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Grit MP Fry suggests misinformation led to PM’s quick rule-out of broadband tax

By Laura Ryckewaert      

'Obviously he hasn’t read it,' Grit MP Hedy Fry says of PM Justin Trudeau dismissing part of a committee report that suggested new taxes on internet service providers.

Prime Minister Justin Trudeau and Liberal MP Hedy Fry, chair of the House Heritage Committee. The Hill Times photographs by Jake Wright and Cynthia Münster
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Liberal MP and Canadian Heritage Committee Chair Hedy Fry has suggested that Prime Minister Justin Trudeau didn’t fully understand what the committee was recommending when he shot down the idea of new taxes on broadband distribution.

That recommendation—to expand an existing five per cent levy on TV service providers, which gets put toward producing Canadian content, to also apply on broadband distribution—was one of 20 recommendations the committee made to help the Canadian media industry.

Both Prime Minister Trudeau (Papineau, Que.) and Heritage Minister Mélanie Joly (Ahuntsic-Cartierville, Que.) were swift to rule it out on June 15, less than an hour after the committee released its report, though details of the recommendations had leaked a day earlier.

“I was surprised, because I hadn’t even tabled the report in the House, so nobody had read it with the exception of the people who leaked their version of it,” Ms. Fry (Vancouver Centre, B.C.) said in an interview last week.

“The prime minister just said, ‘We don’t intend to tax middle-income Canadians,’ and so obviously he hasn’t read it, because what he was saying—which is fair enough, I agree with him—we’re not going to tax Canadians,” said Ms. Fry.

“We noticed that a lot of broadcast media are not just using the broadcast channels, they’re also using streaming, so the gist of our recommendation was if you’re going to assess a five per cent [levy] on revenues, can you make sure that it goes towards broadband devices like streaming? And that’s it,” she said, adding it’s an attempt to “level the playing field.”

Ms. Fry said she’s since sent a copy of the committee’s report highlighting the “areas where they were misinformed” to the prime minister, but she lamented that the “leaked” and “false” characterization of the recommendation has already taken hold.

“That is very sad, and it also is something that shouldn’t be done because people who had access to that report were on the committee and it is a breach of privilege to give out anything before its tabled in the House,” she said, adding it’s something she’ll look to discuss, though not investigate, when the committee returns in the fall.

Ms. Fry told The Hill Times she doesn’t think there’s a “silver bullet” for how to address problems in the Canadian media industry, and highlighted a number of recommendations as important.

In particular, she noted a recommendation for the government to create a new “platform agnostic” funding model to support Canadian news, as well as one to introduce a temporary, five-year tax credit to help print media “move into digital platforms.”

Other recommendations she highlighted include ones to subject foreign news aggregators publishing news in Canada and selling ads directed at Canadians to be subject to the same tax obligations as Canadian news providers, include non-profit media or foundations to register as charities under the Income Tax Act, and to use part of the revenue from the government’s 600 MHz wireless spectrum auction to “support locally reflective news and programming.”

“I also think the diversity of voices helping ethnic and bilingual and aboriginal communities and remote communities get access to news is a really, really important one. We heard that a lot of these communities don’t get any access to news, don’t get any help from the government to put out things in their languages,” she said.

The Heritage Committee’s study on the Canadian media landscape began in February 2016.

“What we discovered, 15 months later, was that we had opened a Pandora’s box of complex and rapidly evolving challenges, issues and events. Indeed the ground seemed to be shifting beneath our feet daily,” said Ms. Fry’s foreword to the report

Two similar studies by the House in 2003 and the Senate in 2006 were “prophetic” in “warning of negative tends and consequences,” she noted, but past recommendations from both “were largely ignored.”

The report noted that daily newspapers have been “hard hit” by the trend of traditional print advertising revenue migrating to digital, which skyrocketed from $560-million to $4.6-billion between 2005 and 2015. Of that, Facebook and Google accounted for two-thirds of digital ad revenues in 2015, at $760-million and $2.3-billion, respectively.

According to 2016 data from News Media Canada, the three main newspaper groups in Canada—Postmedia, Transcontinental, and Torstar—own close to 66 per cent of all dailies and 35 per cent of community newspapers, while five broadcast and telecommunications groups account for roughly 82 per cent of total industry revenue in 2015. Since 2008, 16,500 media sector jobs have been lost, according to the Canadian Media Guild, including 7,790 from print and 5,911 from broadcasting.

“In 2017, we are now able to see, fully, the devastating impact of the 2014 Postmedia/Sun Media merger. Postmedia now owns 15 of the 21 largest English language dailies in Canada and eight of nine in the Western provinces,” said the report. “As predicted by the Senate report, the diversity of voices and opinions have been greatly diminished and the principle of democracy, challenged.”

In all, 20 recommendations were made in the main committee report, titled “Disruption: Change and Churning in Canada’s Media Landscape.”

Pierre-Olivier Herbert, press secretary to Ms. Joly, said last week that the minister is currently reviewing the committee report, but he reiterated that a call for a five per cent levy on broadband distribution has been “ruled out.”

“The minister has been consulting Canadians from across the country. We thank the committee for their work and we’re going to analyze the recommendations in the context of those Canadian content consultations,” he said, adding that the “minister’s vision is going to be unveiled in September.”

Along with this latest report, the minister has a mountain of feedback and other reports produced through the course of public consultations launched back in September 2016 to consider, including The Shattered Mirror report published by the Public Policy Forum in January.

However, a dissenting report from Conservatives on the committee took a starkly different tone, stating that “overwhelmingly” the recommendations made “have embraced an effort to turn back the clock, and keep things the way they were,” calling it a “fool’s errand.”

“With the transformations of the digital world, the media is genuinely democratizing for the first time. No longer is a citizen’s influence limited to choosing which newspaper to read or which television news to watch. Now, every citizen can use the online digital world to report news and opinion and distribute it,” read the dissenting report. “This is a welcome environment.”

“Higher taxes and government control of the news is not the answer,” it continued, adding that calls to tax digital outlets producing news in Canada with “a ‘Netflix tax,’ internet tax, or any other news tax,” will “in practice, reduce the amount of local or Canadian content available in the digital world.”

“The Conservative members of the Committee do not agree with the evidence and recommendations that foresee a larger role for government in controlling the news. This is contrary to the notion of a free press in society,” it said.

Conservative MP Peter Van Loan (York-Simcoe, Ont.), a member of the committee, said while lots of “interesting evidence” was heard during the committee’s study, “there were two clearly different views,” something he said was “quite clear” from the “very start.”

“[The Liberals’] approach was higher taxes, new taxes, more regulation, more government interference, more government control of journalism, and I think we made clear throughout that we didn’t agree with these things,” he told The Hill Times in an interview.

Mr. Van Loan said new, positive digital alternatives to traditional media are emerging, like community-based Facebook news groups, like the group “Our Town of Georgina” in his community. While it’s a closed group, Facebook indicates there are 2,539 members and it describes itself as a “place where you can have your voice heard on the local political issues, good and bad.”

“Everybody gets to chime in and talk about what’s on there. If people have questions, they’ll get them answered, and the stuff is immediate. This is the stuff that wasn’t covered in local papers before. If they were, you were lucky that once every three council meetings, there was one item on the agenda that they wrote an article about after the fact,” said Mr. Van Loan, adding it often wasn’t by a journalist from the community.

While there’s an ability to self-select certain biases or bents in online news, he said the potential for such “echo chambers” similarly exists in traditional media. Yet he said, when online, that selection is in the hands of individuals, not “a narrow elite that gets to decide what matters to you, what information you will get, and what are the acceptable perspectives.”

Local newspapers are being treated as mere “revenue sources” and coverage is “suffering” as flagship papers fail, said Mr. Van Loan. But in turn, new locally run ventures are popping up, from Facebook groups to things like The Georgina Post, a small biweekly paper launched little over a decade ago.

The main committee report calls for changes to the Competition Act to require a panel of media experts “to do a ‘diversity of voices’ test to ensure there is no dominance in any media market,” in part to address media mergers that have left a significant chunk of Canada’s local and daily newspapers in the hands of large corporations and hedge funds.

But Mr. Van Loan said he’s against the proposal, as he thinks it’s asking of the Competition Bureau something that isn’t its job.

That said, some recommendations, like those around amending the Income Tax Act to allow digital advertising on Canadian-owned platforms to be a deduction, “we we’re fine with,” he said.

In her foreword, Ms. Fry wrote that there was “an unusual synergy among members of the Committee,” which is why she said she was “very surprised” and “sad” to see the dissenting report filed by Conservative MPs—the tone of which she called “disconcerting.”

The Canadian Association of Journalists has voiced particular support for five recommendations in the report around, which “really speak clearly to our own priorities,” said president Nick Taylor-Vasiey, also reporter for Maclean’s.

Those are: amendments to deductions allowed under the Income Tax Act; a tax credit to compensate for print investments in digital; making foreign news aggregators subject to the same tax obligations as Canadian media; encouraging indigenous journalism; and making non-profit media outlets eligible for charity status.

The Hill Times

Canadian Heritage Committee Recommendations

The House of Commons’ Heritage committee made a total of 20 recommendations in its final report, tabled June 15.

  1. The Heritage Minister explore existing structure to create a new, “platform agnostic” funding model to support Canadian journalistic content
  2. That a) an indigenous journalism initiative be created for “training Indigenous journalists to cover indigenous government institutions and other relevant issues for indigenous media outlets across Canada,” and b) that the responsibility for this initiative be financed via programs to support Canadian programming and be embedded with APTN.
  3. The CRTC and Innovation, Science and Economic Development Canada (ISEDC) continue “efforts to improve affordable broadband internet access in Canada, with an emphasis on Northern Canada and rural and remote regions.”
  4. The government amend section 19, 19.01 and 19.1 of the Income Tax Act “to allow deduction of digital advertising on Canadian-owned platforms.”
  5. The government introduce a temporary, five-year tax credit to “compensate print media companies for a portion of their capital and labour investments in digital media.”
  6. The government “level the playing field” by ensuring that foreign news aggregators publishing Canadian news and selling advertising directed at Canadians, across all platforms, be “subject to the same tax obligations as Canadian providers.”
  7. The Heritage department change the Canada Periodical Fund to a) “make daily and free community newspapers eligible”; b) offer more support for the online distribution of magazines and newspapers; c) offer more support to Indigenous, ethnic and official language minority print media; and d) increase the program’s budget “in the event” a review of the program’s eligibility leads to more recipients.
  8. The CRTC “collect more data on the state of local broadcasting in Canada.”
  9. The CRTC review its policies for local and community TV “to determine its impact on funding” for the community TV sector.
  10. The CRTC “rigorously track and enforce non-compliance with licence requirements regarding locally reflective news and programming.”
  11. The CRTC “identify other sources of funding for the community radio sector.”
  12. The current five per cent levy for Canadian content production on broadcasting distribution undertakings be expanded to broadband distribution.
  13. The government set aside a portion of the revenue from its 600 MHz auction to “support locally reflective news and programming.”
  14. CBC/Radio-Canada prioritize and expand its “local and regional coverage, including unserved areas across all of its platforms.”
  15. CBC/Radio-Canada “eliminate advertising from its digital news platforms.”
  16. Federal institutions “increase their dissemination of information in official languages, ethnic and indigenous communities.”
  17. Amend the Competition Act to add a section to deal “specifically with news media mergers, which would require a panel of experts in media to do a ‘diversity of voices’ test to ensure there is no dominance in any media market.”
  18. Existing ethics guidelines and press councils “apply equally to digital media.”
  19. The government amend the Income Tax Act to change the definition of a registered charity to include non-profit media or foundations.
  20. ISEDC “provide start-up funding for new digital media companies.”

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