Proceedings of the Standing Senate Committee on
Social Affairs,
Science and Technology
Issue 22 - Evidence, December 8, 1998
OTTAWA, Tuesday, December 8, 1998
The Standing Senate Committee on Social Affairs, Science and Technology met this day at 10:00 a.m. to consider Bill S-10, to amend the Excise Tax Act.
Senator Lowell Murray (Chairman) in the Chair.
[English]
The Chairman: Good morning, colleagues. We have before us this morning Bill S-10, Senator Di Nino's bill to remove the GST from reading materials. Specifically, what we have before us is an amendment moved in the Senate by Senator Maheu and a subamendment moved by Senator Di Nino. It is in respect of that amendment and that subamendment that our witnesses, quite a number of them, are appearing today under some pressures of time, as we all know.
The last time we met, we had a discussion about the impact of the harmonized sales tax, that is, the GST plus provincial sales tax, in those provinces that have harmonized their provincial taxes with the GST, namely, New Brunswick, Nova Scotia and Newfoundland. The question was, is the full harmonized sales tax applied to reading materials? The answer is that for books, at any rate, it is not. In other words, the provincial sales tax is not charged in New Brunswick, Nova Scotia or Newfoundland on books. It may be charged for a nanosecond but there is a point-of-sale rebate, the effect of which is that only the 7 per cent GST is charged on books in those provinces. Our friend Terry Thomas from the Parliamentary Library has written me a letter about that, which I shall have translated and circulated to all members of the committee.
Without further ado, I am going to call on our first witnesses who are from the Don't Tax Reading Coalition. They are familiar figures around here, almost old friends of ours. Please go ahead.
Ms Jacqueline Hushion, Chairperson, Don't Tax Reading Coalition: Good morning, senators. Two weeks ago, we appeared before the House Finance Committee chaired by Maurizio Bevilacqua. The committee confirmed its agreement with our position that reading material should be zero-rated. That same evening, the Governor General honoured the best of Canadian literature at Rideau Hall. It was a great day.
We are pleased to be before you again on the subject of Bill S-10 and specifically to address Senator Maheu's proposed amendment. The senator has given a lot of thought to this amendment. We applaud her, as we applaud Senator Di Nino for originating this important bill.
The third reading debate on Bill S-10 made it clear that there is a bipartisan consensus on the core values of the bill. Now the debate has been distilled to a smaller question: Should zero-rating extend to magazines and newspapers as well as to books as originally and repeatedly promised, or are there in fact good reasons to deny the proposed tax reduction to readers of periodicals?
We submit that there are no good reasons to penalize the readers of magazines and newspapers and that the bill is a stronger, more principled measure without the 5 per cent clause. Accordingly, we respectfully request that the committee approve the bill and the amendment, but also approve Senator Di Nino's subamendment. We should like to see three yes votes by the committee: yes to Senator Di Nino's subamendment, yes to Senator Maheu's amendment, and yes to the main bill.
Our arguments in favour of this course focus on the following issues. First, the majority of countries do not tax magazines and newspapers. The proposed amendment would violate the government's indisputable promise to zero-rate all reading materials. Zero-rating all reading materials that contain advertising would be an inexpensive investment in Canada and in Canadians. Canada's tax rate of 7 per cent on magazines and newspapers and 15 per cent in the harmonized provinces on that reading material is the highest tax rate on reading in the G-8 countries.
In Western Europe, not one country taxes newspapers and magazines at the full rate. The most common tax rate for those items is zero. Not a single country in the OECD discriminates against publications based on advertising content. The government's promise to zero-rate reading material has always explicitly included magazines and newspapers. The excellent background document prepared by the Library of Parliament recognizes that there was a political commitment to zero-rate all reading material but notes that "there was some confusion as to whether the relevant promise was made by an individual, a party caucus or a party convention". To clear up that confusion, the answer is "all of the above".
The original commitment was made in 1990 by individual Liberal parliamentarians. In November 1990, Senators Hébert and Fairbairn led a debate in support of an amendment to the GST to ensure zero-rating. The wording was identical to Bill S-10, which is before you today. In 1991, the leader of the opposition, now the Prime Minister, repeated that promise. Following that, the Liberal parliamentary caucus, MPs and senators presented a priority resolution that reaffirmed the historic principles embedded in tax-free status for the printed word and promised to remove the GST on reading materials. The current Finance Minister was in that room at the time. The vote was unanimously in favour.
Senator Maheu also wrote to us at that time, immediately before the 1993 election, to say that, "The GST should be removed from books, magazines and newspapers. It is not simply a matter of affordability,"she said, "it is the principle that reading should not be taxed."We very much appreciate the dialogue that Senator Maheu has brought to the deliberations of this committee. That dialogue has made us all think. We know where this is going. The political commitment is undeniable.
We also want to look at the annual cost to the federal treasury of keeping this promise. We calculate that the GST collected on the sales of books, magazines and newspapers, excluding tax on advertising revenue, which we agree should remain taxed, is approximately $200 million. Finance has a $300 million estimate. It is mystifying to us. That figure of $300 million would suggest that our three publishing sectors sell $4.5 billion annually at the consumer level. With all due respect to the Department of Finance, if our industry were twice the size it is, I think we would know it.
If the numbers are as important a consideration in your passage of Bill S-10 as the consideration and honouring of promises made, then I will ask David Hunt to share our data with you now.
Mr. David Hunt, National Director, Don't Tax Reading Coalition: Three questions arose during the deliberations on this bill and particularly during the evidence stage on November 27 that we have decided to address today. First, how much GST is raised annually in sales of reading material? Second, is a tax on reading regressive? That question was raised in the excellent background document from the Parliamentary Library. Third, what do we mean when we say that Bill S-10 will benefit small publishers more than larger ones?
The most recent survey of family expenditures in Canada was released by Statistics Canada on July 28, 1998, after the bill was introduced for third reading. The most recent figures available are also the highest figures available because, obviously, sales grow every year. Annual consumer spending by Canadians on books, magazines and newspapers includes about $900,000 in sales of trade books and about $600,000 in sales of post-secondary textbooks. The total is about $3 billion in sales at the consumer level. That includes a number of sales that under Bill S-10 would not be zero-rated. I have copies of those handouts to pass around later.
Statistics Canada considers as books things like industrial directories, street guides, blank books, colouring books, stamp and coin albums, which Revenue Canada has already said would not be covered by Bill S-10. It also includes direct imports by households, many of which, as you know, are not subject to the GST. It also includes purchases from small suppliers, sales under $30,000 a year, and purchases from things like charity book sales, second-hand book sales operated by institutions and so on. We have estimated that to be about 12.5 per cent of that total market, which we think is conservative, leading to a final figure of about $203 million. That is the net GST exposure from zero-rating reading material under Bill S-10.
Finance comes up with the vastly inflated numbers of anywhere from $300 million to $400 million. That is the annual GST collected on annual advertising sales in magazines and newspapers, again according to the Statistics Canada and Industry Canada joint publication called Statistical Review Information Technology and Content Industries. That GST revenue remitted to the government from advertising sales in newspapers and magazines is $200 million, approaching the GST that would be covered by Bill S-10. As you can see, the GST on advertising sales in fact is greater than the GST on publication sales for those two categories.
Those industries are coming to you and asking to be zero-rated on actually less than half of their total revenue because that is the specific commitment made by both the government and by individual parliamentarians.
We have been asked to explain how we came up with figures of the offsetting tax increases that would result from removing that tax. As you can see here, we have set up three tables. For the total GST foregone for books, magazines, and newspapers, we are back to this $203 million estimate of the total tax cut. Taking that tax off would mean new sales of reading materials coming into our industry totalling $96 million worth of books, $41 million worth of magazines, and almost $55 million worth of newspapers annually.
When revenues to the publishing industry increase, so does employment. Over 1,000 new jobs were created in our sector. That is a direct correlation. It has been studied many times. We have run that through a model assuming a 40 per cent personal tax rate, and $15,000 Employment Insurance savings from each job that can be created, giving us this figure: roughly $29 million $30 million in payroll tax and EI savings.
We have run that through our industry economic model down here. This is where our joint industries spend their money: costs of goods sold, royalties, freelance fees going to individual Canadian writers and freelancers and so on. This is the tax revenue from the supplier profit in those industries. This model does not include employment gain within those supplier industries. That is just the direct jobs gained within the publishing sector. This is the tax revenue from the new supplier profits. As you can see, it is a fairly small percentage of this figure but it does add up to $15 million.
The summary of the net impact is that we would be giving up $203 million worth of GST revenue but we would gain increased income tax and EI reductions due to employment gains, new corporate tax revenues from suppliers and industry profits, and reduced collection costs, which are estimated at 10 per cent of the marginal tax collected for our industry. It is a very expensive industry for Revenue Canada to tax, as they freely admit. The total net benefit we come up with, the total net reduction in taxes, is roughly $138 million. We would submit that that is the real cost to the government of removing the GST from reading material, which has been repeatedly promised.
Again, for the sake of contrast, I would point out that that is less than 10 per cent of the total reduction in personal taxes that the Finance Minister has already committed to make in the February budget. He has committed to make a reduction of between $1.5 and $2 billion. The most recent figure I saw in this morning's Globe and Mail was $1.9 billion in tax reductions. We are humbly submitting that you should start with the one you already promised.
Is a tax on reading regressive? The Library of Parliament paper, which we have said several times is excellent, seems to have misunderstood our argument about what portion of household income is spent on reading materials. That is the definition of regressivity and progressivity.
This is a graph of a family expenditure survey in Canada. Reading materials as a percentage of household income is highest for the households under $10,000. It drops very cleanly down to households with income over $90,000. The slope of that graph is reversed for a number of other consumption categories. Clothing is one. Transportation is another. In the categories of accommodation and education, as well as others, higher income households spent a larger percentage of household income on those categories than did lower income households.
Reading materials, along with food and basic shelter, are three of the very few categories where the opposite is true, where the slope is this way and lower income households spend a larger percentage of income on those materials than do higher income households.
We have also been asked to explain our contention that small publications will benefit more from zero-rating than will large publications. Essentially, this graphs the impact on a publications budget of zero-rating publication sales against the percentage of that publications income that comes from advertising. That is why the slope is perfectly straight. Over at this end, you have publications that sell very little advertising. Over at this end is the example of publications that are supported 100 per cent by advertising, and therefore, they do not charge for copies. Obviously, for those there is no benefit at all, which is why the line intersects. These two bands are just examples.
Over here, we have an example of a smaller publication with between 10 per cent and 25 per cent of its revenues coming from advertising. That represents a very large group of publications: artistic, literary, social, ethnic publications, local interest, ethnology, folklore and so on. They depend on that advertising revenue. As you can see, their benefit from zero-rating would range from about 5 per cent to 6.5 per cent of their publications budget, whereas a publication that is larger and derives more of its revenue from advertising, in the 50 per cent to 70 per cent range, would have a net benefit in the 2 per cent to 3.5 per cent range. That is still a very significant sum. It is a very significant disincentive for Canadians to subscribe to a publication that gets a significant percentage of its revenue from advertising, such as L'actualité or Maclean's, but it is less of a benefit to the publication based on the fact that that publication has advertising sales to fall back on, which will continue to be taxed under the GST.
The core of our argument is that a publication that gets more of its revenue from publication sales will benefit more from the zero-rating of those sales. A publication that has a larger percentage of advertising but still sells the publication to its readers will derive a proportionately smaller benefit. We do not feel that another mechanism has to be written into the legislation. We feel that the mechanism is already there, that zero-rating publication sales creates an incentive for publications to generate more of their revenue from direct sales to Canadians.
The Chairman: Thank you, Mr. Hunt. Colleagues, I will ask you to hold your questions until we have heard from all of the witnesses. Then I will bring all the witnesses back to the table for questions.
Good morning, Mr. Saunders. I presume you have a brief opening statement for us. Please proceed.
Mr. Craig Saunders, National Coordinator, Canadian University Press: I do. I will assume that you read the brief that I sent in. I should like to highlight the main points within it. First of all, because I do not believe that my organization has testified before or has made a statement before, I will give a brief background on it.
Canadian University Press is the world's oldest national organization of student newspapers. We were founded in Winnipeg in 1938. Currently, our membership includes just over 50 of the 150 student newspapers in Canada.
Regarding how the GST affects newspapers and magazines, student newspapers work a little bit differently from other newspapers. Student newspapers have two funding sources. One of them is advertising, like other newspapers. However, the other side is not from subscriptions. Student newspapers are often part of student organizations like a student union or student council. Sometimes they are independent organizations within a university. As a result, the contribution that students make to their campus newspaper comes through a student fee, and that is an exempt fee.
When a magazine or a newspaper does its billings and its revenues come in, a normal magazine or newspaper would receive GST revenues from advertising, subscriptions or cover sales. For a student newspaper, the GST revenues from subscriptions are non-existent -- they are not even a possibility.
Student newspapers are an interesting and important part of Canadian culture and especially the academic culture. They are the first places that many ideas are discussed. They are the medium for discussion within the academic community, and they are often the only voice that students have to discuss among themselves. They are also community newspapers. They serve an academic community, a collegial community, as well as a community of citizens at large, both on and off their campuses.
In my brief, I highlighted The Carillon at the University of Regina which, when I was the editor there, was the second largest newspaper in the city, with a whopping circulation of 4,000 a week. It may seem like an insignificant medium but it is a medium that has had a significant impact on Canada. It is the largest training ground for new journalists in Canada. There are literally thousands of students involved in the student press. I can honestly say that the number of students involved in the student press probably dwarfs the number of students involved in journalism programs, which I do not mean to demean in any way.
If you look through my brief, you will notice that I mention a number of prominent Canadians who have been involved in the student press. Among them are Peter Gzowski, past and present senators, many of the top journalists, some top politicians and many top authors. You will note that I open with what I think is a very appropriate quote from Margaret Laurence, which defines for me how the student press is important to Canada. It gives people the confidence and the hands-on skills, the ability, and as I said, the confidence really, to go out there and make a stand with their own writing, to begin to express themselves, or to discover and develop ideas.
As I said earlier, student newspapers do not receive revenue from subscription fees. As a result, when the GST came in, it adversely affected student newspapers more than it did many other publications. Many publications could recover the cost of the GST by passing it on to the consumer through a subscription price or through advertising. Student newspapers cannot do that, and I do not think that they should be able to do that.
As a result, many papers immediately lost a portion of their operating budget. As a matter of fact, it was the student fees that went straight into the GST payments because suddenly we were paying more for services like printing.
If you look across the spreadsheet that hopefully you received with this brief, you will see that there is no typical student newspaper. I have attempted to clump them into three groups: large, mid-sized and small. This is certainly not a comprehensive list. I apologize for that. There is no student paper that has a typical ad content or a typical percentage of their budget delivered to anything. They are very different papers. They are a diverse lot. I did notice that the largest student papers are often less heavily affected. The money they lost to the GST when it was implemented was a much smaller percentage of their budget than it was for a smaller newspaper.
The other thing I noticed is that the more advertising a newspaper has, the less impact the GST has on it because it is able to recover a greater percentage of its GST expenditures through advertising revenues. As a result, the student papers that are hardest hit are the smallest ones in small communities that are often the most volunteer-driven and community-based. As a result, the GST has had a negative impact on the diversity of the student press. Some of those papers, large and small, are currently having difficulty surviving. It is not a matter where we can just go back and raise student fees, which, frankly, I do not think most student newspapers savour the idea of doing, anyway.
The impact of the potential savings from zero-rating might look insignificant, being between a few dollars and a few thousand dollars, but a few thousand dollars for a student newspaper is a very significant amount of money. When I was the managing editor of The Carillon, my salary was $400 a month to run a community newspaper. My news editor made less than half of that, and my news editor worked about a 40 or 50 hour week. Really, the positions of student newspapers are like volunteer positions.
I included the salaries column just to show how it can offset, but those are spread out among dozens and dozens of students at each paper. The largest paper there, The Varsity, probably has a group of staff and volunteers that well exceeds 100 people, maybe even considerably more. It is probably the largest student paper, or at least one of the largest three.
For some of the smaller papers where nobody is paid, or where employees are paid only very small honoraria, like The Carillon, a matter of $2,000 or $1,500 means that they could hire a copy editor for a year. It means that they could hire an arts editor. At The Martlet, the $2,000 that would be saved is even more than their former poetry editor, W.P. Kinsella, probably made. Therefore, it is a very significant amount.
The zero-rating of the student press, which is part of an academic community, would cost a negligible amount. For all of the 150 student newspapers in Canada, it would probably be under $100,000. In terms of the GST, that $100,000 is insignificant. To the students and to their papers, it is a significant portion of the budget to which they have given their own money freely. Those papers provide them with a voice and a forum for discussion. I would argue that that has played a significant role in the political and cultural development of this country.
The Chairman: Thank you very much, Mr. Saunders. You will permit me a personal note. The very first time that I came to Ottawa, quite a few years ago, was as a delegate to a Canadian university press conference that was held in one of the Senate committee rooms, when I was one of the editors of the weekly newspaper at Saint Francis Xavier University. Those were the days.
We have here the representatives of the Canadian Magazine Publishers Association, including Mr. Rick Boychuk, the Editor of Canadian Geographic Magazine, and Mr. Jean Paré, Publisher of L'actualité.
Mr. Paré, the floor is yours.
[Translation]
Mr. Jean Paré, Publisher, L'actualité: My name is Jean Paré. I am a member of the Canadian Magazine Publishers Association, Magazines Canada and almost all of the magazine associations, but I am not speaking on their behalf since I am neither the president nor the delegate of any of them.
I am president of the French magazine section at McLean Hunter Limited, and I am speaking on behalf of my McLean Hunter colleagues. You have before you a written brief that was prepared. I am not going to insult you by repeating it. I know that your time is precious and I would like to go through the notes adding some considerations that stem from my 25 years of experience in magazine publishing.
I think the concept of this bill is excellent and sound, as it aims to correct a mistake that was made when the GST was brought in several years ago. Canada had relatively limited experience with that value-added tax and did not realize how much of a negative impact it would have on some sectors like information, reading and culture. I am talking about books, but also periodicals, given the volume in money and print-runs.
To give you an example of what has happened since the GST was adopted, print-runs for all magazines in Canada dropped considerably. That occurred in the middle of a recession, which did not help, but I would not say that that was the main cause. I have experienced the effects of the GST, year after year, when planning our subscription sales. For three consecutive years, Canadian magazines were unable to increase their subscription rates to keep up with inflation. Not only did their runs decrease, but their capacity for growth and investment in their editorial content also dropped.
The GST is not the only cause. When we look at the difference between what happened in the United States and in Canada, we can measure the negative or perverse impact of this bill, which in other respects was good enough, with the creation of the value-added tax, for our magazines to support it. The problem was the application of the tax.
In your bill, there is a proposed amendment, and the amendment does not amend the bill. That amendment destroys the essence of the bill, because if it were adopted, we would be making the same mistake that was made when the GST was adopted several years ago.
I told you that our magazines were affected. At the time, while the number of Canadian magazines hardly increased at all and print-runs dropped, our foreign competitors considerably increased their print-runs in Canada because they were able to avoid the GST. We estimate that 70 per cent of foreign magazines sold in Canada do not collect the GST nor do they pay it. If they collected it, they kept it for themselves since they do not have offices in Canada.
The proposed amendment, which limits zero-rating to books and magazines containing less than 5 per cent advertising or no advertising at all, is based on the idea that advertising is not a cultural or valid information-based activity and that it cannot be zero-rated. Advertising in magazines is and will continue to be subject to the GST. The only thing that would not be subject to the GST would be the sale of the magazine to the readers as such. As a result, the argument can be made that the proposed zero-rating applies to the editorial content.
Other witnesses will tell you that this tax will be as difficult to apply as a tax that was designed to tax food products at different levels according to how much sugar or fat they contain. Imagine the problem that this would give rise to for a retailer who has books, magazines and newspapers with different levels of advertising! It appears difficult.
I would especially like to point out that large magazines are not less deserving than university newspapers, small scale cultural magazines, ethnic publications or general interest publications. I would say that they are essential to the existence of small magazines. They are essential to the health of the magazine industry in general.
Magazines are places where publishers and the authors of articles from small publications earn a living. They are places where people learn to work. Large magazines, large newspapers and large publications are often the sources or the place where future magazine editors are born, and it would be hard to get by without them. The large magazines also support Canadian publication associations. Lacking advertising revenues, the small, highly specialized magazines could not survive without these associations.
Magazines are certainly as deserving as books. I read a lot of books, I buy a lot of books, and I encourage everyone to read books. We also promote books in our magazines. But a sort of myth exists that books are communications, cultural and information tools that are superior to magazines.
In reality, periodicals, newspapers, magazines, journals, whatever shape they take, are the main tools Canadians use to obtain information on understanding the identity of their country and developing it, for finding all kinds of intellectual resources, as well as ideas that will enable them to live their lives, to live with their fellow citizens, and to be active politically, socially and culturally.
Magazines are mainly what link 30 million people in this country, whether they be English or French speaking. It is not because large publications contain advertising and a highly diversified content and that they are not highly specialized that they are any less essential to communication among Canadians. I might even say that they are more essential.
I think that large publications reach more people, and because they reach more people, they instill common knowledge and a common identity. A country cannot be based solely on small means of specialized communication. These small publications are essential in that they provide training, education and information for their target audience, but none of them establishes links between individuals. Newspapers and large magazines establish these links and they do so with editorial content that shows they're concerned about serving society, and not only making money by distributing advertising.
For us, advertising is not the reason we exist, it is the means we use to exist. Our raison d'être is to reach our readers. Advertising is the means that enables us to buy from Canadian authors, from Canadian journalists, from Canadian photographers and Canadian illustrators, and from Canadian designers. We buy magazine content thanks to advertising revenues.
For most magazines, advertising revenues account for 80 to 100 per cent of their total revenues and for 60 per cent of revenues for the most successful magazines. In the case of L'actualité, Châtelaine and some of the other magazines we publish, 60 per cent of revenues come from advertising. Without advertising, there are no magazines and this communication among Canadians no longer exists.
Magazines are not limited to superficial stories that we can do without. Some target young people and adolescents. Here is a magazine called OWL that targets school age children. A French version called Hibou is distributed in the schools for young French-speaking children in Canada.
What do magazines like L'actualité do? They go into the schools. That is proof of the cultural, informative, political and social value of magazines. We have a pedagogical program entitled the "In School Program", because some of our magazines are also used in English-language schools. Several thousand school age children receive our magazine under the direction of their teachers. They have special prices and pay 50 cents for each issue. That is below the cost of production. We provide schools throughout Canada with these magazines, and I believe that 50,000 children use these magazines to learn a language. L'actualité is the argument used outside Quebec for learning French as a second language, often in immersion programs. Education experts, specialists, and teachers must also get involved to write the workbooks for the teachers as well as the workbook for the pupils. These are real publications that are used for teaching purposes in schools.
I could give you the example of Géographica, a small magazine that has just come into being and that is experiencing serious difficulties. Lack of advertising is a problem, especially for a magazine that wants to bring Canada's geographic reality into every home. We can see the extent to which something as superficial as advertising is just as essential as bread, butter and milk on the table.
The Chairman: I apologize for having to interrupt you. We have other witnesses to hear, and after hearing from them, we will invite you back to the table for a more in-depth discussion.
[English]
The Chairman: Mr. Boychuk, do you have something to add at this point?
Mr. Rick Boychuk, Editor, Canadian Geographic Magazine, Canadian Magazine Publishers Association: I am here today to illustrate some sense of the importance of magazines to Canada, and to offer you some sense of what we do to contribute to developing or, rather, maintaining a sense of "Canadianness".
The Canadian Magazine Publishers Association is 25 years old and includes over 270 Canadian publications. They tell Canadian stories, using illustrations, pictures, maps, and other original works used by Canadians.
We support the legislation in the Senate to zero-rate the GST on reading materials. We are pleased to note that Bill S-10 is identical to wording proposed by Senators Jacques Hébert, Royce Frith and Joyce Fairbairn as an amendment to the legislation that implemented the GST.
We are particularly pleased to support S-10 before this committee, which has spent considerable time recently on issues of social cohesion in Canada. It is valuable to recall the wording of the O'Leary Royal Commission. What was said of the magazine industry then is still true today. "It is largely left to our periodical press to make a conscious appeal to the nation, to try to interpret Canada to all Canadians, and to bring a sense of oneness to our scattered communities."
Clearly, magazines play a unique role in promoting Canadian literacy and helping Canadians to see the world through Canadian eyes.
I have a copy of the latest Canadian Geographic with me today, in addition to the member's directory. I hope you will take a moment to review it. I do not like to be too shameless about this. I want to stress the value of Canadian magazines in explaining Canada to Canadians.
The magazine Canadian Geographic was founded by the Royal Canadian Geographical Society in 1930. Our paid circulation numbers 240,000. We are the only Canadian magazine with a full-time cartographer on staff. A few years ago, in collaboration with Mr. Paré, we launched a French-language magazine, to address French-language readers.
Advertising revenues are vital to the success of the magazine. The magazine helps support all sorts of the society's activities, including expedition, scientific research and, in particular, education programs in schools. With the assistance of a major advertiser and the collaboration of Governor General Roméo LeBlanc, we recently delivered to every classroom in 16,000 schools across Canada a new map of Canada. That is one example of the many ways in which we contribute, like many other Canadian magazines, to helping Canadians understand the country.
In our next issue, we will publish a detailed map of Nunavut that will include everything from vegetation zones to communities.
We believe that this is what this legislation is all about: helping us to reach Canadians with accessible information they want to know about and using the written word, illustrations, and original cartography to tell the story in a highly readable way.
We are opposed to the amendment limiting zero-rating of GST for Canadians interested in reading publications with more than 5 per cent advertising content. The amendment does not recognize the important role this wide-variety magazine plays in reaching Canadians and encouraging them to read.
Last week, one of Canada's most premier observers of cultural industries, Rick Salutin, who is a columnist for the Globe and Mail and who appeared before a House of Commons committee two weeks ago, said this about magazines -- and I am endorsing his comments. Let me paraphrase those comments: "I think magazines are the key way that society discusses itself. Newspapers are too fast. You have to write too fast, read too fast, and they are gone. Books are too long, and they take too long to come out. Magazines are the main way that writers have the time to reflect or write something out, to get it there before the issue is dead. Magazines sit around the house for a week or a month,"and in our case I hope longer than that, "and readers have a chance to linger over them. Canadians understand that, and I think Canadians are real readers of magazines. You give them a chance and they read it."
The Chairman: You publish an excellent magazine. For those senators who do not subscribe to Canadian Geographic, you should. It also makes an excellent gift. I have seen your recent promotional material on that subject. Mr. Paré's editorial comments are worth reading every week. He says more in fewer words than most journalists manage to do.
Ms Jane Cooney, Past-President, Canadian Booksellers Association, Proprietor, Books for Business: I am pleased to have this opportunity to discuss Bill S-10 with you and, specifically, to address Senator Maheu's proposed amendment to the bill. Our position is clear. We do not support the 5 per cent amendment. We believe the bill is a stronger, more principled measure without that particular clause. We believe the cost of zero-rating all reading material, as specifically promised not only by the government but also by Senator Maheu, would be money well invested. To do otherwise would be to break faith with the people of Canada who believe this government's promises regarding this issue.
Our remarks today will focus briefly on four key issues. One, magazines and newspapers are an important part of the stock of many bookstores; two, magazines and newspapers are important to the development of literacy skills, particularly among young people and new Canadians; three, the proposed amendment would damage Canadian culture and social cohesion; and four, the proposed amendment would violate the government's clear promise to zero-rate reading materials, including magazines and newspapers.
The Canadian Booksellers Association represents over 1,300 retail bookstores from all parts of Canada, from coast to coast to coast, from St. John's to Victoria to Yellowknife. Bookstores stock a range of reading materials, including magazines and newspapers from across Canada and around the world. My own store, Books for Business, which is located in Toronto, carries a wide range of local, national and international magazines and newspapers. These magazines and newspapers contain information that assists our customers, who are individual professionals, secondary school teachers, university professors, librarians, human resource trainers, et cetera, to carry out their jobs, to inform their students, and to manage their businesses more productively.
We consider those magazines and newspapers to be an integral and meaningful part of our business and, more important, a key part of our mission to provide written information and entertainment to our customers in the most timely, relevant and cost-effective formats possible.
Furthermore, booksellers witness the importance of magazines and newspapers in developing literacy skills. Customers who enter our stores to buy magazines and newspapers often graduate to buying books. This is particularly true of younger readers, of new Canadians, and of new readers.
Buying a book is an investment, both economically and emotionally, for many of these individuals. Magazines and newspapers are more accessible and provide an open door to the world of print. It is not just our observations that tell us this. All available research confirms the importance of magazines and newspapers in developing literacy skills and in developing independent readers. It remains only to point out that some of the strongest opposition to removing magazines and newspapers from this bill has been from the representatives of literacy groups.
Honourable senators, please listen to them; they are the experts.
You have heard today from the representatives of the Canadian Magazine Publishers Association and the Canadian University Press about the cultural importance of periodicals. Again, we echo their sentiments.
Finally, you have heard today the litany of government promises on this issue, promises that always included magazines and newspapers. Everyone, from the Liberal parliamentary caucus to the Liberal policy convention to Senator Maheu to the current Minister of Canadian Heritage and to the Prime Minister himself, specifically and emphatically promised to zero-rate books, magazines and newspapers the instant the budget was in balance and tax cuts were a possibility.
Canadians do remember. That promise has not expired just because it was delayed. Literally every day since January 1, 1991, we have fielded complaints about the GST being applied to the books, magazines and newspapers that we sell. Every day, customers say to us, "Did the government not promise to take the GST off reading?" Lately, we have taken to answering, "Yes, they did. Let us see if they intend to keep that promise."
Ms Sheryl McKean, Executive Director, Canadian Booksellers Association: I have come to answer questions today and to support Ms Cooney's position. She did a great job.
Mr. F.C. Larry Muller, Chair, Educational Resources Group, Canadian Publishers' Council: When I received Senator Di Nino's invitation, I took the opportunity to read Hansard, something I had never done previously. It was an illuminating experience. I was staggered that so much compelling evidence had resulted in so little activity over seven years.
I could not imagine what I could possibly bring to this discussion that had not already been said. I did, however, think about it, and one critical item, it occurred to me, has been overlooked in all the discussions: We are failing to recognize reading for what it really is, and we are treating it as something else.
In Oscar Wilde's play, Lady Windermere's Fan -- which, by the way, finished a wonderful run on Niagara-on-the-Lake this year -- Lord Darlington defines a cynic as "a man who knows the price of everything and the value of nothing". That play was written in 1891. A hundred years later, in a book titled The Hungry Spirit, the great British commentator, analyst, and prophet of business practice, Charles Handy, laments the tragedy of applying business paradigms to everything in society, including hospitals, prisons, social welfare and education.
Inputs and outputs, costs and revenues are now the measure of all things. I believe these writers are decrying the commodatization of society. Put a price on everything -- animal, vegetable, mineral, spiritual -- and then we do not have to worry about what it is and what it means in people's lives. Once a price is established, we can tax it.
In between Oscar Wilde's play and Charles Handy's book, the world has seen cataclysms of unimaginable horror. Canadians have poured out their blood, not only in war, but also in peacekeeping activities, not for dollars and cents, but for humane values, decency, dignity, tolerance, political freedom, respect for others, freedom of expression. What is the price you would put on such things? If we could put a price on them, we could, of course, tax them.
I respectfully submit that print-based reading materials are not a commodity; they are not a taxable item. They are part of the nourishment of the human spirit that makes the values we live and die for possible. The materials are so potent that dictators burn them in public squares, exile their authors in prison or destroy those who produce them.
Print-based reading materials, newspapers, magazines, books, are the very stuff of John Stuart Mill's "marketplace of ideas", the public forum and debate that makes civilized democratic life possible.
You have heard really heart-wrenching accounts of the 45 per cent of Canadians who are functionally illiterate. If we are to save another generation from being similarly deprived, we must break the cycle. We must do everything in our power to give books and magazines a real presence in homes. Millions of Canadian children are living below the poverty line. Almost certainly, if these children are not introduced to the world of reading, we will have another 45 per cent of adults who cannot play their proper role in society and cannot fulfil their human potential.
Let us also recognize that real reading comes in many forms: puzzling over the funnies on a Saturday morning; reading comic books and even better such lively magazines as Owl; pouring over Christmas catalogues and reading the blurbs, wondering what Santa will bring; following the instructions to assemble toys; devouring series books such as the Hardy Boys or Nancy Drew from the old days, or the Animorphs from today; studying magazines about cars and rock stars; and finally, stumbling on that one special story or piece of literature that will electrify and illuminate a child's life. We need wide-ranging, indiscriminate, devouring reading to launch kids on a lifelong journey.
Better readers are better students. Every teacher knows that, but better readers are almost always the product of the home environment, not the school environment. Richly endowed homes have many books, magazines and other types of reading matter, and a parent or parents who read to their children. Poorly endowed homes have hardly any reading materials, and a parent or parents who are unable to share the experience of reading with their children.
I have a book here called Everybody's Favourites: Canadians talk about books that changed their lives. I want to share with you just one quote from one writer.
The story was C.S. Lewis' The Lion, the Witch and the Wardrobe. I began reading it at 4:00 on a Monday, after school, and finished it the following morning. I did not sleep that night. But the magnificent paradox of the book, and all of the Narnia stories is that by not sleeping for a few hours, I was awakened for the rest of my life.
That is the legacy that I want, and I am sure we all want, for every Canadian child. This legacy, to a huge extent, depends on the government's finally keeping an oft-repeated promise, to remove the tax from reading. Can we not once and for all close the book on a very sad chapter in our national and cultural life? Can we not at last zero-rate the GST on reading materials?
[Translation]
Senator Gill: I would like to thank everyone for their work and overviews of the situation. Mr. Paré, you stated that magazines could promote Canadian identity. I have seen L'actualité and I have noted that these magazines contain articles of all leanings.
These magazines promote Canadian identity, but I assume that from time to time they may promote other things. Can that also promote Canadian unity? There is a price to pay for all of that, and the government is penalizing publications instead of promoting them. I would like to hear your point of view.
Mr. Paré: The integrity of Canada does not mean that everyone must share the same opinions. Some people are left wing, some are right wing, and some are more traditional. A country is also a broad discussion. If we have no magazines, no newspapers, if we do not have the books to lead these discussions, I wonder if we have a country. I just returned from a business trip to San Diego and to other cities on the American west coast. I realize that I was in Canada when I got on the plane and saw people reading Report on Business, Canadian Business, Maclean's, Châtelaine, all of these Canadian magazines, whereas on the American planes they did not have any Canadian magazines. I realized that I was in Canada when I went into the airport and I saw newsstands where more than half of the visible titles were Canadian and talked about issues concerning my country, my province, my city, and my village.
Some of these magazines talk about politics, and culture. I bought one on agriculture. The magazine is 90 years old this year and when I bought it, ten years ago, it was on the verge of going bankrupt. I bought it for two reasons: because I learned to read by reading articles on Jersey cows and on potato beetles. That is proof that a good publication can serve all kinds of purposes. I also wanted to buy it because I believe that farmers in a country need to talk to each other and to learn the same things. They need to communicate.
That magazine did not turn a profit for five years, and we succeeded in saving it because a large publishing house was able to cross the desert, and with its "know how", reorganize it. Today it is an expensive magazine, because it targets a small audience, because it is highly specialized and costly to produce.
Because a subscription is expensive, the tax on this magazine for farmers is much higher than the tax on a less expensive general-interest magazine. We have noted that GST on magazines does not affect all citizens in the same way. It has a greater impact on people who must buy more expensive magazines.
Yes, all magazines contribute to the identity of this country, because not all Canadians agree with Canadian policies. There are even some who advocate policies to destroy Canada, but at least, they talk about Canada, and not other countries and the United States.
[English]
Senator Poy: I want to congratulate everyone here today on their presentations. I personally do believe in the free expression of ideas. It does not matter what anybody says, we are exchanging ideas, and therefore I believe very strongly that there should not be any tax on reading materials. This is the statement I want to make today.
Senator Di Nino: This is quite an interesting day. I was thinking as all of you were speaking about what kind of questions I wanted to ask that would made any sense after the tremendous presentations that you all made.
I will share with you that I spent last week in Taiwan observing the democratic process, which is in its infancy in that country. It hit home today when Mr. Muller was speaking about the value of being able to be informed in a free society, which probably happens more through magazines and newspapers than it would through books, particularly in a country where up until 1987 martial law existed. You really hit home a point that perhaps we have not addressed during the extensive discussions we have had on Bill S-10. I want to thank you for that.
For the record, so that when we reread this, when others read this in the future, I wonder if you could expand further the notion of what reading means for society, particularly for a free society in a democratic world.
Mr. Muller: One of the most striking things that all of us remember is the role of samizdat in the Soviet Union, the underground basement mechanical printing presses that shared ideas and made them available. The Gulag Archipelago was written, among others, but basically the kind of periodical that can send a key idea out to a lot of people is a fundamental instrument in achieving freedom, awareness and informed discussions.
This is why, as a book publisher, I am extraordinaryly uneasy when we make distinctions between newspapers, magazines and books. To me, they are a continuum. I went through all of them. I learned to read through all of them. I learned to think through all of them. I could not bear to see them divided.
Senator Di Nino: What is the difference between a magazine and a book, other than the way it is bound?
Mr. Boychuk: A book takes a long time to gestate. It involves two years of research and writing, followed by a publication schedule for a spring or fall launch. Magazines can address themselves to popular discourse much more quickly, and they can do it in a much more visual fashion. In our case, and in the case of lots of magazines, you integrate imagery, cartography and text. We offer readers many more ways in which to enter stories and learn about the context of issues or, in our case, places in the country.
Books are much more a text medium; magazines reach out to people in a way that is much more visual. There are coffee table books, but there is a greater division within book publishing than there is within magazine publishing. If you have a coffee table book, it does not necessarily address you in a text fashion, and works of fiction or even non-fiction do not necessarily use books.
One of my great complaints about books is that they do not use enough maps.
Ms Cooney: The user-friendliness of magazines and newspapers is very valuable in terms of obtaining new readers and of encouraging new Canadians to feel comfortable with the printed word in this country. Quite apart from the currency of a magazine or a newspaper, they are easier to handle, there are more of them, and they are also less expensive, so they reduce some of the barriers to reading that books may create.
Mr. Paré: I agree that there is no wall between books and magazines. Magazines and periodicals -- media, in general -- would be much poorer without the books.
A book is a very personal expression. All my journalists have written books. They do it during the weekend, during the holidays, at night. It is a personal expression. They do it because they believe in what they are writing and they want to express themselves. When they write for the magazine, it is different, it is a communication. They write with the reader in mind. They already understand the questions before they are asked, and they answer the questions. However, they use their books and other people's books.
If you are a reader, you are aware that someone who writes a book will be invited to appear on TV and to speak on the radio, and will appear in the magazines.
[Translation]
Books are often the source of material, but the media are the echo chamber, they are the tribune for all of these people. I have translated Marshall McLuhan, a great Canadian scholar, and I know exactly how many of his books have been sold. Very few.
Everyone knows Marshall McLuhan. His ideas have been widely diffused, used and have enriched the entire intellectual class and all members of the media, and this was achieved thanks to the media, magazines, newspapers and TV.
I find that the media and books work together. It was Marshall McLuhan who pointed out that democracy is the general diffusion of knowledge and that it came about with the advent of the printed word. It was invented with Gutenberg and might well disappear when printing disappears.
[English]
Senator Cohen: I have been very impressed. You have given me so much food for thought. You were almost poetic in some of your presentations.
Canada has just been thoroughly chastised in Geneva about the whole area of poverty in Canada. I note that Mr. Muller, in his article, said, "This year, in physically and financially devastated East Africa, Botswana, Zambia and Zimbabwe are all removing duties and value added taxes on books so that there will be no governmental obstacles placed between children and the opportunity to read."
As you say, Canadians should live their values. We should not leave ourselves wide open for the world to say, "This is what you have done to the poor. Now look what you are doing for literacy in Canada." I was compelled to make that statement.
Mr. Muller: The same is true of Latin America, where they have desperate poverty. None of those countries tax reading materials.
Mr. Hunt: Just this year, both Indonesia and Russia have removed their value-added taxes from reading materials. Those countries do not have the luxury of a fiscal dividend.
Senator Cohen: To use a tired expression, we must put our money where our mouth is.
Ms Hushion: Argentina made a decision to not tax reading. They fought a big battle down there, and that is over.
[Translation]
Senator Ferretti Barth: I am happy to be here and to listen to your comments. I agree with the bill introduced by Senator Di Nino. The bill contains three amendments, and I will stand by the third amendment proposed by Senator Maheu. It deals with eliminating the tax on all reading material and leaving it intact for magazines that have more than 5 per cent advertising.
It is a counterbalance for the government so that it does not lose this revenue entirely. You talk about books, magazines and children's books, and by adopting the third amendment, I do not think there would be anymore problems. To adopt a gradual approach, the third amendment could also be amended over time.
You also said a lot about problems with reading. Since I arrived in Canada, and especially in Quebec, I have spent a lot of time working with underprivileged families, and we have had problems buying children's books, magazines and other things.
Do you think that the 7 per cent tax on magazines and newspapers would significantly deprive children of the opportunity to be exposed to reading? I want to make sure one thing is absolutely clear. The Conservatives are the ones who adopted this legislation on reading material. At the time, criticism was not levelled at the government, but now, we have this bill. I congratulate you on your initiative, but as a member of Parliament, I think that we must proceed gradually. We cannot eliminate everything all at once.
I do not think that books should be subject to the GST. There would be a tax on magazines and periodicals with more than 5 per cent advertising. Magazines contain a lot of advertising, and you cannot eliminate the GST.
The Chairman: What was your question?
Senator Ferretti Barth: I was very concerned with the nature of books, especially children's books. I said that I had not yet seen a drop in reading. My question is for Mr. Muller.
Mr. Muller: I will answer in English because my French is quite limited. I do not want to massacre your beautiful language.
[English]
You asked several questions. Shall I try to address them one by one? You talked about gradually phasing in the tax change by leaving the magazines with 5 per cent in place. I would find that morally offensive. The government, the Prime Minister, the Minister of Finance, everybody has agreed that reading material should be free. I can find no reason in my mind or heart to support the suggestion that reading materials that have 5 per cent advertising are second class and should be penalized. Advertising makes it possible for a lot of very worthwhile magazines to exist. They could not be born or survive without some degree of advertising.
As a child, I enjoyed reading advertising. I found it helped my reading abilities to see these wonderful things. One becomes wiser, but certainly the advertising is part of the reading experience.
A promise was made. If I can quote Robert Service's Sam McGee, "A promise made is a debt unpaid." The government promised to take the tax off. I find it unacceptable to suggest that we will take most of it, or a little bit, off or leave some on. That is my personal opinion.
Second, would it deprive poor people? What we have in Canada is an amazing and wonderful array of terrific reading materials of all sorts. I know from 31 years experience in the publishing industry, for every per cent or two that prices increase, sales decrease a per cent or two, which means that fewer people are being reached by magazines they could otherwise afford. I cannot think of anything more important to this country than increasing as much as possible the number of wonderful reading experiences in homes, and therefore, if I could reduce the price by five cents, I would. We should forget about the advertising side and really consider the desperate need to start children reading. That is my personal belief.
The Chairman: You have before you an amendment moved by Senator Maheu and a subamendment moved by Senator Di Nino. Senator Di Nino, do you want to take a minute to explain the purport of your subamendment?
Senator Di Nino: First of all, I want to thank my colleagues, many of whom have privately and publicly expressed support for the bill. I think that the amendments were designed to delay this bill and to find a way to kill it, when it makes it to the other place, if we are to proceed with it and pass it in the Senate. For the bill would create intricacies, some of which are suggested by the paper prepared by the library.
The third-party amendment really does penalize an important and crucial part of the literacy program in this country. When I asked about the difference between a book and a magazine, I said that the principle between a book and a magazine is really no different. All of them are to educate, inform and entertain in different ways, but certainly they are all there for that purpose.
To suggest that one segment of this important component of the democratic system, one segment of this important component of educating, informing and entertaining our populace from childhood to those who reach my age -- if they are lucky enough -- is an insult. It is an insult to many Canadians.
It is telling the 1,500 magazines, the 270 that belong to the Canadian Magazine Publishers Association, that they are second-class citizens.
It is an insult to the individuals who produce hundreds and hundreds of third-language publications in this country. They do not import publications from other countries, but publish from the Atlantic to the North to the Pacific. Some of the individuals are known to many of us, or many of them are known to some of us, and they often work eight days a week, 26 hours a day trying to put forth a message, trying to educate or inform in their own way their own communities. There are hundreds of them across this country, if not thousands, and any consideration of their publications as second class is an insult to all of these people.
I want to respond if I may for a moment to Senator Ferretti Barth.
The Chairman: We do not have much time. You must not filibuster your own subamendment. I would like you to explain the purpose of your subamendment.
Senator Di Nino: We believe that a tax on all reading material is inappropriate. It is certainly a commitment made by many in government prior to this one, and this particular one, that zero-rating of reading material is what we are talking about, not zero-rating of only a component of that particular industry. Period.
The Chairman: Senator Maheu had moved an amendment to the effect that any reading material that contained more than 5 per cent advertising should still be subject to the GST. You want to remove that from her amendment.
Senator Di Nino: Absolutely.
The Chairman: Colleagues, you have before you the amendment moved by Senator Maheu, and you have the subamendment moved by Senator Di Nino. Do I need to read the subamendment, or may I dispense? Everybody has a copy of Senator Di Nino's subamendment.
[Translation]
Senator Gill: Is this the Order of Reference that we just received from Paul Bélisle?
The Chairman: Yes. It is an excerpt of the Order of Reference from the Senate. You know what is behind all this, Senator Gill?
Senator Gill: Yes, Mr. Chairman. I am starting to understand not only the current issue but the games played at committees. The political game. I have to learn, I am a new senator. I have to learn how Senate committees work as soon as possible. I also need to understand the amendments that are introduced, the side issues and the hidden side of politics.
The Chairman: Senator, several months ago, this committee returned the Bill S-10 to the Senate without amendment. In the Chamber, Senator Maheu moved an amendment and Senator Di Nino moved a subamendment. In its wisdom, the Senate referred the amendment and the subamendment to us. Today, we are here to vote first of all on the subamendment, and then on Senator Maheu's amendment.
[English]
You have given me permission to dispense, so the vote will be on Senator Di Nino's subamendment. I will ask the clerk whether all the senators seated at the table are members of the committee. Yes. I will read your names in alphabetical order and you will vote please, yea, nay or abstention on the subamendment of Senator Di Nino. Senator Butts?
Senator Butts: Nay.
The Chairman: Senator Cohen?
Senator Cohen: Yea.
The Chairman: Senator Cools is absent. Senator Ferretti Barth?
Senator Ferretti Barth: No.
The Chairman: Senator Gill?
Senator Gill: No.
The Chairman: Senator Johnstone?
Senator Johnstone: Yea.
The Chairman: Senator LeBreton?
Senator LeBreton: Yea.
The Chairman: Senator Di Nino?
Senator Di Nino: Yea.
The Chairman: Senator Poy?
Senator Poy: Yea.
The Chairman: Five yeas, three nays. I declare the subamendment carried. We will now proceed to the amendment as amended; Senator Maheu's amendment as amended by Senator Di Nino. Senator Butts?
Senator Butts: Nay.
The Chairman: Senator Cohen?
Senator Cohen: Yea.
The Chairman: Senator Ferretti Barth?
Senator Ferretti Barth: No.
The Chairman: Senator Gill?
Senator Gill: No.
The Chairman: Senator Johnstone?
Senator Johnstone: Yea.
The Chairman: Senator LeBreton?
Senator LeBreton: Yea.
The Chairman: Senator Di Nino?
Senator Di Nino: Yea.
The Chairman: Senator Poy?
Senator Poy: Yea.
The Chairman: The amendment as amended is carried by a recorded vote of five to three. I will report to the Senate that the Senate has accepted the amendment of Senator Maheu and the subamendment of Senator Di Nino. Thank you, colleagues. We meet tomorrow when the Senate rises, but not before 3:30, on our study on social cohesion.
The committee adjourned.