Canadian Heritage Committee on Jan. 31st, 2017

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Yes. What is that number? No one can give me this number. You come forward with $300 million to $400 million a year. I've not been able to get from the Library of Parliament or anybody this number that I can deduct if I take an ad through the National Post or your former paper, a full-page ad that I can deduct on my income tax. I would like to know that number. I'd like to know that number, because we keep on saying the CBC gets this, the CBC gets that, but I want to know what a business gets out of this ad in a newspaper. I can't find this number, this deduction that they get that you are talking about in section 19. I don't know that number. They don't know that number. We need to know that number.

[Edward Greenspon]

Okay. Let me take a little run at trying to explain the circumstances around why we don't know that number, if you will.

What section 19 does is it takes away the normal-course business operations of any business for non-Canadian-owned publications. It's slightly different for magazines because it's based on Canadian content and that was post-NAFTA, but just leaving that aside, it takes it away.

There's about $13 billion of advertising in Canada a year. About $5.5 billion of it is digital, so it's outside of section 19. That leaves $7.5 billion of non-digital advertising. That is, if it's going to a Canadian operation, it's just getting the normal-course business deduction that a steel company would get, or a grain company on the Prairies would get, or anybody would get. I think the question, and so the greater mystery in some ways, is how many people are outside of section 19 and are being denied the right to the normal-course deduction. That's a number that I don't think anybody knows, and I think that number is probably close to zero, in fact.

[The Vice-Chair, NDP, Pierre Nantel]

Merci. I'm sorry, Mr. Greenspon; we have to go back to the Liberals.

Mr. Seamus O'Regan, please go ahead.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Thank you, Mr. Greenspon.

I was going to mention Andrew Coyne as well. It's almost as if he could be a member of the committee, which would probably make it even more interesting than it already is.

He speaks to this, and as you said, you've had this debate for some 20 to 30 years. Anybody who was in the field of journalism or who respects good journalism is always going to be reticent to see any sort of government involvement, although we'd be kidding ourselves to say that there's obviously not some now.

You stated very clearly in the report that journalism must be independent from government, which means that whenever we talk about tax credits or financial support of any kind, we have to be so careful about it. I mean, as you said, any bona fide news organization can apply for the fund, but then it comes down to how we determine what a bona fide news organization is. We heard from hither and yon, from all sizes, shapes, and colours of news organizations, or at least organizations that argue that they are news organizations, and the classification becomes very difficult.

If government does take a more active role, as you seem to be recommending, how do we make sure we protect journalistic independence? Surely—and I come back to this fairly frequently on this committee, and so I apologize to my colleagues—we are not the only functioning democracy to be dealing with this right now. As you were exploring the issue, did you find any other examples in other countries of how they may be succeeding at this in varying degrees?

[Edward Greenspon]

Let me take your first question first, and I'll try to be as quick as I can.

I think there are two colliding principles. It's unfortunate that they're colliding, but they are. One is journalism, news media. We all want it to stay as far away from government as possible. As you say, that has not always been so. Section 19 has been around since 1965. The CBC has been around since the 1930s. There is policy that governments have put in place. Nonetheless, that's principle one: we want to keep journalism as independent from government as possible. However, we want journalism, and particularly the reporting of original news of a civic nature, to be vibrant in a country that's lost 225 weekly newspapers, 25 daily newspapers, one-third of jobs, etc. We have a problem. How do you deal with that?

I think the public is very much onside with your view and Mr. Van Loan's view and my view that we don't want to create a dependency here in any way, that it would not serve democracy well. This is why we rejected the tax credit route, which I think has been the prime route that many in the industry have been advocating for. That route would have the industry coming back to government every year about its tax credit, and government every year doing its budget, looking at the consolidated revenue situation, having to decide whether to keep the credit at 20%, move it to 15%, or whatever. You'd be in a constant policy relationship, which is not good.

This is why we try to invite a structure—and I think this is really important to your question—such that they're not coming to government for this fund, but they're coming to what I like to call a double-arm's-length agency, which would be more independent than the Social Services and Humanities Research Council or NSERC or the Canada Council. It's set up on a governance structure that's used by the Canadian Foundation for Innovation, which is kind of complex, but ultimately the board of directors is not appointed by the government and the CEO is not appointed by the government, unlike the CBC, for instance. It's more independent than we are accustomed to. That would be making the determinations.

Now you may make the argument that it would not be sufficiently accountable, but the money is also not coming directly from government. The money is coming from an industry levy. We are trying on both sides of this equation to keep government as distant as possible. Government is required to set up the structure for this, clearly, but after that, government's out. You don't need to come back every year and do what's happening in Ontario right now in the lobbying for the return of the tax credit.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Is there anything internationally, anything in other jurisdictions that you found as other governments grapple with this?

[Edward Greenspon]

Well, you know, many countries, as I've said, have got rid of the unevenness on VAT or sales tax. Many countries have opened up and made it easier for philanthropic organizations to invest. There's no such thing as a kind of section 19 in any country in the world. There are some funds that have been created. Section 19 is uniquely Canadian for the unique situation of a smaller country on top of a huge exporting country. Section 19 is unique out there.

There are countries that have set up funds of one sort or another. France negotiated a fund with Google at one point. Google has its European initiative fund, which will be coming to an end. Google tells me that it came under political pressure at a particular moment in time. They told us in the course of our work that they don't have the intention of renewing that fund.

There are a few kinds of different ideas out there. There's nothing that I think grabbed us. I think countries are struggling with it. The Scandinavian countries used to subsidize the second newspaper in every city, but they found that there is no longer a second newspaper in every city to subsidize, so that's not a sustainable policy.

I think there's some opportunity here to show some leadership.

[The Vice-Chair, NDP, Pierre Nantel]

You still have a good minute to go, because we have a nine-minute period. This person is so competent that he gives a very long answer, but we all need it.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

He's used to deadlines.

[Peter Van Loan, Conservative, York—Simcoe, ON]

We should let the chair have a set of questions.

[The Vice-Chair, NDP, Pierre Nantel]

That's so beautiful. I will at the very end. Thank you.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Let me ask you a personal question, then, as somebody with a lot of experience in the field. Let's just say that in a perfect world, everything in the report was implemented. How then would you feel about the state of journalism in Canada?

[Edward Greenspon]

I would think in a sense that we've given it a boost to try to find answers. It's incumbent upon companies and individuals to find these answers. Some companies have been innovative. I'm sure you've heard from La Presse. They've been very innovative and very impressive. The great risk to La Presse, to some extent, is the next generation of development, because they'll have to go back and do another API development. What they've done won't last, given the changes in technology and the expectations. It's going to be very expensive. Are people going to foot a $40-million to $50-million bill to do that again?

I hope that this will help people get up the hill, particularly the younger digital upstart companies that have no capital to work with whatsoever. I think there's creativity but not capital. I would like to see them have an opportunity to maybe invent a future that we can't imagine.

[The Vice-Chair, NDP, Pierre Nantel]

Thank you, Mr. Greenspon.

Now we're back into a shorter period of questions of about five minutes.

Go ahead, Mr. Waugh.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

What do we do with Google and Facebook? For the last year, everybody who has sat where you are sitting mentioned those two dynamic companies.

[Edward Greenspon]

Yes, what do we do about Google and Facebook? I have mentioned that they were responsible for 82.4% of the ad impressions in the quarter that was measured, and in the United States, in the quarter that we talk about in the report, there was a $2.7 billion growth in revenue year over year in that quarter, of which $1.4 billion went to Google, $1 billion went to Facebook, and $300 million went to everybody else.

There was a great reluctance toward a lot of policy types of solutions, but we heard a receptivity from the public to tax Google and Facebook. That didn't seem a principled approach to us. They are two very successful innovative companies that have hit the sweet spot with Canadians and people all over the world.

Nonetheless, I think that when you've got that kind of consolidation of the Internet, consolidation over both audience and revenue, it's an issue that should be considered by policy-makers, and I don't think it's a national issue. You're talking about a global company, and I think that's beyond the ken of one country itself to address, but I think it's worth considering.

I wouldn't want to penalize success, though. I don't believe in that, but I would like to have a system. The cable companies are a good example. The cable companies were seen to be common carriers that were profiting from content created elsewhere, so a levy was placed upon them. I'm not placing a levy on Facebook or Google, but I recognize that a lot of that levy could very well fall on them. We've taken a principled approach to that.

I think the other question about Google and Facebook is whether they should take the responsibility of the publishers for the non-truth neutrality issues. When I was the editor-in-chief of The Globe and Mail, I was responsible for everything that appeared in The Globe and Mail, including letters to the editor. If a letter to the editor was defamatory, that was my responsibility as the editor-in-chief, and not the writer of the letter to the editor; and I believe it's a principle that if you publish something, you should be responsible for the quality of what you publish. That seems to me a fairly obvious fact that isn't obvious to everybody.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Even more so now, after Sunday's incident in Sainte-Foy. We saw so many fake news stories out of there. It was disheartening.

[Edward Greenspon]

The problem's heading north.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Do you have any opinion on Netflix?

[Edward Greenspon]

No. I just think it's outside the purview of our study—

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Yes, it is.

[Edward Greenspon]

—but it's obvious that what we recommend around HST would apply to Netflix too.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Okay.

[Edward Greenspon]

And it has, in all the other countries that have any service that's delivered digitally.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Some think the newspaper industry is archaic. They've never moved past the 1930s. You've been in it for decades?