By KONRAD YAKABUSKI
Friday, November 17, 2017
When Pierre Karl Péladeau left politics last year to return to the top job at Quebecor Inc. he had given up a few years earlier, it was only a matter of time before he began looking for a new cause to champion.
Judging by the energy he's been pouring into his bid to force Ottawa and Quebec to start taxing Netflix, he's found it.
Mr. Péladeau this week used his first major speech since returning to Quebecor to advocate for fiscal and regulatory equity between domestic and foreign content distributors, in the wake of Ottawa's refusal to apply the same rules to Netflix as its Canadian competitors.
"In the face of the stakes involved in the digital economy, planetary competition and a federal government that unduly favours foreign companies, it is high time for action and mobilization," Mr. Péladeau said in his speech to the Montreal Board of Trade. The speech followed weeks of similarly strident op-eds, Tweets and Facebook posts by Mr. Péladeau.
To be sure, Mr. Péladeau has selfish business reasons for wanting to ensure that Netflix faces the same tax and regulatory burdens as Quebecor. The latter's online content distributor, Illico, must charge sales taxes on its subscriptions. Its conventional and specialty television operations face domestic content requirements.
And its Videotron cable unit must contribute a portion of its revenues to the Canada Media Fund. Netflix operates free of such requirements.
But there is more to Mr. Péladeau's crusade than protecting Quebecor's bottom line. He is among several prominent Quebec business leaders who are seeking to force the federal and provincial governments to take on not just Netflix, but all foreign players in the digital economy that operate free of Canadian taxes. For Mr. Péladeau and Maison Simons chief executive Peter Simons, tax equity is an urgent moral imperative if Canadian governments are to sustain public services at current levels.
Judging from the public reaction to Heritage Minister Mélanie Joly's decision to exempt Netflix subscriptions from Canadian taxes, the issue has more political resonance in Quebec than in the rest of Canada. Netflix's voluntary undertaking to instead spend $100-million a year over five years to produce content in Canada - or, as Mr. Péladeau points out, barely 1 per cent of the $8-billion (U.S.) Netflix plans to spend over all on content in 2018 - has been almost universally panned in Quebec as a capitulation by Ottawa in the face of foreign internet juggernauts.
Mr. Péladeau, who stepped down last year after a brief and bittersweet stint as leader of the sovereigntist Parti Québécois, stopped short of praising provincial Liberal Finance Minister Carlos Leitao, who has vowed that Quebec will act on its own to tax Netflix subscriptions. So far, Mr. Leitao's plan only amounts to a "statement of intention," Mr. Péladeau added.
Indeed, the Action Plan on Fiscal Equity that Mr. Leitao released last week conceded that taxing foreign internet companies remains easier said than done. "The context of the digital economy raises application difficulties linked to the collection of taxes for [companies] not having any or a significant physical presence in Quebec," the document notes.
They "have no obligation to register, collect or remit Quebec sales taxes, even when their products are taxable."
The Quebec finance ministry estimates the failure to collect sales taxes on foreign online sales will deprive the provincial treasury of $270-million (Canadian) in 2017.
That may not sound like a huge sum given that the 9.975-per-cent Quebec Sales Tax is expected to raise $17-billion this year. But with online sales rapidly increasing, the figure will only rise in coming years.
Alas, Mr. Péladeau has more reason to be optimistic than Mr. Simons. Mr. Leitao insists the next provincial budget will contain a mechanism to ensure the QST and the federal goods and services tax - which Quebec collects on Ottawa's behalf - are charged on Netflix subscriptions. But he says Quebec will leave it to Canada Border Services to ensure sales taxes and duties are collected on manufactured goods purchased from foreign online retailers.
The Quebec finance document concedes, however, that "postal administrations are facing a considerable increase in the number of parcels transiting through customs, and sales taxes are only charged on a fraction of imported goods."
Still, Mr. Simons is not giving up.
He is supporting a private member's bill introduced by the far-left Québec Solidaire that would force credit-card companies to charge sales taxes on foreign online purchases. The bill stands little chance of being adopted.
But it has ensured that the debate surrounding taxation and the digital economy remains high up on the political agenda in Quebec.
Not so for governments in the rest of Canada, where taxing Netflix still seems taboo.