Three new tax measures to support Canadian journalism, but nothing for broadcasters. Oh, and no Netflix taxes
OTTAWA – In the federal government’s budget released this afternoon, Finance Minister Bill Morneau announced a few measures directly impacting the telecommunications sector and to a certain extent the broadcasting sector.
On broadband expansion, in the fall of 2018 the Auditor General of Canada criticized the government for not having a national strategy. ISED (Innovation, Science and Economic Development ministry) responded they could not formulate a strategy without funding. Today, the government promised $1.7 billion in 10 years towards broadband deployment and $1 billion from the Canada Infrastructure Bank over the next decade.
The launch of a new Universal Broadband Fund (to go on top of all the other funds) will focus on extending “backbone” infrastructure to underserved communities. A process will be launched in the spring of 2019 to bring reliable high-speed internet access to even the most challenging to-reach rural and remote homes and communities in Canada.
(Ed note: A strategy might be useful at this point.)
This effort will ensure that 95% of Canadian homes and businesses will have access to internet speeds of at least 50/10 Mbps by 2026 and 100 per cent by 2030, no matter where they are located in the country. What’s unclear is if 50/10 Mbps will meet needs in 11 years or what the basic service objectives will be by then. Plus, companies like Xplornet are working hard to bring broadband where there is none.
“By 2030, every Canadian home and small business will have access to high-speed internet, no matter where they are located in the country. And work is already underway. Supported by the Accelerated Investment Incentive introduced last fall, service providers are already working to bring high-speed internet to more Canadian homes in rural and remote locations,” said Finance Minister Bill Morneau in the Budget speech, in the House of Commons.
"We’ve seen competition and innovation undermined – that can’t be allowed to continue with this round of funding." – Jeff Philipp, SSi Micro
Those running Far North operator SSi Micro pronounced themselves happy with the budget, but tempered their enthusiasim with a note that yes, a better strategy is still needed to make sure the funds are put to work equitably.
The company said in a release this funding should be conditional on three key principles: i) competitive and technology neutrality; ii) a focus on funding gateway and backbone infrastructure; and iii) open access for all service providers to those same facilities.
“In recent programs, not all funding recipients are respecting the obligation for other service providers to
have timely and open access to subsidized capacity” said SSi founder and CEO Jeff Philipp. “As a result, we’ve seen competition and innovation undermined – that can’t be allowed to continue with this round of funding.
"This is important: young people in Canada’s North can be tomorrow's innovators if they have access to the same tools and support systems that exist in the south. However, if we don't address the critical infrastructure shortfall in the North and other remote areas, then Canada as a leading innovation nation will leave people behind – and particularly those in our most at-risk communities," he added.
This new funding, “was a long time coming,” added Samer Bishay, president and CEO of both Iristel and Ice Wireless in a company release. “Now, Ottawa should invest the precious tax dollars with agile companies that are using the latest breed of technologies, not just the status quo incumbents that have failed to deliver on promises to help bridge the digital divide for 20 years.
“It’s good to finally see the government put money behind it and set real targets… and with advancing technology, we don’t even know whether 50/10 speeds will be fast enough in 2030. That’s one more reason the government must work with more nimble companies to roll this out effectively with the best technologies,” Bishay added.
The Canadian Communication Systems Alliance was pleased with the new money in the budget noting "in addition to focusing on extending ‘backbone’ infrastructure to underserved communities, the new fund may also support ‘last mile’ connections to individual homes and businesses for the most difficult-to-reach communities," said CEO Jay Thomson. “We are delighted to see the government taking these next steps in building Canada’s broadband services to rural communities.”
"We cannot rely on big telco to do the job any more — they had their chance and they failed.” – Alfred Loon, Eeyou
"Recognition of the divide between urban and northern communities is an important first step," added Alfred Loon, president of independent rural operator Eeyou Communications Network of Mistissini, Que. "This positive gesture needs to be reinforced by encouraging small and independent operators and non-profit community groups to step up and become their own Internet Service Providers. We cannot rely on big telco to do the job any more — they had their chance and they failed.”
On the broadcasting side, the budget 2019 proposes to provide $20 million over two years, starting in 2019–20, to the Canada Music Fund, so that the Fund can enhance its support for the production, promotion and distribution of Canadian music. With this investment, the Fund will be able to support more Canadian musicians and music entrepreneurs, and help with the rising costs of marketing and promotion necessary in the music industry today.
"This funding increase is fantastic news for Canada's commercial music industry. We are keen to continue to work closely with government to ensure that these dollars are invested in the most impactful way, such as providing additional support for sound recording, international export opportunities, promotion, marketing, touring and showcasing, and the domestic development of our great artists," said Stuart Johnston, president of CIMA, the not-for-profit trade association representing the interests of Canadian owned music companies from coast to coast to coast, in a release.
Budget 2019 also proposes to introduce three new tax measures to support Canadian journalism:
- allowing journalism organizations to register as qualified donees (similar to charities in that they can take cash gifts and issue tax receipts)
- a refundable labour tax credit for qualifying journalism organizations
- a non-refundable tax credit for subscriptions to Canadian digital news. These measures are intended to provide support to Canadian journalism organizations producing original, broad-based, news.
An independent panel will be established to recommend eligibility criteria for the purposes of these measures. Once the panel has made its recommendations, eligibility of organizations will be evaluated and a recognition process will be put in place. Qualified Canadian Journalism Organizations Qualified Canadian Journalism Organization (QCJO) status is a necessary condition for each of the three measures. In order to be a QCJO, an organization will be required to be recognized as meeting criteria developed by the independent panel. This recognition will be made by an administrative body that will be established for this purpose.
None of this aid will benefit Canadian broadcasting companies as they are specifically discluded in the QCJO rules, according to the Budget document (available in a pdf here).
ACTRA, the actors' union, said the budget forgot all about Canada's video industry. “Despite citing our cultural industries as a key contributor to our economy, there was no new investment in our screen industries,” said ACTRA national president David Sparrow, in a release.
“Canada’s funding programs need to evolve in response to the technological changes in the content industry. This is essential if Canadians are to receive the maximum benefit from these investments,” added Stephen Waddell, ACTRA national executive director. “While previous federal budgets took steps to stabilize funding for the Canada Media Fund, Telefilm Canada still requires additional budgetary support to better position the agency to effectively carry out its mandate and reinforce strategic priorities related to gender parity, diversity and Indigenous filmmaking.”
Finally, we have not so far seen any wording suggesting some form of taxation for foreign on-line enterprises doing business in Canada, or what people call a Netflix Tax. There was no mention even of having foreign digital operators collect sales taxes, as many were urging the government to do.
“Platforms like Facebook are displacing Canadian journalism, but not replacing it”, said Daniel Bernhard, executive director of the watchdog group, Friends of Canadian Broadcasting in its release. “Mr. Trudeau is paying lip service to the importance of journalism and democracy while quietly siding with companies like Facebook that pollute our democracy. These companies profit wildly from Canada’s policy of inaction, smothering Canadian journalism in the process.”
