Optics for gov’t could hamper tax on foreign ads proposal: Friends

OTTAWA — A media advocacy group calling for changes that would upend the ability for Canadian organizations to deduct taxes on foreign digital advertising admitted Tuesday that its proposal could face political challenges considering the government’s sensitivity to tax-related matters. The proposal, put together by the Friends of Canadian Broadcasting, wouldn’t introduce new taxes, but the group’s executive director Daniel Bernhard told the Senate transport and communications committee that the optics of something involving amendments to the Income Tax Act could hobble the effort. “I think there are a lot of people who, politically...might be concerned about something that looks like an increase in taxes,” Bernhard said, pointing to the challenges the Liberal government had faced early in its term with proposals to amend how small businesses are treated for tax purposes. “It’s a difficult issue,” Bernhard added. “Because we’ve fallen behind, we now have this price differential and we’re talking about reducing it and that, I think, makes the politics more difficult, but it doesn’t mean we should just let this disparity persist.” The group proposes to close what they call a “loophole” by updating Section 19 of the Income Tax Act that exempts taxes on money spent by Canadian organizations to advertise on foreign internet platforms. It said in a report released last month that if the loophole is closed, about $1.3 billion in corporate tax could be cycled back in Canada. For Canadian media, that could mean an annual incremental advertising revenue gain of between $275 million and $440 million if 10 per cent of the foreign internet advertising were non-deductible, the report noted. “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. Bernhard was joined by consultant and lawyer Peter Miller and Ian Morrison, the outgoing executive director of the organization. Morrison added that there could be a role for the committee “to elicit from appropriate spokespeople for departments in the federal government the rationale for doing nothing because it has not been articulated to us in any satisfactory manner.” Last month, the group held an event on Parliament Hill with parliamentarians and senators in conjunction with the release of the report. At the reception, chairman of the transport and communications committee David Tkachuk said he would look into having hearings on the matter. Miller noted Tuesday that the group is not aware of an examination of this issue by the federal government. The group was faced with a question from Liberal Senator Terry Mercer, who asked about a possible political “deterrent” if the proposal costs the consumer in any way, including price increases for internet usage. Miller said that this isn’t a consumer tax and is not the same as a tax on Netflix Inc. He added that the result may well lead to the internet giants cutting their advertising rates as a competitive response. “Either money would shift to Canadian media,” Miller said, “or it goes into government coffers; either way, it’s a win-win. And I would submit that, from a political point of view, it’s a far easier thing to do because it isn’t a direct consumer ramification.” Bernhard said that the “function of media, in many ways, is to keep consumer costs down by keeping government accountable for the way that it spends money and makes decisions.” He argued that “the ability for the public purse to be exploited because of a lack of scrutiny I think is a much bigger expense to the consumer than the application of our rules for advertisers,” a point with which Mercer agreed. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Optics for gov’t could hamper tax on foreign ads proposal: Friends

Broadcast | May 22, 2018

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Optics for gov’t could hamper tax on foreign ads proposal: Friends

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