‘Level playing field’ for foreign digital news services: committee

OTTAWA — After a year of study and hearing from 131 witnesses, some of them multiple times, the House of Commons’ heritage committee delivered a report aiming to tackle a rapidly changing media environment that included a call for foreign digital companies like Facebook Inc. and Alphabet Inc.’s Google to pay the same taxes. Among the 20 recommendations found in the committee’s majority report tabled on Thursday was one for the federal government to “level the playing field among industries publishing Canadian news, on all platforms by ensuring that foreign news aggregators, which publish Canadian news and sell advertising, directed to Canadians, are subject to the same tax obligations as Canadian providers.” In its report, the committee said it heard, “without exception,” from witnesses that “foreign-owned media have a distinct financial advantage over Canadian domestic media providers.” During their appearance in front of the committee last fall, Google representatives rejected the notion that the company was taking advertising revenue from domestic media companies or that it should be subject to sales tax. Google is “grabbing nothing from no one,” Richard Gingras, Google’s vice-president of news, told the committee in November, adding that 70 per cent of digital ad revenue went back to the publishers. “Canadian media is not able to compete very well with foreign and international news aggregators who come in and provide news in Canada and don’t pay that same tax,” Hedy Fry, committee chairwoman, said during a press conference Thursday morning. “So we’re saying level the playing field again. Foreign and Canadian news providers will be having the same taxes levied on them so that there is not a disadvantage to one or the other.” In their dissenting report, Conservative members of the committee said that the move would serve to diminish the availability of content in Canada. “Paradoxically, the Committee’s call to tax digital outlets that publish Canadian news will, in practice, reduce the amount of local or Canadian content available in the digital world in which people live and consume such media,” the minority report said. “It is a fundamental truth of public policy that, ‘if you tax something, you will get less of it.’” Other tax changes recommended by the committee include reforming the Income Tax Act, “to allow deduction of digital advertising on Canadian-owned platforms.” It was a suggestion raised during the study by both Friends of Canadian Broadcasting and the Public Policy Forum in its Shattered Mirror report. In a Thursday press release, Friends of Canadian Broadcasting said the committee’s recommendations were a “recipe for success,” but that the Income Tax Act proposal “should go one step further and disallow deduction of advertising expenses on foreign digital platforms.” The release said that it heard from the Canada Revenue Agency that it needs a legislative change and that without it, “the promise of using an incentive to increase ad revenues for Canadian digital media outlets cannot be implemented.” On the advertising front, the committee also recommended that CBC/Radio-Canada be stripped of ads on its digital platforms. The report noted that CBC president Hubert Lacroix told the committee that 10 per cent of its advertising revenues comes from digital platforms, or $25 million. In an interview, Fry said she didn’t know where the money would come from to address the shortfall, but that the group heard consistently from media companies that the CBC was their biggest competitor. “So we said to CBC, since you’ve got this windfall of money, learn how to use it differently; we’re just suggesting that they get out of digital advertising. Because CBC has just won three gold medals for producing digital content. They’re good at that, they’re working with Netflix , they’re working with other providers to ensure they provide good digital content. The digital advertising is what’s hurting the other platforms.” CBC has said earlier this year that eliminating digital advertising would harm its TV arm and, in a Thursday press release, said it couldn’t support the committee’s recommendation. “Removing advertising from one platform is a half measure that would weaken our ability to sustain our programs and services," the release said. "It doesn’t provide any of the advantages of being completely ad-free, and, because TV and digital advertising is often sold together, it undermines our remaining commercial revenue.” Other recommendations the committee made in its report include setting aside money from the coming 600MHz auction to “support locally reflective news and programming,” and that the CRTC “identify other sources of funding for the community radio sector.” — With reporting by Charelle Evelyn at cevelyn@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

‘Level playing field’ for foreign digital news services: committee

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‘Level playing field’ for foreign digital news services: committee

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