Carl Neustaedter

01/31/2017

Remarks to the House of Commons Standing Committee on Canadian Heritage, Jan. 31, 2017

By Edward Greenspon, President and CEO, Public Policy Forum

Thank you Madame Chair. I am pleased to be with you today to speak about The Shattered Mirror: News, Democracy and Trust in the Digital Age. Le Forum des politiques publiques est fier de notre processus consultatif et du rapport que nous avons produit.

But we are not the Standing Committee on Canadian Heritage. And so I think all people who care about the state of news in Canada have high hopes for your deliberations.

I am struck how increasingly important the questions of news and democracy look with each passing day. Last week, we saw more layoffs at Postmedia. Over the weekend, we were reminded of the importance in the United States of a free AND strong press. The coverage of the terrible shootings in Quebec City speak to the need for reliable news and the role of news in communities seeing themselves reflected.

Je sais que nous n'avons pas beaucoup de temps et que vous avez eu l'occasion de lire le rapport ou la couverture médiatique de ce rapport. Je vais prendre cinq minutes ou moins pour vous guider dans quelques-unes de nos douze recommandations.

One minute on analysis. We’ve documented convincingly, I believe, not just the sharp decline of revenues in the traditional media, especially newspapers and increasingly local television, but the fact there is an unsustainable acceleration of this downward trajectory. Perhaps more disturbing to me is the absence of indicators that new digital-only news operations have the capacity to fill this democratic gap.

Several of our recommendations are, I believe, simple enough:

1.     Rectify the perversity that Canadian companies are charged sales tax on digital advertising and subscription sales but foreign news companies are not;

2.     Address the lack of clarity that inhibits philanthropic organizations from investing in journalism in Canada;

3.     Bolster the “Informs” part of the CBC/Radio Canada mandate in a world with not enough genuine news and increasing volumes of fake news

4.     Remove digital advertising from CBC.ca and radio-canada.ca.

At the heart of this report is a modernization of Section 19 of the Income Tax Act that would rebalance the playing field in favour of news organizations providing original civic news for Canadians. Cela comporte plusieurs éléments:

1. Extend Section 19 to Internet, a matter which often tends to be treated as more simple than we believe it is. The original Section 19 and 19.1 were intended to change advertising behaviour. It is less likely that behaviour would be changed in digital advertising and therefore a different approach is required.

2. Address the new realities of international trade agreements, which don’t allow public policy to be ased on corporate nationality. We have chosen two new criteria: that a news organization is subject to taxation in Canada and that it meets a minimum threshold of journalistic investment in Canada.

3. Instead of either being able to deduct or not deduct advertising costs under Section 19, we have recommended moving to a 10 percent levy, or withholding tax, on distributors of news that fall outside the Section 19 criteria. This borrows from the approach of the long-standing cable levy.

4. We estimate the 10 percent levy would produce revenue of $300-$400 million a year. This money would go to an arm’s length Future of Journalism and Democracy Fund.

5. We find this approach superior in many ways to tax credits. It generates money to support journalism and digital news innovation from the $5.5 billion (and growing) digital advertising pie rather than from the government. The governance structure we have suggested for the Fund would keep the government out of decision-making about where the money goes. These are critical points. I am a journalist like some of you and I want to keep the government as distant as possible from both supplying money to the fund and disbursing money to news organizations.

Why is this better than tax credits?

  • Tax credits are more prone to politics than our proposal. You can see this right now in Ontario, where the newspaper is lobbying to be reinstated in the Ontario Digital Media Tax Credit scheme.
  • Tax credits also tend to reward equally those organizations that spend their money wisely and those with less-than-stellar records of managing their enterprises.

6. I have been asked in recent days who would qualify. My answer is that any bona fide news organization can apply. We were very conscious not to be excluding early-stage news companies that need help to grow.

7. Finally, beyond applications for funds, we hope news organizations will be more creative than we can anticipate, we have suggested the fund finance four initiatives:

  • A badly needed local news initiative under the auspices of The Canadian Press, an under-appreciated national asset with high standards and a sturdy technological infrastructure.
  • An Indigenous news initiative to cover the institutions and debates of Indigenous democracy, particularly on a local level.
  • A legal advisory service to bolster smaller news organizations in pursuing investigative journalism.
  • A research institute that can tell us the many things we don’t know: how much fake news is in Canada and from where; what happens when a community loses a local news organization; where news originates; public attitudes to news and democracy and trust; and other essential information.

Je pense que je devrais probablement laisser cela pour le moment. Je suis heureux de répondre à vos questions.

 

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