Senate committee to look into issue of tax on foreign ads

OTTAWA — The chairman of the Senate transport and communications committee said Tuesday that he will look to hold hearings on the possibility of taxing advertising on non-Canadian internet platforms. “What I will undertake is that we will...talk about hearings that we can have,” Sen. David Tkachuk said Tuesday morning, “and specifically on the issue of the tax loophole — I think we’d like to spend a couple of days on it, to make recommendations and also to get some publicity out on this matter.” He added “it will be a fair and honest assessment of where we’re going.” If it holds a hearing, the committee would then be expected to release a report on the matter, his office confirmed over the phone. Tkachuk was speaking at an event held to discuss the issue at centre block on Parliament Hill. The impetus was an updated report, released Tuesday, by Friends of Canadian Broadcasting that recommends measures to “close the loophole,” referring to bringing Section 19 of the Income Tax Act up-to-speed with the rise of the internet as a competitor to traditional print and broadcasting media. The nexus of the problem is that foreign internet platforms, such as Alphabet Inc. and Facebook Inc., are not viewed by the Canada Revenue Agency as the same as foreign traditional newspaper or broadcaster under the Act. This means that while a Canadian advertiser cannot deduct taxes for spending on the latter, it can on the former, simply because the definitions haven’t been updated in over 20 legal scriptures of Parliament, the report said. “While a 1996 web site could not provide broadcasting, newspapers and periodicals, internet media in 2018 can, and do,” the report reads, recommending a revisiting on this interpretation. The report notes that, at a minimum, “technological neutrality should require that a periodical or newspaper that is in both physical and digital form should be deemed a ‘printed publication’ in either or both formats.” In an email Tuesday, Friends media contact Jim Thompson said the organization had heard a rumour that Tkachuk’s committee would be doing something on the matter, but nothing was made public. Friends, which has been raising the issue as one solution to the so-called “media crisis,” notes in its report that as of 2017, as much as $5 billion in advertising expenditures would not be deductible, representing a corporate tax gain of about $1.3 billion. “Monies would shift to Canadian local media without additional government grants or tax credits” if the rules were changed, the report said. More specifically, Canadian media would see an annual incremental advertising revenue gain of between $275 million to $440 million if 10 per cent of the foreign internet advertising were non-deductible. “For Canadian media, it could be the single greatest factor in reversing revenue declines and ensuring viability for Canadian local print, TV and radio operations — and their contributions to Canadian culture, news and democracy,” the report said. Incoming Friends executive director and spokesman Daniel Bernhard said during the question phase that excess tax money could go to various different initiatives, including local private and public media, public infrastructure, tuition support for journalists and increasing rural broadband access — all without the need for government intervention. To illustrate the ad problem, late last year, the Canadian Media Concentration Research Project (CMCRP) released a report that suggested most of the internet ad gains over the last year had gone to Alphabet’s Google and Facebook. Friends' report suggests 80 per cent of Canadian internet advertising goes to foreign internet sites and platforms, and two-thirds go to Google and Facebook. The group has been raising the case for the changes for many months. It has also lobbied the government on the matter since last year, filing 10 communications in March, including with Tkachuk and Sen. Art Eggleton, who also appeared Tuesday morning. The issue has also been raised in the Public Policy Forum’s Shattered Mirror report last year. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Senate committee to look into issue of tax on foreign ads

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Senate committee to look into issue of tax on foreign ads

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