Inside Canada’s Plan To Offer Tax Credits & Subsidies To Media

By Glenn Dyer | More Articles by Glenn Dyer

So will a near $C600 million, five year series of tax breaks help the Canadian print media sector which has seen the best part of a third of all journalism jobs disappear since 2010 – 3,000 alone from Post Media, the country’s biggest print group in the last six years? Hundreds of others have gone from Torstar, another big publisher and similar numbers have been sacked from TV, radio and smaller print organisations.

Papers large and small have been swapped, consolidated, closed and jobs have vanished as the sector has slowly collapsed from the lack of circulation and ad revenues.

Successive Canadian governments have been under growing pressure to help – the Conservatives resisted, the current Liberal government promised action, then held a series of inquiries and studies and a scattering of ideas.

Late last week, while the world was absorbed in burning turkeys and football, falling oil prices, share markets, and Brexit, the government of Prime Minister Justin Trudeau finally produced its long-awaited media assistance package.

The centerpiece is millions of dollars a year of subsidies and tax breaks. The package was revealed in the Trudeau government’s mid-year economic update (their version of our Myefo update which is due next month). It was revealed 11 months before Canadians go to the polls in Federal elections due on October 21, 2019.

The millions of dollars a year in direct assistance will be decided by an independent panel comprised of members of the news and journalism industry which will decide which journalism jobs and which news organisations are eligible for the new funding. The package will cost an estimated $C45 million in 2019, building to a substantial $C165 million a year by 2023.

The package builds on a more modest $C10 million a year aid package for smaller newsgroups operating in some of Canada’s far-flung regions and territories. Last week the government said the money will start in 2019-10 and will be paid to what it called independent, non-profit groups that create “open source news content” to be provided free of charge to local media organisations.

According to the latest PwC media outlook report, Canadian daily unit print circulation has fallen 28% in the past four years – from an average 6.1 million copies in 2013 to 4.4 million in 2017 and is expected to hit 3.8 million in 2022. Revenue is taking a similar route thanks to the rapid growth of Google, Facebook, and other online rivals.

There are three interesting moves so far as other countries are concerned. The first is a temporary, non-refundable tax credit that will allow subscribers to claim 15% of the cost of subscriptions of eligible digital news media. This is meant to help support digital news organisations in achieving a “more financially sustainable business model.” The eligible digital news organisations will have to be predominantly Canadian.

The second will see non-profit journalism organisations able to qualify for a new category of “qualified donee” under Canadian tax law that will give them charitable status to issue receipts for donations from both individuals and corporations. It will open the door for charitable foundations to provide financial support.

This measure builds on a pledge in the Trudeau government’s 2018 budget to examine new funding models to enable private giving and philanthropic support for journalism. In its statement, the government said the package will aim to help “trusted” news organisations, but will leave it to the media sector to define the application of the new initiatives.

In some respects, the donee model is similar to the approach of The Guardian which has built a large group of donors who are now supporting the paper.

Thirdly; qualifying news organisations will be able to obtain a refundable tax credit for producing a wide variety of news and information of interest to Canadians. The tax credit will apply to the labour costs associated with producing original content and will be open to both non-profit and for-profit news organisations. The measure will allow outlets to claim a portion of their labour costs.

An independent panel drawn from the news industry will be established to define the eligibility of the measure, which will start on January 1 next year. This looks like being the most expensive part of the package and could eventually see much of Canada’s media sector receive some form of labour cost subsidy.

The big question is whether the media groups use this to build new audiences, create more content and lift employment, or will it be wasted on enhancing profits by allowing the companies to cut planned investments and have the government fund them? In other words, a rent-seeking boongoggle?

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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