When Google affiliate Sidewalk Labs won a bid to plan a technology-filled neighbourhood of the future on Toronto’s waterfront, the announcement was scheduled, in part, to fit with Prime Minister Justin Trudeau’s itinerary.
On a sunny October morning in 2017, Mr. Trudeau beamed at former Google chief executive Eric Schmidt from the podium and vowed the project would become a “thriving hub for innovation, and create the good, well-paying jobs that Canadians need.” Sidewalk said the neighbourhood could house 5,500 jobs – theoretical jobs, that is, if the neighbourhood got built.
It didn’t, after 2½ years of controversy over its origins, overreach, and privacy and financial implications. And since the launch of Sidewalk, when U.S. West Coast tech giants made similar job announcements, Mr. Trudeau and his deputies became harder to find. When Amazon.com Inc. said in 2018 that it would expand its Toronto work force by 600, local MP Adam Vaughan was his envoy. By February, 2020, when Google announced it would hire 5,000 more Canadians – for real jobs, not theoretical ones – not a single federal politician showed up.
Once willing to cozy up to Big Tech with cameras rolling for the sake of foreign direct investment, the Liberals have shifted their position to one of skepticism. Until this past spring, that came in the form of gradually distancing themselves from behemoths accused of massive-scale data collection and outsized market power, such as Facebook Inc., Alphabet Inc.’s Google and Amazon.
But since Sidewalk officially abandoned the Toronto project in May, the now-minority Trudeau government has moved to actively curtail tech giants’ power in Canada, ramping up initiatives during a rapid-fire series of late-fall announcements.
Heritage Minister Steven Guilbeault is considering an Australian-style requirement for platforms to pay news publishers for content when users link to it. The Liberals tabled changes to the Broadcasting Act that would force streaming services to promote and help finance Canadian content. They announced a long-promised update to private-sector privacy laws with world-leading fines for data abusers. They even moved forward with a plan to tax Netflix subscriptions and app purchases by Canadians.
“Over the last few years, we’ve come to the realization that this great, wonderful promise of the free internet and all the wonderful possibilities these companies were offering us came at a pretty steep cost,” Mr. Guilbeault said in an interview.
Ottawa’s more aggressive push also comes at a time of rising public distrust of the tech giants worldwide. But while Canada quietly stood back for many years, only slowly shifting its position after all-party Parliamentary hearings into 2018′s Cambridge Analytica data-misuse scandal, other countries began taking action much earlier.
After years of deliberations, the European Union’s General Data Protection Regulation came into effect in May, 2018, with strong safeguards for personal privacy in a data-driven world. California soon followed suit. Dozens of jurisdictions in the United States and Europe have launched antitrust investigations into Facebook and Google.
As the Liberals move to rein in the tech giants here, they appear to have public opinion on their side. Nanos Research polls conducted for The Globe and Mail last month showed broad support for policies such as more social-media regulation and requiring digital platforms to charge sales tax.
And the NDP, which along with other opposition parties can provide decisive support in a minority Parliament, wants the government to move fast. “The Liberals don’t even have to do the work; they can just copy the work that other countries that are further ahead of us have done,” NDP MP Heather McPherson said.
Here are six hot-button issues Ottawa is tackling, or likely will soon.
Issue: Tightening up the tax rules for large multinational corporations, so the taxes each pays in Canada are more in line with its activities here, rather than based on the jurisdiction where it is registered.
Date: The Nov. 30 fall economic update said tax changes in this area will raise about $800-million a year in revenue, with further details to come in the 2021 federal budget.
Analysis: Known as the “Base Erosion and Profit Shifting” talks, member countries of the Organization for Economic Co-operation and Development have been negotiating for years on a global approach to taxing the corporate profits of large digital multinationals. The OECD has estimated that countries are losing out on US$100-billion to US$240-billion a year in revenue owing to tax planning strategies by the world’s largest companies.
The OECD and the Group of 20 had set a deadline of finalizing their work by the end of 2020, but have since pushed that to mid-2021. The most recent proposals have faced resistance from the U.S., which is home to many large digital companies such as Amazon, Apple Inc., Facebook and Google. The U.S. has also threatened trade tariffs for countries, such as France, that plan to act unilaterally in this area.
After initially backing down, France is now moving ahead with a Digital Services Tax that would impose a 3-per-cent tax on gross income from large companies that operate in specific fields. These include digital advertising and digital platforms and marketplaces, such as Facebook and Amazon.
Finance Minister Chrystia Freeland announced in the fall economic update that Canada will unilaterally impose a new approach to taxing digital multinationals if no multilateral agreement has been reached.
McGill University tax law expert Allison Christians, who has followed the OECD negotiations closely, said it is not clear what Ottawa is proposing based on the language in Ms. Freeland’s update. That lack of clarity also raises questions about how the government generated such precise revenue estimates, she said.
Any unilateral action by Canada is likely to face objections from the United States, she said, adding that the U.S. position is not expected to change under president-elect Joe Biden.
“The U.S. failure to sign on [to the OECD proposals] is problematic,” she said. “The U.S. position is rational from their perspective. The tech giants are their companies, so they don’t really have anything to gain by the rest of the world trying to tax them. And the existing rules, as flawed as they are, run in the favour of the U.S. right now, so why would you agree to a change?”
Issue: Requiring Netflix Inc., Google and other global digital service companies to collect and remit federal sales tax.
Date: The fall economic economic statement announced that all digital marketplace platforms will be required to register to collect and remit the federal sales tax starting July 1, 2021. Another measure related to short-term rental platforms, including Airbnb, will require that either the property owner or the company that runs the website collect the sales tax. The government estimates that the first measure will bring in $1.2-billion over five years, while the short-term rental change will lead to $360-million in new federal revenue over five years.
Analysis: Economists are baffled as to why it took Ottawa so long. The move addresses a discrepancy in which Canadian-based digital services, such as Crave, have long collected sales tax while competing with Netflix and other foreign companies that did not.
The root of the issue can be traced to an interpretation by the Canada Revenue Agency that emphasized whether or not a company had a physical presence in Canada when determining the company’s tax-collecting obligations.
Some provinces are already requiring foreign-based digital companies to collect provincial sales tax. For years, then Liberal Finance Minister Bill Morneau said he was examining the issue, but action never came.
The announcement is the latest twist in a highly politicized and often confused political drama.
In the run-up to the 2015 federal election, two similar but distinct issues were percolating that eventually blurred into one controversy over a so-called “Netflix tax.” In the 2014 budget, Stephen Harper’s Conservative government sought input on “ensuring the effective collection of sales tax on e-commerce sales to Canadians by foreign-based vendors.” This was not immediately controversial.
Around the same time, however, the federal broadcasting regulator was proposing that large digital companies, such as Netflix and Google, be subject to broadcasting regulations that would require them to pay into funds that support the creation of Canadian content. This was the original “Netflix tax.”
In the election campaign, Mr. Harper released a video in which he declared his love for movies and TV shows and vowed that only his party could be trusted not be bring in a new Netflix tax. The Liberals quickly vowed that they also opposed a Netflix tax.
Liberal MP Nathaniel Erskine-Smith, who has advocated for tougher regulation of large tech companies, said that flare-up during the 2015 campaign is the main reason why the Trudeau government wouldn’t touch the sales tax issue for so long.
“It made no sense,” he said. “[Mr. Harper] tried to use that as a wedge issue. And so, you know, Trudeau had said, ‘Well, we are not going to adopt a Netflix tax.’ And that meant no GST on Netflix for some reason. But, thankfully, we’ve moved past that.”
Issue: Requiring foreign streaming services, such as Netflix and Spotify, to abide by the same Canadian content rules that domestic broadcasters follow.
Date: Bill C-10 was tabled on Nov. 3 and has had days of House debate, but no votes yet.
Analysis: Canada’s broadcasting sector is highly regulated, with rules that aim to boost the creation and promotion of Canadian content against the encroachment of U.S.-created film and television.
However, as foreign-owned streamers entered the Canadian market, they were not subject to these rules. The Liberal government has tabled a bill that would give the broadcasting regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), responsibility for and power over those streamers’ place in the market.
The bill does not, however, specify what the new rules for streamers would be – for example, how much money a service such as Disney+ would have to spend in Canada. Instead, if the bill passes, the Liberal cabinet would then tell the CRTC what kind of rules it wanted, and give the CRTC nine months to write them.
Janet Yale, a veteran telecom lawyer who chaired an expert panel that provided guidance to the government on the legislation, said the advantage of this approach is that regulations would be a lot easier to change than legislation in the years ahead.
“You don’t want to be too prescriptive in legislation,” Ms. Yale said. “Who would have predicted five years ago that we’d be where we are today?”
As well, the Liberal government has already signalled that its instruction to the CRTC will include a new order that broadcasters must fund more programming from Indigenous creators.
Manitok Thompson, the CEO of the Inuit Broadcasting Corp., said she would welcome such an order, but the legislation should define the term “Indigenous” and outline support for First Nations, Métis and Inuit. She said that’s important because Inuit have a distinct culture and language that could get subsumed by other groups because of the relatively small Inuit population.
“That Indigenous word scares me, as an Inuit broadcaster,” she said. “I know that we are the minority. Our voice will be too small for funding or to be recognized with this bill if they don’t define it better.”
Issue: Giving Canadians more protection of and control over their personal information.
Date: Introduced as Bill C-11 on Nov. 17, alongside legislation to create a tribunal to review fines proposed by the federal privacy commissioner and hear appeals of the commissioner’s decisions.
Analysis: Ottawa has long promised to give Canadians stronger digital rights through an update of the 20-year-old Personal Information Protection and Electronic Documents Act. Its proposed successor, the Consumer Privacy Protection Act (CPPA), tries to bring Canada’s privacy regulations closer to those in more progressive jurisdictions such as California and the European Union, including fines for violators as high as $25-million or 5 per cent of a company’s global revenue.
Critics who follow foreign regulations, such as the EU’s General Data Protection Regulation, say Canada’s proposals left out some crucial ideas. Teresa Scassa, Canada Research Chair in Information Law and Policy at the University of Ottawa, said C-11 took a confusing approach to consent for collection of personal data.
The bill apparently aims to reduce the burden on Canadians to provide consent – but in doing so, it could create loopholes for businesses to collect some sensitive data without consent.
Dr. Scassa also said the bill doesn’t explicitly frame privacy as a human right to the extent that Europe’s General Data Protection Regulation does. Both of these issues could create opportunities for data misuse. “If you had a strong statement of purpose about the role data plays in relation to human rights, that would help to shape the interpretation of the legislation in a way this doesn’t do,” she said.
Former BlackBerry co-CEO Jim Balsillie, a long-time critic of the Liberals’ approach to corporate data collection and now chair of the domestic-tech advocacy group the Council of Canadian Innovators, said the bill has “more holes than Swiss cheese.” Like Dr. Scassa, he said the legislation should have been built upon privacy as a human right, rather than balancing individual rights with corporate interests. “This is not a balancing issue. This is a primacy issue,” he said.
Mr. Balsillie argued that the sweeping new legislation is little more than a public-relations move. “They’re managing for the optics, but they’re not really pushing back against foreign tech influences,” he said.
But Innovation Minister Navdeep Bains said in an interview that some balancing was necessary because of the nature of Canada’s economy. Many small domestic providers operate alongside – and compete with – global giants.
“Canada is a country of many small and medium-sized businesses that don’t necessarily have the resources or the tools to be able to deal with some of the more prescriptive approaches of other jurisdictions,” Mr. Bains said.
Issue: Requiring social-media companies to remove harmful content, such as hate speech or images of child exploitation.
Date: Legislation is expected in the new year.
Analysis: Social-media companies have come under increasing criticism for the lack of moderation of content that is shared on their platforms. The issue became even more urgent in 2019, when a shooter in New Zealand used Facebook to livestream the murder of worshippers at a mosque.
More recently, the Montreal-founded website Pornhub – a YouTube-like platform that allows users to upload and view pornographic videos – was found to be hosting many videos of child abuse.
The Liberal government has said it will introduce a bill that would force digital platforms to take down “illegal content” within 24 hours or face significant penalties. It would follow similar rules being put in place in the European Union.
Websites that host user-generated content, such as YouTube, have long argued that they are not legally liable for what users do with the platform.
Some advocates say the government already has tools to crack down on illegal content. The Friends of Canadian Broadcasting argued in a report this year that there is a clear legal liability if a social-media company is officially notified about a piece of unlawful content on its platform and it does not take it down.
“Our elected officials don’t need to create new laws to deal with content that is already defined as illegal,” said Daniel Bernhard, the executive director of Friends.
Issue: Supporting the news industry, which has been under financial pressure owing to the entrance of Facebook and Google into the online advertising market.
Date: Nothing has been tabled yet. The Liberal government has said for months it is researching the issue and may introduce a bill next year.
Analysis: Newspapers, TV stations and other outlets that fund journalism have seen their business models upended in recent years because digital platforms – principally Facebook and Google – have attracted much of the ad spending and driven down the cost of reaching customers. At the same time, those outlets also serve up the content that is shared on search engines and social-media platforms.
Other countries have moved faster than Canada to support their news industries. Two in particular – France and Australia – have taken very different approaches. France has proposed a so-called “link tax” that allows publishers to demand licensing payments from websites that link to their content. Australia, meanwhile, is trying to correct the competitive imbalance in the marketplace by giving publishers the right to bargain with the platforms for some form of redress.
News Media Canada, a lobby group that represents news outlets, said Facebook and Google have effectively formed an “anticompetitive” duopoly on the digital ad market. The group recommends Canada adopt a model similar to Australia’s.
Google and Facebook, for their part, argue they have directed billions of views to news publishers and that any market issues are owing to a lack of digital innovation by traditional news media.
Mr. Guilbeault said he’s been in regular contact with his counterparts in France, Australia and other countries. When asked which approach the Canadian government is leaning toward, he said: “We’re still doing the analysis. I can’t answer that question yet.”
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