Online streaming services like Netflix and Disney+ will soon be required to contribute 5 percent of all Canadian revenues to support Canada’s broadcasting system—a measure which could mean increased costs for subscribers, experts say.

The tax, which will take effect in September, will be used to boost funding for local and cultural broadcasting, the Canadian Radio-television and Telecommunications Commission (CRTC) has announced. The tax will be implemented for all streaming services making more than $25 million per year and is expected to bring in an estimated $200 million per year in new funding.

“Today’s decision will help ensure that online streaming services make meaningful contributions to Canadian and Indigenous content,” CRTC chief executive and chair Vicky Eatrides said in a press release.

Funding will also be directed to French-language content as well as content created by official language minority communities, equity-deserving groups, and Canadians of diverse backgrounds. Online streaming services will “have some flexibility” to send their contributions to support Canadian television directly, the press release said.

The 5 percent tax is being implemented under Canada’s Online Streaming Act, formerly known as Bill C-11. The Online Streaming Act requires the CRTC to modernize the Canadian broadcasting framework to enhance and improve Canadian content, Ms. Eatrides said during a June 4 speech at the Radiodays North America conference in Toronto.

“Building the new framework is like building a house, and the Online Streaming Act gave us the blueprint,” she said.

Streaming Tax Criticized

Critics of the Online Streaming Act say that Canadian subscribers will likely be the ones footing the bill for the CRTC’s new tax.

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University of Ottawa law professor Michael Geist says consumers will either be hit with higher bills or fewer content choices as a result of the tax.

“At a time when affordability is a major concern, Canadian consumers should prepare for a new Bill C-11 fee on their bill,” Mr. Geist wrote in a June 4 blog post, adding that the Online Streaming Act is about making streaming companies pay “even if it is consumers that will ultimately get the bill.”

“Throughout the Bill C-11 debate, the government insisted that the streaming services needed to pay their fair share,” he wrote.

“The CRTC had its marching orders from the government, and it is clear that it followed them. In doing so, it has turned itself into a government bank for cultural lobby groups in which streaming services and the public provide the funding and the Commission directs the withdrawals.”

Prime Minister Justin Trudeau himself admitted some years ago that higher taxes would be passed onto consumers.

“The reality is that taxpayers will be the ones to pay those taxes,” Mr. Trudeau said in 2018 when asked about streaming platforms paying higher taxes. “We … promised not to raise taxes for taxpayers who are already paying enough for their digital subscriptions and Internet.”

The Canadian Taxpayers Federation (CTF) is also criticizing Ottawa for the upcoming streaming tax, pointing out that the prime minister’s words prove the government has reneged on its promise.

“The federal government should be doing everything it can to make life more affordable and that means cutting taxes, not imposing new ones,” CTF federal director Franco Terrazzano said in a press release. “Canadians have every reason to worry this new tax will mean higher prices to stream their favorite music, movies, and TV shows.”

Ottawa isn’t alone in requiring US streamers to direct Canadian revenues toward domestic content. France put similar rules in place in 2021, obliging streamers to dedicate 20 to 25 percent of revenues to European and French content.