OTTAWA – The Senate Standing Committee on Transport and Communications has released its report on the deductibility of foreign internet advertising.
Aptly named The Tax Deductibility of Foreign Internet Advertising in Canada, the report comes on the heels of hearings held in May and June where the Senate Committee heard from 13 individuals or groups. The issue was brought to light by a study undertaken by Friends of Canadian Broadcasting called Closing the Loophole which proposes that the definition of ‘broadcasting’ be amended to ensure non-Canadian online companies cannot benefit from this corporate tax incentive which was intended to help Canadian media.
The report ponders the question of why Canadian companies advertising on the likes of Facebook and Google are able to claim the expense as tax deductible under the Income Tax Act, when they cannot do the same when purchasing ad time on U.S. broadcasters like WXYZ Buffalo or KING Seattle, all while advertising for traditional media is dwindling and Canadian publications and stations are shutting down.
While recognizing that “a single decision or recommendation will not solve the complex cultural and tax policy challenges faced by the local news media and broadcasters in Canada”, the report urges the federal government to examine how Section 19 of the Income Tax Act contributes to the media industry’s decline and what can be done to improve the situation for all Canadian businesses.
“We are watching Canada’s foundering news media industry desperately look for a business model that will work in the internet era”, said Senator David Tkachuk, chair of the committee. “We are looking forward to studying the Telecommunications Act, the Broadcasting Act, and the Radiocommunication Act in the fall. We hope it will provide some solutions to the issues facing our newspaper and broadcast industry.”
