Quebec intends to carry on with a plan to coax Netflix Inc. into collecting and remitting provincial sales tax on its video-streaming service, despite an agreement with the federal government to forgo its own sales tax on the company's Canadian subscribers.
Carlos Leitao, the province's Finance Minister, said the video-streaming service "falls well within the basket of taxable services" and he intends to collect up to $20-million per year despite the federal deal that gave up on GST in favour of a commitment from Netflix to spend $500-million on Canadian programming over five years. An additional $25-million has been earmarked for developing francophone markets.
The deal unveiled last week by Heritage Minister Mélanie Joly has provoked disapproval in the Quebec government and among cultural and arts groups, broadcasters and other business leaders who complain the agreement provides insufficient requirements for French-language programming and also gives Netflix an unfair advantage over homegrown streaming services.
Netflix doesn't release regional subscription numbers but research firms say 1.2 million to 1.45 million Quebec households have the service, which would translate into $14-million to $20-million annually for the province.
Mr. Leitao was short on details for how he will tax Netflix. He conceded he will need the company's co-operation to start collecting the province's 9.975 per cent tax on the company's subscription fees in Quebec as it has no office or headquarters in the province. He pointed out other jurisdictions including Australia and the European Union have struck taxation deals, but those agreements have often taken years to hammer out.
When asked what he will do if the company refuses to collect the money, Mr. Leitao said: "We'll cross that bridge when we come to it."
Mr. Leitao said he needs to know the details of the agreement the company struck with Ottawa before he can go ahead with his tax plan. Quebec has harmonized its tax with the federal 5-per-cent levy, complicating matters, he said. "We need Ottawa to be clear about their process," he said. "I need to know what's in that deal."
Speaking at a premiers' conference in Ottawa, Prime Minister Justin Trudeau reiterated that he has no intention of backing down. "I promised Canadians I would not raise taxes on the middle class and I'm sticking to it," Mr. Trudeau said.
Netflix officials did not respond to Quebec's position Tuesday.
The National Assembly, including the governing Liberals, unanimously adopted a motion calling on the government to collect the tax as soon as possible to "guarantee fiscal and regulatory equity among players in the cultural industry."
"That [federal] deal is a fool's bargain and it's very dangerous," said Gabriel Nadeau-Dubois, the co-leader of the fourth party in the legislature, Québec Solidaire.
Quebec Culture Minister Luc Fortin called on the federal government to revise its position and to come up with a "pan-Canadian solution for all enterprises. We are taking steps to apply our laws. Ottawa should apply its laws too."
Ms. Joly met with Quebec's Union des artistes (UDA) on Tuesday and tried to reassure Quebec's cultural producers that the Netflix agreement is just a first step in an overall reform in Canadian policy to protect homegrown culture in the digital era. "We need companies that benefit in this new era to participate. We need to find a new model that will guarantee the sustainability of financing and of our cultural sovereignty on the Internet," Ms. Joly said.
Sophie Prégent, president of the UDA, emerged from the meeting saying she delivered a message to the government that the province's artists are angry.
"Ms. Joly underestimated the fervour and furor of people on the ground," Ms. Prégent said. "I think she genuinely thinks she brought us something that would satisfy us. It's the opposite."
Ms. Prégent said the deal lacked transparency and added that cultural industries can't survive on one-off deals with foreign companies that can't be held accountable. "I'm tired of hearing 'It's a great deal, it's a brilliant agreement.' I want her to stand with us."
Pierre Karl Péladeau, CEO of Quebecor Inc., which has a streaming service, and clothing retailer Peter Simons were among the business leaders condemning the federal deal, saying it sets an uneven playing field for local competitors to international giants who sell into Canada and Quebec.