Screenshots can be expensive in Canada

The Canadian government would like to ask the Meta platform to pay a link tax. The operator of Facebook and Instagram is expected to pay a potential nine-digit sum as users circumvent the news block imposed by Meta in Canada. Users in Canada have not been seeing hyperlinks to news articles since December; instead, they now post screenshots of news articles, copy their text into their own posts, or link to postings on other (non-taxed) social networks, where a hyperlink to the news source is waiting.

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According to the minority government led by the Liberal Party and supported by the Social Democrats, Meta serves the purpose of the link tax introduced in December: making news available. This is not about copyright; violations of the law by publishing someone else’s work must be dealt with separately and have nothing to do with the link tax.

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The link tax is a so far unsuccessful attempt to force the two companies to cover about 30 percent of the total cost of producing news content in Canada. Google and Meta should pay 300 million Canadian dollars (more than 200 million euros) annually to keep their users informed of news, even if the news is only available in live streams or behind a paywall.

Potemkin Tax

But no one is paying the Canadian link tax yet. Meta has already blocked business-hurting hyperlinks to news sources on its offerings in Canada. Media researchers applaudThis results in Canadian media companies losing eleven million views per day. Google threatened to shut down its ad-free offering, Google News Canada, after the government exempted it from the link tax. Google pays a small amount into a fund but pays no one to the controversial link tax. News publishers are losing a lot of revenue due to the lack of traffic from Facebook and Instagram and newspapers are dying. Media unions have lobbied for a left-wing tax for years.

The Canadian government is angry with Meta and has launched a competition agency investigation. And now the responsible culture minister, Pascal St-Onge, has prompted the de facto independent regulatory authority CRTC (Canadian Radio-television and Telecommunications Commission) to initiate link tax proceedings against Meta because of the screenshots posted. The regulator responded with an invitation for anyone to file a complaint and provide evidence.

In fact, the text of the law probably covers the government’s interpretation: the crime of making news content available is so broad that even the reproduction of parts of a news story in the form of a screenshot or quote could trigger the tax – perhaps even if it violates Meta’s terms of use. It is unclear whether hyperlinks to other services that then link to news sites are also included.

Censorship Gets Complicated

It is also unclear how Meta can defend itself against users who violate copyright and trigger the link tax through their postings. Theoretically, a single slip posting could lead to a high tax burden, as it is not based on sales, profits or the number of postings. The amount of the payment should be determined in negotiations between Meta and the media company; if this fails, the regulatory authority should set an amount. The government expects more than $100 million.

Until these proceedings are complete, neither Meta nor the publishers will know how many millions are involved. And by the time that is determined, the tax could be abolished. The opposition Conservatives have promised to abolish the link tax (as well as the CO₂ tax) if they come to power. Opinion polls predict the party will win a landslide victory. Elections are expected in 2025.

Google charges surcharge for digital services tax

Meanwhile, in late June, the current government introduced another online tax, also originally proposed by the Conservatives: if a company that has annual sales of more than 750 million Canadian dollars worldwide generates sales in Canada by operating online marketplaces, social networks, the provision of online advertising or the exploitation of user data, it will have to pay three per cent of these Canadian sales as a digital services tax. The annual exemption applies to the first $20 million.

The amounts are chosen so that, if possible, no Canadian company would have to pay a digital services tax, but US companies would. The US government is therefore preparing to retaliate. In the end, Canadian companies are likely to foot the bulk of the bill: Google Ads will charge a Canadian surcharge of 2.5 per cent starting in October.

This is not a surprise. Such surcharges Google already charges between two and seven percent for line items in Austria, France, India, Italy, Spain, Turkey and the United Kingdom, which levy similar taxes. Because of its market power in online advertising, Google does not fear any significant loss of revenue. Just as Meta does not lose money from blocking hyperlinks to external news sites, but potentially benefits from the longer time spent by users on Facebook and Instagram. A ray of hope: part of Misinformation postings in Canadian Facebook groups are said to have halved passed.

Another five percent tax will come into effect in September: the streaming tax is aimed at subsidizing cable TV, commercial radio and music in Canada. The measure also gave the Conservatives ammunition for an election campaign against the Liberal government.

(DS)