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Canadian MPs Recommend Changes To Media Taxation

by Mike Godfrey,, Washington

16 June 2017

The Canadian Parliament's Heritage committee has called for a five percent levy on broadband internet services, but Prime Minister Justin Trudeau has said he will not increase taxes on the middle classes.

The committee has published its recommendations on how the Government can best respond to the changing landscape of media distribution and consumption.

The report contains a recommendation for the expansion of the existing five percent levy for Canadian content production on broadcasting distribution undertakings to broadband distribution. The levy, currently charged on cable bills, helps fund the Canadian Media Fund.

Trudeau was quick to signal his objection to the proposal. Speaking at an event in Montreal, he commented: "We respect the independence of committees and Parliament and the work and the studies they do, but allow me to be clear: we're not raising taxes on the middle class, we're lowering them."

"We're not going to be raising taxes on the middle class through an internet broadband tax. That is not an idea we are taking on."

The Conservative members of the committee also rejected the scheme. A dissenting report stated that they "strongly oppose any proposal to impose a 'Netflix Tax,' internet tax, or any other news tax on Canadians."

Another important recommendation was that the Government amend sections 19, 19.01, and 19.1 of the Income Tax Act to allow a tax deduction for digital advertising on Canadian-owned platforms.

Section 19 establishes the tax deductibility of expenses incurred in advertising in the Canadian newspaper press and broadcasting industry, where the adverts are directed primarily at the Canadian market. Section 19.01 contains a similar provision for periodicals, and Section 19.1 provides that deductions cannot be made for advertisements directed at the Canadian market by foreign broadcasters. A 1996 Canada Revenue Agency (CRA) opinion established that "a website is not a newspaper, a periodical, or a broadcasting undertaking."

The report stated: "In light of the changing media landscape and the negative impact of having advertising dollars flow to foreign-owned internet platforms, the Committee agrees that extending tax deductions to new forms of media dissemination makes sense."

The report also recommended that the Government:

  • Introduce a temporary, five-year tax credit to compensate print media companies for a portion of their capital and labor investments in digital media; and
  • Ensure that foreign news aggregators, which publish Canadian news and sell advertising directed to Canadians, are subject to the same obligations as domestic providers.

TAGS: tax | investment | tax incentives | cultural heritage | internet | Canada | tax breaks | services

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