The proverbial ink is barely dry on the disastrous Bill C-18, yet the Canadian media lobby has already moved onto the next targets for government funding, grants, and tax reform. The effort, which is seemingly designed to ensure that government funding or regulation cover the entire cost of news, focuses on extending grants, expanding provincial tax credits, and overhauling the tax treatment of ad spending. It has hard to overstate how dangerous these policies have become as the sector’s addiction to government funding and regulation has come at an enormous cost that erodes public trust and created dependence on the very governments the press is supposed to hold to account.
The slippery slope of this government’s funding the media has been ongoing for years: the Local Journalism Initiative offered tens of millions in grant money, the Labour Journalism Tax Credit created a tax credit worth nearly $14,000 per journalist when established that was more than doubled last year on a retroactive basis to nearly $30,000 per journalist, and the Online News Act (Bill C-18) offered the hope (or more accurately illusion) of hundreds of millions more from Google and Meta. On top of the federal money, the Quebec government offers a similar tax credit system that comes close to ensuring that government money and regulation cover the entire cost of news journalists at print and digital publications in the province. And if that were not enough, the CRTC is working through its plan for Bill C-11, which the Canadian Association of Broadcasters hopes will lead to the creation of yet another news fund, with 30% of contributions from Internet streaming services such as Netflix and Disney going to the news divisions of Canadian broadcasters such as Bell and Rogers.
Yet despite the hundreds of millions in support – which the sector pledged would be temporary – it appears the only thing these policies bring are demands for more. With the Labour Journalism Tax Credited both extended and expanded in last year’s Fall Economic Statement, the sector has turned to the Local Journalism Initiative in the hope that it too will be extended. Further, the lobbying to expand the Quebec labour journalism tax credit to other provinces is in full swing with B.C. the first target. If adopted, the independence of the press would be placed further at risk given the combination of federal and provincial tax credits – combined with Google money – could result in public money and regulations covering the full cost of news journalists.
In addition to the tax credits and granting programs, the lobby has also set its sights on tax reform, namely the removal of tax deductions for advertising on foreign digital platforms. The tax deduction policy dates back decades and Canadian publishers and broadcasters would like the foreign platforms removed, effectively making it more expensive to advertise on those platforms when compared to advertising on Canadian services that would still qualify for the preferential tax treatment (in fact, some are even calling for tax credits for advertising on Canadian services). Misleadingly referred to by some MPs as a billion dollar subsidy to the platforms, the reality is that changing the tax treatment would be unlikely to dramatically shift ad dollars to Canadian publications since advertisers typically seek out effective ads, not necessarily cheap ones. Instead, the primary impact would be to make advertising on foreign platforms more expensive for Canadian businesses, leading to increased costs that are invariably passed along to consumers.Not only would the policy change raise cost issues for Canadian businesses, but it is likely to spark a trade challenge under the USMCA since it would specifically target non-Canadian service providers and advertising is not covered by the cultural exemption.
While the government should be thinking about policies to address the challenges faced by the media sector, it is time to recognize that caving to media lobby demands over the past five years for a seemingly endless array of tax credits, grants or other programs has done far more harm than good. It has undermined trust in the media, extended the life of some businesses that probably should be allowed to die if no longer commercially viable, and created barriers to newer, innovative services that provide real hope for the future.
Related posts:
The Government’s Epic Bill C-18 Miscalculation on Mandating Payments for Links
Regulations Alone Can’t Fix Bill C-18: Why News Media Canada’s “Surrender” May Not Be Enough to Stop Google From Blocking News Links in Canada
The Law Bytes Podcast, Episode 170: The Bill C-18 End Game – What the Senate Heard About the Online News Act
Bill C-18 is Dead, Long Live Bill C-18: Government Rewrites Online News Act With Final Regulations
Pigs at the trough of public money.
Let them die.
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Post media is US owned, so it would be only fair that ads on it would also be non-deductable.
Making ads on foreign platforms non-deductable will cause advertisers to reduce ad spending, including on Canadian platforms, and foreign platforms to cut ad prices. The platforms will also try to run more ads to offset the price cuts. As a result, there will be little or no benefit to Canadian media.
However Postmedia is a “Qualified Canadian Journalism Organization” (QCJO) under the Income Tax Act. The Act doesn’t talk about ownership, at least in the case of a corporation. See section 248(1) of the Act for the definition.
Presumably any ad deductions would be contingent upon the media outlet being a QCJO. If it does this would exclude Rebel News which was rejected on the basis that only about 1% of what it publishes is produced by it, even though the definition in the Income Tax Act does not specify a minimum, only that the organization produces original work.
As far as the rest is concerned, I agree about the reduction of the number of ads that Canadian advertisers produce. I am not so sure about the foreign platforms cutting prices; I would expect they would only do this if it starts to impact the revenues they are seeing from Canadian advertisers.
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Advertisers will minimize their expenditure on ads, especially on Canadian platforms, and international platforms will lower their ad pricing if they make ads on foreign platforms non-deductable.