Canada Needs to Repeal The Ridiculous Journalism Tax Credits

So how many of you know that Canada subsidizes our journalism industry???It’s amazing to me that not many average Canadians know this.??And the knowledge of these credits amongst the professional community is also quite low.??

A.????Quick Summary

Let me give you a quick summary.??Proposed supports were first announced in the 2018 Fall Economic Statement with details later provided in the?2019 Federal Budget. It proposed 3 initiatives:

1.?????not-for-profit news organizations would be able to receive charitable donations and issue official donation receipts;

1. The creation of a new refundable labour tax credit for qualifying news organizations; and
2. The creation of a temporary non-refundable personal tax credit for subscriptions to Canadian digital news media.

All of the initiatives were passed into law by the 2019 budget bill #1 with effect for 2019 (with the exception of #3 above which became effective for the 2020 taxation years and, under current law, will expire after the 2024 taxation year).??

The first initiative above was implemented by introducing various definitions into the Income Tax Act (the “Act”):

-????????“qualified Canadian journalism organization” under subsection 248(1) which has a variety of requirements but also requires the Minister of National Revenue approval.??The Minister may also take into account the “recommendations of a body established for the purpose of this definition”.??More on the “body” below;?

-????????“qualifying journalism organization” defined for this purpose in subsection 149.1(1) of the Act; and?

-????????“registered journalism organization” as defined in subsection 248(1) of the Act.???

Combined together, and assuming all of the relevant definitions are met, such organizations are now able to be a “qualified donee” (as laid out in paragraph 149.1(1)(b.1)) thus enabling such organizations to issue charitable receipts.?

The second initiative is a very lucrative refundable tax credit that is laid out in section 125.6 of the Act.??In order to qualify for such credits, the organization must be a “qualifying journalism organization” as defined in subsection 125.6(1) of the Act.??Twenty-five percent of such an organization’s “qualifying labour expenditures” (as defined in subsection 125.6(1) of the Act) is eligible as a refundable tax credit subject to an annual cap of $55,000 of salary per employee (meaning an annual refundable tax credit of $13,750 with such amounts prorated for short taxation years).??

The third initiative provides an individual a maximum federal personal tax credit of $500 x 15% if the individual has a digital news subscription with a?qualified Canadian journalism organization.??

B.?????So How Much is All of This Costing Canadian Taxpayers?

When introduced, the 2019 budget documents (see page 353 at the link?here) projected that the above measures would cost Canadian taxpayers $595M for the period from 2019-2020 to 2023-2024.??(The latest?Report on Federal Tax Expenditures?seems to suggest the measures will cost Canadians less than the original estimates). Admittedly, this is not a lot of money when compared to the entire budget revenues and expenditures. But that’s not the point.??I’ll comment on the major concerns of this legislation in section E below.?

C.?????Why Were These Proposals Introduced?

There is no doubt that traditional print media has struggled mightily for quite some time.??Changing consumer habits as a result of emerging technology dramatically and negatively affected traditional newspapers.??In my hometown of Calgary, AB, for example, the once flourishing and very large Calgary Herald building that sat so proudly on Deerfoot Trail has long been abandoned and recently sold to U-Haul.??A small but very visible sign of the struggles and changes that traditional print media have endured.??Combine that with large technology companies that aggregate news content without paying the content creators adds even more pressure[1].??

So, the question is what to do???Do you let traditional news organizations fail? Or find their way???Interesting questions with no easy answers.??However, the government of Canada chose to subsidize such organizations in the manner described above.??After the proposals were released, Heritage Canada – the Department responsible for administering these initiatives – released a?news release?that partially stated the following:

The Government of Canada understands that for a democracy to function properly, it needs to have solid, independent news media. It also recognizes that Canadians now consume information differently. Readers are changing their habits and are getting information online.

The Honourable Pablo Rodriguez, Minister of Canadian Heritage and Multiculturalism, today confirmed that an independent panel of experts is being set up to make recommendations on the eligibility criteria for tax measures announced in Budget 2019 to assist Canadian journalism organizations that produce original news.

The above news release also contained the names of the eight associations who would provide recommendations as to who should comprise the so-called “expert panel” that would ultimately provide recommendations as to which organizations would qualify as a?qualified Canadian journalism organization?as discussed above[2].??

So, if you believe the government on its face, the measures were necessary to save Canadian democracy since it wouldn’t function properly if journalism organizations failed.??Seems like a stretch to me.??If traditional print media failed, then other organizations would inevitably pop-up to fill the void.??And we have seen a lot of that over the years.??In an effort to discredit these new journalists, such organizations are often painted as “far right” or “far left” independent media.??Such stigmas are not helpful.??

D.?Where Are We Today?

The journalism incentives have been around since 2019.??There has been very little pick-up on the first initiative (enabling certain non-profit organizations to be treated as a registered journalism organization thus enabling them to issue charitable receipts for donations received).??The list of organizations currently disclosed as registered journalism organizations can be viewed?here.??However, the list of qualified Canadian journalism organizations – which can be viewed?here?- is much, much longer and interesting to review to see which organizations are trying to take advantage of the incentives.

So, all to say, the incentives are alive and supposedly well…

E.?????So, What’s the Problem With All of This, Kim?

Well, there’s a lot wrong with all of this. Here’s a partial list of my very obvious concerns:

-????????A free press, which I agree is an important aspect of a functioning democracy, should be independent both from a legal and appearance perspective.??Providing government incentives does not assist with helping to achieve this objective;?

-????????Further to the above, one of the major concerns expressed by many Canadians (including myself) when these proposals were first introduced was that the organizations who took the incentives would be afraid to “bite the hand that feeds them”.??Four years into the incentives, I would agree that this is still a very valid concern.?There are many examples of biased reporting (which, of course, is not a new phenomenon) that, anecdotally, seems to have gotten worse since 2019.??Is this solely the result of the journalism incentives???Obviously, no, but it certainly hasn’t helped.??As a result, I have cancelled all of my newspaper subscriptions (with the exception of one) and mobile news feeds (like Apple News) in recent years and instead rely on new organizations that have emerged.??If I want biased reporting, I can easily find it myself;??

-????????Are providing incentives “the answers” to a foundational and existential problem that traditional print media has faced???In my opinion, no.??So, do I have a great solution, then.??Nope.??I’m certainly no media expert.??Although, I must admit that enabling traditional print media find its way and re-invent themselves – combined with new entrants to the market - does seem appealing to me since that is generally how society works.??Societal changes pose both threats and opportunities.??Entrepreneurs face that reality daily so not sure why traditional print media shouldn’t change as well and find their way. Yes, change – including cuts of staff and operations – is sad but ultimately it is often inevitable.??To pour money into an old model of doing business doesn’t seem right to me;

-????????I’m not a big believer in government picking “winners and losers” by having a so-called “expert panel” provide recommendations to the Minister for approval.??There is no shortage of historical experience that shows such a methodology and system is ripe for abuse including politically charged bias.??In my opinion, if you are going to have a system of incentive credits, the criteria should be very objective and free from the subjective influence and control of so-called “experts”; and?

-????????But, perhaps I’m wrong about the above.??There is no shortage of people who disagree with my views regarding the journalism tax incentives.??If I am wrong and indeed incentives are a great idea, then query whether Canada’s taxation system the proper way to provide such incentives???The Act is already too complicated.??Adding incentives such as the journalism amounts simply adds unnecessary complexity and the need for additional public servants to wade through the complexity and administer it.??There has to be a simpler way to provide incentives.?

F.?????Some Final Thoughts

So, there you go.??If you have made it this far in the article and you previously didn’t know about the journalism tax incentives, well hopefully now you do.??What’s your thoughts???Do you agree with me that the perception of bias is real and should be an overriding concern???I’d love to hear your thoughts.??

But, to re-emphasize, if it hasn’t been abundantly clear, I’m not a fan of these incentives.??Ultimately it will do nothing to save traditional print media companies from inevitable change.??The perception of bias is a major problem and a functioning democracy should steer clear from such bias and enable free speech, “freely”.

These so-called incentives need to be repealed.?

[1]?The government also recently passed its controversial?Bill C-11?which apparently is an attempt to?subject foreign and large technology companies to adhere to Canadian content requirements and regulations comparable to traditional broadcasters. The policy change comes with a requirement for these platforms to spend millions investing in Canadian content and creators.??Such a bill has been the subject of significant backlash from such technology companies.??Many Canadians have also expressed concern about the censorship aspects of this bill.??Notwithstanding, this article is not about Bill C-11 and its significant concerns but is simply mentioned to bring some context to the overall journalism / broadcasting arena.

[2]?Here is the?latest report?of the so-called independent panel of experts that I can find online.??Interesting to note the members…mostly academics from what I can tell and only comprises 4 people.?