According to court documents, the government led by Canadian Prime Minister Mark Carney plans to scrap a specific tax imposed on entertainment companies such as Netflix (NFLX.US) and Walt Disney (DIS.US), following opposition from U.S. officials and Hollywood film studios. However, streaming platforms will still be required to allocate a portion of their revenue to produce Canadian and Indigenous film and television content.

The Canadian Attorney General's lawyers stated in a letter to the Federal Court of Appeal that the government intends to "eliminate the basic contribution requirement for streaming services." Nevertheless, Hermine Landry, a spokesperson for Canadian Culture Minister Mark Miller, clarified: "Platforms will still need to reinvest a certain percentage of their revenue into Canadian and Indigenous content creation."

Since 2024, Canada has mandated that streaming platforms of a certain size contribute 5% of their Canadian revenue to support the nation's film and TV production. According to the letter submitted to the court, the Canadian government plans to fill this funding gap through public fiscal allocations.

In May, the Canadian Radio-television and Telecommunications Commission (CRTC) proposed increasing the contribution rate for streaming platforms to 15% of their Canadian revenue. This proposal sparked strong backlash from Hollywood executives and officials in the Trump administration. U.S. Ambassador to Canada Pete Hoekstra stated that the plan specifically targets American companies, establishing new discriminatory trade barriers that "make an already bad situation worse."

The Carney government ordered the agency in June to reassess the 15% tax increase, arguing that it "would impose new costs on businesses providing these services, which could ultimately be passed on to Canadian consumers through higher prices."

The letter was submitted during ongoing appeals in the Federal Court of Appeal, where the Canadian Film Association—representing major companies including Netflix, Walt Disney, and Sony Pictures—has filed multiple lawsuits. Landry stated: "We will instruct the CRTC to cancel the basic contribution requirement, which extends beyond the audiovisual industry into the broader cultural ecosystem. This obligation is not directly linked to the core business of streaming platforms and has been mired in lengthy legal disputes."

The "basic contribution requirement" refers to the current 5% streaming tax. The court letter indicates that the Canadian government is expected to release further details "in the coming weeks." The CRTC has referred the matter back to the government for further guidance.

The Canadian Association of Broadcasters cautioned: "It is too early to make a final conclusion based solely on this administrative letter." The Canadian Film Association has not yet commented.

The funding mechanism supporting Canadian and Indigenous content creation has been widely praised within the industry. It has helped produce globally popular films and shows like "The Great Canadian Baking Show" and "Schitt's Creek," which have achieved international acclaim.

Key Points:

Canada's government is scrapping a 5% streaming tax but will require platforms to support local content. The CRTC's proposed 15% increase was rejected after U.S. opposition. The policy shift aims to avoid legal gridlock and potential consumer price hikes.