Thank you, et merci, Monsieur Nantel. I will say that you're a more generous chair than some, because I was told that I'd have five to six minutes, so my presentation will perhaps be shorter than 10 minutes and not longer than that.
In any case, I am pleased to be with you here today to speak about the “The Shattered Mirror: News, Democracy and Trust in the Digital Age”. I'm joined by two of my colleagues from the Public Policy Forum: Claude Lauzière, who is one of our policy leads at the Public Policy Forum, and Carl Neustaedter, who is our director of communications.
The Public Policy Forum is proud of its consultative process and of the report it produced.
But we're not the Standing Committee on Canadian Heritage, and so I think all people who care about the state of news in Canada have high hopes for your deliberations over the next while.
I am struck, as I'm sure you all are, by how increasingly important the questions of news and democracy look with each passing day. Last week we saw more layoffs at Postmedia. Over the weekend we were reminded of the importance in the United States of a free and strong press. The coverage of the terrible shootings in Quebec City speaks to the need for reliable news and the role of news in communities seeing themselves reflected in their communities.
I know that we do not have much time, and that you have had an opportunity to read the report, or the media coverage of the report. I will take five minutes or less to guide you through some of our twelve recommendations.
I'll spend one minute on analysis, and I'm happy to answer questions.
As you'll see, there's a long diagnostic section at the beginning of the report.
On the analysis, I think we've documented fairly convincingly not just the sharp decline of revenues in the traditional media, especially in newspapers and increasingly in local television, but the fact that there's an unsustainable acceleration of this downward trajectory. Perhaps more disturbing to me in our study was the absence of indicators that new digital-only news operations have the capacity to fill this growing democratic gap.
Several of our recommendations are, I believe, simple enough.
The first is rectify the perversity that Canadian companies are charged sales tax on digital advertising and subscription sales but foreign news companies are not. We believe that's simple enough to address, and 20 to 30 countries have already done so.
Two, address the lack of clarify that inhibits philanthropic organizations from investing in journalism in Canada.
Three, bolster the “informs” part of the CBC/Radio-Canada mandate in a world with not enough genuine news and increasing volumes of fake news.
Four, remove digital advertising from CBC.ca and Radio-Canada.ca. This is something that they have said they are open to as well now.
We say this not because we think this money will shift to Canadian publishers—which is a bit of a pipe dream, I think—but rather because we think it's good for the CBC not to be distracted from its core mission of serious news by chasing clicks and eyeballs, which has, we believe, more serious repercussions digitally than it has for television.
At the heart of this report is a modernization of section 19 of the Income Tax Act that would rebalance the playing field in favour of news organizations providing original civic news for Canadians. This has several elements, and I just want to go through these, because this is technical in some places. The committee is very familiar with these issues, so I think you will understand it, but I don't think it has been universally understood.
Number one is to extend section 19 to the Internet, a matter that often tends to be treated as a more simple thing than we believe it is. The original sections 19 and 19.1 were intended to change advertising behaviour. It is less likely that behaviour would be changed with regard to digital advertising, and therefore a different approach is required.
The second element is to address the new realities of international trade agreements—when I say new realities, I mean from the 1960s and 1970s ,when sections 19 and 19.1 were introduced—which don't allow public policy to be based on corporate nationality. We've chosen two new criteria: one, that a news organization is subject to taxation in Canada; and, two, that it meets a minimum threshold of journalistic investment in Canada.
Three, instead of either being able or not being able to deduct advertising costs under section 19, we've recommended moving to a 10% levy or withholding tax on distributors of news that fall outside of our section 19 criteria. This borrows from the approach of the long-standing cable levy.
I would say that the penalty of not being able to deduct under section 19 is not something that is used or has been used very often. As I said earlier, those elements were meant to change behaviour, and they did change behaviour. The Internet advertising world is a very different world, a much more complex world. We expect that maintaining those kinds of criteria would be very difficult to administer.
Fourth, we estimate that the 10% levy would produce revenue of $300 million to $400 million a year. This money would go to an arm’s-length future of journalism and democracy fund. We find this approach superior in many ways to tax credits. It generates money to support journalism and digital news innovation from the $5.5-billion digital advertising pie rather than from the government's treasury. The governance structure we have suggested for the fund would keep the government out of decision-making about where the money goes. These are critical points. I am a journalist, like some of you, and I want to keep the government as distant as possible from both supplying money to the fund and disbursing money to news organizations. This was a concern that came across in the public opinion research we did. I think it's a concern that the industry shares. We are trying to develop something that is independent of government once the structure is set up.
Why is this better than tax credits? Tax credits are more prone to politics, we believe, than our proposal. You can see this right now in Ontario, where the newspaper industry is lobbying to be reinstated in the Ontario digital media tax credit scheme. The newspaper industry should not be lobbying government any more than is absolutely necessary. I'd rather it be absolute zero, but certainly they should not be having something, losing it, and trying to get it back again. This is not good for an independent press. Tax credits also tend to reward equally those organizations that spend their money wisely and those with less stellar records of managing their enterprises.
I have been asked in recent days who would qualify for this fund. My answer is that any bona fide news organization can apply. We were very conscious not to be excluding either early-stage news companies that need help to grow or the established news companies that still provide the vast majority of news.
Beyond the application for funds, we hope that this new fund will be more creative than we can anticipate. We have suggested, as well as the application process, four initiatives that the fund would support.
One would be a badly needed local news initiative under the auspices of the Canadian Press, an underappreciated national asset with high standards and good infrastructure.
Two, we favour an indigenous news initiative to cover the institutions and debates of indigenous democracy, particularly on a local level. In our round tables across the country, we were struck by some very small indigenous news operations that were trying to hold indigenous governments to account in the same way that occurs here on Parliament Hill, but that were completely devoid of resources to be able to do it.
Three, we suggest a legal advisory service to bolster smaller news organizations in pursuing investigative journalism. These organizations tend to get chilled very easily by intimidation, and if they go down this route, it's very expensive. We want to create incentives so that they feel freer to pursue more aggressive lines of journalism.
Finally, we suggest that the funds support a research institute. In the course of our research—and I'm sure you've had the same frustration—there are just so many things that seem impossible to find out, particularly in Canada. We don't know how much fake news there is in Canada or where it comes from. We don't know what happens when a community loses a local news organization. We don't know where news originates, as opposed to where we access the news. We don't really understand very well the public attitudes to news, democracy, trust, and other kinds of essential information.
These are some of the pieces we are looking at. I'd be happy to answer your questions.
I was just at a public policy event at the Château Laurier. Steven Chu, the former energy secretary for the United States government, was speaking there. He cited a Chinese proverb that I thought was pretty good: it was that if you don't change directions, you'll end up where you were heading. I think where we're heading at the moment isn't very great.