Citing a study commissioned by Friends of Canadian Media, a recent National Post editorial called on government to revisit the advertising tax deductibility provisions of the Income Tax Act that could be a game-changer for the long-term viability of Canada’s news industry.
The Post is not alone in joining Friends of Canadian Media in championing revamped advertising tax incentives to support Canadian news media. News Media Canada, the Canadian Association of Broadcasters, the Canadian Radio-television and Telecommunications Commission, the chair of Cogeco, Louis Audet, the standing committee on Canadian heritage and the standing committee on finance have all advocated for such changes. There are live legislative proposals in the United States for a variation on the theme — a small business tax credit for advertisers patronizing local news outlets.
In the 1960s and ’70s, the Canadian government introduced tax measures to support Canadian media by discouraging Canadian businesses from buying ads in American newspapers and magazines and on U.S. television stations targeting Canadian audiences. These tax measures helped redirect hundreds of millions of dollars annually to Canadian media.
Fast forward to today. At over $15 billion annually, the Canadian internet advertising market dwarfs all other advertising media, with foreign internet advertisers representing an estimated 92 per cent of all internet advertising in Canada — Google and Meta alone take 80 per cent.
What happened? An internet that has come to dominate our media and information consumption patterns and is itself dominated by foreign platforms is the obvious number 1 reason. But the government’s failure to update advertising deductibility rules comes in a close second.
In 1996, the Canada Revenue Agency declined to extend its definition of a foreign newspaper and foreign broadcaster to include online equivalents. And every federal government since has failed to update the advertising deductibility provisions of Income Tax Act to align with the new reality.
Why does it matter? While as Canadians we do not all choose the same platforms for news — be it radio, TV, newspapers, digital or social media — we do share a common interest in ensuring that the sources are reliable, trustworthy and, as much as possible, Canadian. Today, even as the internet has become the preferred content delivery platform for many Canadians, so-called traditional Canadian media remains our preferred source of news. According to a poll conducted by the Gandalf Group in November 2023, mainstream media (TV, newspapers, radio) remains the most trusted source of news among Canadians.
While the current federal government has introduced several initiatives designed to support Canadian media, the unrelenting pace of journalist layoffs and newsroom closures attest to the reality that these have fallen short of both expectations and needs. The Canadian Journalism Tax Credit, introduced in 2019, the most successful measure to date, does not support broadcast news and has a relatively modest budget of $65 million annually.
An anticipated $330 million annually in news licensing payments from the Online News Act got hammered down to a $100-million shotgun deal with Google (for all Canadian news media, including CBC), and is currently mired in administrative delays. Contributions to television and radio news from foreign streaming giants under the Online Streaming Act, including an estimated $60 million annually to private broadcasters, are being challenged in court, with no clear resolution in sight.
Updating advertising tax incentives is virtually the only remaining policy lever left to government that would have the scale and heft necessary to reverse declines in Canadian news media. When Friends of Canadian Media argued for changes in 2017, foreign internet advertising revenues were a third of what they are today and represented a third of all Canadian advertising revenues. The dominance of foreign internet advertising just seven years later attests to the urgency of the situation — if we do nothing, how much longer will it take for Canadian media advertising to dwindle to the almost insignificant share of the Canadian advertising market that foreign internet advertising itself had at the turn of the century?
A double-barrelled change to the Income Tax Act in today’s environment would combine a reduction in deductibility of foreign internet advertising with refundable tax credits to reward advertising in Canadian news media. This “market-facing” tax incentive leaves it up to individual advertisers to decide if they will take advantage of the incentive and which Canadian media outlets they will spend their advertising dollars on.
No matter the fine points of a new tax policy, it is vital that we act now. Our Canadian news media sector cannot afford to wait much longer.
Postmedia Network
Peter Miller is a communications lawyer and co-author of “Close the Loophole! The Deductibility of Foreign Internet Advertising.” Marla Boltman is executive director of Friends of Canadian Media.