Ottawa – The federal government should study the idea of changing tax measures that encourage news media advertisers to spend money with foreign companies, hobbling Canada’s already declining news industry, a Senate committee recommended in a report released Tuesday. 

The Senate Committee on Transport and Communications report, The Tax Deductibility of Foreign Internet Advertising in Canada, recommends the government study Section 19 of the Income Tax Act, which makes advertising in newspapers, magazines and online publications a tax-deductible expense. 

Foreign-based companies such as Facebook and Google account for as much as 80% of Canadian online advertising revenues. Those companies compete for advertisers with traditional Canadian broadcast and print media outlets. 

Witnesses representing various segments of Canada’s media industry told the committee that eliminating tax deduction for ads on foreign internet news outlets could give the domestic news industry a much-needed boost. However, other witnesses told the committee that eliminating the tax deduction could put Canadian businesses at a disadvantage relative to their international competitors.  

The committee urges the 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.

Quick Facts

• Annual internet advertising revenues grew from $901 million in 2006 to $5.5 billion in 2016.
• Advertising revenues for daily newspapers have dropped from $2.7 billion to $1.6 billion in 2016.
• Under the Income Tax Act, advertisers may deduct from their income tax 50% of the cost of the ads they buy in newspapers or magazines that publish less than 80% original content.
• If a newspaper or magazine publishes more than 80% original content, its advertisers may deduct 100% of their advertising expenses.

Quotes

“We are watching Canada’s foundering news media industry desperately look for a business model that will work in the internet era.  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.”

- Senator David Tkachuk, Chair of the committee

“As Canada’s news media industry searches for ways to remain financially viable, our committee urges the government to revisit the 1996 tax decision which is still being applied in today’s dramatically different world of technology.” 

- Senator Patricia Bovey, Deputy Chair of the committee

“There’s no secret the internet has been a game changer for publishing in Canada, especially for the country’s news industry. It’s time for the government to respond to this rapidly changing sector with policies that address this reality.”

- Senator Dennis Dawson, Deputy Chair of the committee

Associated Links

• Read the report: The Tax Deductibility of Foreign Internet Advertising in Canada.
• Follow the committee on social media using the hashtag #TRCM.
• Sign up for the Senate’s eNewsletter.

For more information, please contact:
Sonia Noreau
Public Relations Officer
Senate of Canada
613-614-1180 | sonia.noreau@sen.parl.gc.ca