Canadian Radio-television and Telecommunications Commission (CRTC) to give the regulator more teeth and a bigger mandate in dealing with the digital giants. That would include giving the CRTC the power to impose spending requirements on media content providers and “discoverability,” or how content is displayed on a website.

But one expert said the new powers and responsibilities proposed for the regulatory agency would be “wholly inappropriate,” and likely run afoul of Canada’s obligations under trade agreements and the constitutional guarantee of freedom of expression.

“I’ve got huge concerns with the massive regulatory structure that this envisages,” said Michael Geist, a professor at the University of Ottawa. “It’s really unprecedented to see this level of regulation.

“They want give the regulator huge powers to determine what … the website looks like, what content they provide,” he said. “If it were to be implemented, it would be subject to challenge on a number of grounds and, quite frankly, the government ought to reject them.”

But the report’s recommendations won endorsement from others, such as the Directors Guild of Canada, ACTRA and the Canadian Media Producers Association.

Friends of Canadian Broadcasting, an advocacy group, applauded the panel’s vision for the CBC with an expanded mandate for more Canadian content, a long-term commitment of federal funding and an end to all commercial advertising within five years.

“I would say it is ambitious, but appropriately so,” said Daniel Bernhard, the group’s executive director.

“We have this absurd situation in Canada where our government policy has allowed foreign tech companies to basically asphyxiate Canadian media,” Bernhard said. “This blueprint is really what is necessary to ensure that our own cultural conversation and democratic conversation can survive.”

Recognizing the importance of local news in a democracy, the panel also recommended that the $595-million journalism labour tax credit be extended beyond its five-year mandate that started in January 2019 “in order to strengthen the capacity of news organizations over the long term.”

It also says that the credit, which has mainly benefited print media, should be applied to news on all platforms, including broadcasting.

Crucially, the panel says that an uneven playing field exists between social media platforms such as Facebook and news media organizations, a tilt that should be corrected.

“As a result of the imbalance in their bargaining power, news content creators are unable to individually negotiate terms over the use of their content by social media platforms,” the panel says.

Newspaper publishers have long called for more information behind the closely guarded algorithms that the digital giants use to determine what articles are most read. This information, says the panel, could be made public to the publishers.

“We believe that the best way to address misinformation and fake news is to have accurate, trusted and reliable sources of news,” Yale said.

In terms of privacy and data breaches, the panel called on the federal government to harness the power of their collective agencies, such as the office of the privacy commissioner, to examine the scope of the problem.

That review should examine “the use of Big Data by dominant online platform providers and potential threats to privacy, competition, consumer protection, cultural sovereignty, democratic institutions, and taxation, and make recommendations on legislation.”

The panel also examined the role of advanced networks such as 5G. It did not go into whether Huawei equipment should be used in Canadian networks, which the United States says is a security risk.


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