Week in Insights: Canada’s Streaming Tax Gives US Idea to Borrow

Curated by Daniel Xu

In what may prove a watershed move, Canada announced this month that its Online Streaming Act would require streaming services to pay a 5% tax on Canadian revenue to be earmarked for the Canadian broadcasting system, starting in the 2024-2025 broadcast year.

The law aims to benefit local news, French-language and Indigenous programming, and other diverse community content. But critics contend the new tax violates Canadian obligations under free trade agreements and may do more harm than good, discouraging US streaming services from pursuing the Canadian market. That may be true, or it may simply give US tax policymakers ideas.

The Canadian Radio-television and Telecommunications Commission estimates the tax will inject CA$200 million ($145 million) into the Canadian media landscape, which by comparison would account for about half the federal funding directed toward public television stations in the US. A similar 5% streaming tax on US revenue levied on Netflix Inc. alone would net the government approximately $210 million in just the first quarter of 2024—that may be too lucrative to pass up.

With news media facing significant challenges in the US, we may soon see similar streaming service tax initiatives take shape. A US analog could help address declining local news revenue and floundering public media outlets, offering a lifeline to organizations that are struggling to stay on the air.

Canada’s policy and businesses’ pushback represent the ongoing debate over the role of digital platforms in supporting public media. With more cuts to public broadcasting on the horizon, don’t be surprised if the US looks northward for inspiration.

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Buildings in downtown Toronto.

Photographer: James MacDonald/Bloomberg via Getty Images

State Insights

AB FinWright’s Rachel Wright and Simon Menkes review New York’s new cannabis excise tax, saying it improves the state’s former potency tax but that microbusinesses will save less.

Grant Thornton’s Jamie Yesnowitz, Bridget McCann, and Paul Criscuolo examine the remote work landscape, finding that tax professionals’ expertise can help influence government policies.

Federal Insights

NYU professor Brant Hellwig says the Connelly v. US decision relies on logical determinations rather than traditional legal analysis to close the door on an estate planning opportunity.

Enrolled Agent Bob Kerr examines the IRS’s Direct File pilot, saying there are several unanswered questions about its true costs and need for expansion.

McDermott Will & Emery’s Edward Froelich and Susan Ryba say the US Tax Court’s Valley Park Ranch decision shows that the Tax Court isn’t bound to the Ninth Circuit’s ruling in Altera.

Story Imprinting’s Holly Amaya says the executive presence gap has kept women and people of color back, explaining why firms need to ask if their feedback is actionable.

Global Insights

Forvis Mazars’ Jon Morton and Gabriel Fuenmayor examine transfer pricing transactions, saying murky business purpose risks tax audits and deduction denials.

KPMG’s Maura Hodge analyzes new guidance from ISSB and EFRAG, noting preparers now have a comprehensive list for climate-related disclosures.

DEI Series Insights

EEOC Commissioner Kalpana Kotagal supports lawful DEIA efforts in the workplace and says employers should begin with self-reflection and then continuously review data and refine practices.

NYU’s Kenji Yoshino and David Glasgow propose a new approach to corporate DEI programs that prioritizes content, character, and service over demographic backgrounds.

KPMG’s Elena Richards says businesses should clarify their unique DEI vision at the outset and establish goals and metrics to gauge success.

Ogletree Deakins’ T. Scott Kelly and Emily Halliday survey the landscape of DEI metrics, saying companies should consider federal contractors’ best practices.

Stinson chief DEI officer Ann Thomas says industry leaders should seek buy-in and dialogue to build bridges among employees as more states move to place restrictions on DEI programs.

Rutgers Law School’s Stacy Hawkins surveys DEI’s evolution and says it will continue to adapt as challenges arise.

Deputy GC Amy Yeung says DEI should spur creative solutions and that companies acting from intentionality don’t fear missteps, and learn from them.

Columnist Corner

Columnist Andrew Leahey says Arizona’s proposal to offer more property tax refunds would worsen social divisions and notes that increasing property taxes in areas with unhoused populations would be more humane.

Former general counsel and prosecutor Rob Chesnut examines the central role general counsel has in preparing a company’s board to design or review its DEI policies.

Career Moves

Paul English has been appointed CEO of CLA Global Limited, an international organization comprised of independent accounting and advisory firms.

Erica Williams has been appointed to a second term as chairperson of the Public Company Accounting Oversight Board for a five-year term beginning on Oct. 25.

If you’re changing jobs or being promoted, email your submission to TaxMoves@bloombergindustry.com for consideration.

News Roundup

It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team.

• Ernst & Young LLP will reset base salaries for its accounting recruits starting this fall with pay raises of more than 10%, the Big Four firm said. The higher wages are part of a $1 billion, three-year commitment by EY to attract and train incoming accountants for the artificial intelligence era.
• California lawmakers passed a package of three bills with a $211 billion general fund budget for the fiscal year that starts July 1. The legislation includes a three-year suspension of corporate net operating loss deductions and reversal of a recent tax ruling that was favorable to multinational companies.
• Pennsylvania Republican Rep. Mike Kelly is a firm believer in the power of Opportunity Zones to revitalize distressed areas. In fact, a refurbished theater in his district served as the backdrop for a recent hearing to kickstart a discussion on refining the program helping such areas, which expires in 2026.
• Car buyers have received more than $1 billion in electric vehicle tax credits through a new program that allows for faster payouts, Treasury Department officials said.

Employees work on the R1S model electric vehicles on the pilot production line at Rivian’s headquarters in Irvine, Calif.

Photographer: Alisha Jucevic/Bloomberg via Getty Images

Tax Journals

Tax Management International Journal

Companies should prepare robust defense files and documentation to show business purpose in their transactions in light of a recent Mexican court ruling on the country’s general anti-abuse rule, KPMG’s Armando Lara Yaffar, Michel Sánchez O’Sullivan, Douglas Poms, and Quyen Huynh say.

Tax Management Memorandum

Tax adviser and former IRS official T.J. Sullivan of Potomac Law Group explains what to expect in a professional valuation and what the IRS is going to look for.

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