Federal government should open up advertising deduction to digital media: Corus

OTTAWA—The federal government should amend the Income Tax Act to encourage Canadian advertising dollars to flow to Canadian-owned digital media properties, Gary Maavara, executive vice-president and corporate general counsel at Corus Entertainment Inc., told the House of Commons heritage committee Tuesday. “One of the recommendations that we’ve made to the government is that section 19.1 of the Income Tax Act be applied to digital media. That would result in making advertising expensive on foreign sites in the same way as it works for Canadian television. We believe that would be a great incentive,” Maavara told the committee Tuesday. Section 19.1 of the Income Tax Act prevents Canadians from deducting, as income tax expenses, advertising spending on foreign broadcasters and newspapers operating in the Canadian market. But they can deduct advertising spending with Canadian-owned broadcasters and newspapers, effectively making it cheaper. In a 2007 report, the CRTC estimated the value of the provision to conventional broadcasters amounted to $120 million in advertising revenues. Expanding the provision to digital media would make it more expensive to advertise with foreign companies like Google—an American company that is drawing significant advertising dollars internationally. Actors’ union ACTRA has also supported such an amendment. Tyrone Benskin, ACTRA’s national vice-president, noted in a speech last April that expanding the provision would “allow Canadian advertisers tax deductions for advertising on Canadian-owned websites if the website gives prominence to Canadian digital media content.” Maavara said the difficulty with the proposal is finding a workable definition for digital media. “But I know there are people working on that, and if we can come to that definition, we think this is a terrific way to recapture some of that value,” he said. Corus, a media and production company, operates several television services such as YTV, Teletoon, Treehouse, and the W Network, as well as a radio network. Corus, along with Canadian media production groups, appeared before the committee Tuesday as part of its study on vertical integration and “new viewing platforms” in the broadcasting sector. Bloc Québécois MP and heritage critic Carole Lavallée raised the question of French President Nicolas Sarkozy’s proposal to tax foreign-owned online advertising vehicles, an idea dubbed the “Google Tax.” “Google comes here and gets advertising and there’s no return on that,” Lavallée said. Claire Samson, president and CEO of the Association des producteurs de films et de télévision du Québec, told the committee revenues generated from taxing foreign advertising vehicles could fund the production of domestic content. “If Google pays a tax on advertising revenue from the French market, that gives the French government the possibility to reinvest all or some of that that into the production of French content,” she said. The Canadian Media Production Association (CMPA) also appeared before the committee Tuesday and said it is supporting a cultural group coalition seeking to appeal the Federal Court of Appeal’s so-called “ISP levy” decision, issued in July, to the Supreme Court of Canada. ACTRA, the CMPA, the Directors Guild of Canada (DGC), and the Writers Guild of Canada (WGC), had argued before the court that ISPs—which allow consumers access to broadcast programming online—can be subject to regulation under the Broadcasting Act. The CRTC had referred the issue to the court last year, noting that the “question as to whether ISPs are subject to the Act must be resolved.” The cultural groups argue ISPs should be regulated under the Broadcasting Act and pay into Canadian programming through a contribution regime, like broadcasters. But the court decided in July ISPs play a “content-neutral role” in the transmission of data and do not carry on broadcasting activities. “We’ve sought leave to appeal from the Supreme Court,” Reynolds Mastin, counsel with the CMPA, told the committee Tuesday, adding that the court has not yet decided whether to hear the case. If it does, legal arguments are expected to focus on the wording of the Broadcasting Act. During the Federal Court of Appeal proceedings, ISPs argued the distribution of programming via telecommunications networks, or the Internet, does not amount to broadcasting. They said ISPs, like satellites, only distribute data or signals. The cultural groups argued ISPs are not simply wires, cables, or electromagnetic systems, and that they have functions distinct from “a telecommunications common carrier.” They said ISPs play a “vital role” in receiving Internet data, copying it onto computers, and transmitting it to subscribers. sdoyle@thewirereport.ca

Federal government should open up advertising deduction to digital media: Corus

Broadcast | November 24, 2010

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