Netflix Defends C$500,000 Investment in Canada

Netflix is looking to “set the record straight” about its recent investment in Canada, which has sparked criticism due to the fact that the business does not pay Canadian sales taxes and will not submit to quotas on its production in the country.

Last week, Netflix received approval under the Investment Canada Act from the Minister of Canadian Heritage, Melanie Joly, to create Netflix Canada, a new home for original productions in Canada. The company is planning to use Netflix Canada to work directly with Canadian producers, creators, talent and crews to create more content. As part of the approval, Netflix committed to invest at least C$500,000 in movies and TV shows produced in Canada, both in English and in French, over the next five years. “This means certainty that Netflix will continue to play a large role in the Canadian production community,” the company said in a blog post, penned by Corie Wright, the director of global public policy. “We have invested in Canada because Canadians make great global stories. That says more about the quality and strength of Canadian content, talent and crew than a commitment of any dollar amount.”

Since the announcement, there has been much criticism “and even some conspiracy theories” about the investment. Netflix explained that “the recent price increase has nothing to do with our investment or commitments. That price increase was planned a long time ago.” Also, “We have not made any deals about taxes. Our investment was approved under the Investment Canada Act. No tax deals were part of the approval to launch our new Canadian presence. Netflix follows tax laws everywhere we operate. Under Canadian law, foreign online services like Netflix aren’t required to collect and remit sales tax.”

Critics were arguing that Netflix got special treatment because the government didn’t force the service to meet special content quotas as part of its investment. “That’s wrong,” the company said. “Netflix is an online service, not a broadcaster. No online media service—foreign or domestic—is subject to traditional broadcast media regulations like quotas or content levies; they’re also not eligible for the regulatory benefits that traditional media enjoy. The CRTC decided in 1999 (before Netflix even had a streaming service) that these regulations would not apply to internet-based media. We think that’s the right approach. Internet-native, on-demand services like Netflix are consumer-driven and operate on the open internet. We don’t use public property like broadcast spectrum or rights of way and we don’t receive the regulatory protections and benefits that broadcasters get (and, by the way, we’re not asking for them).”

Netflix added: “We understand that people are curious and eager for immediate details about what comes next. But remember: our commitment marks a long-term investment in Canada—not just a next week, next month or next year investment. That means that now that we’ve been given the green light to establish a local production presence, we have some planning and hard work to do before we can make any additional official announcements.”