Finance Committee on April 29th, 2019

[Trevor McGowan]

To be clear, that's the Minister of National Revenue as defined in the Income Tax Act.

[Pierre Poilievre, Conservative, Carleton, ON]

So, a politician will decide which organization is and isn't a registered journalism organization.

I want to summarize what we've learned here today. The cabinet can appoint a panel to decide the rules that have to be met to be a news outlet, and then it will designate a body, which will decide which organization gets to be a news organization, and then the minister, who is a partisan politician elected to the House of Commons, will decide whether or not you can issue donation receipts as a registered journalism organization. This is an incredibly convoluted and incredibly political process. I think you can understand why so many journalists are worried about their independence under this proposal.

[The Chair, Liberal, Wayne Easter]

Mr. Poilievre, maybe you didn't hear what Mr. Langdon said, but what Mr. Langdon said is on page 133 of the budget document. He said the government will establish an independent panel of experts from the Canadian journalism sector to assist the government in implementing these measures. Secondly, he said the government proposes to establish an independent administrative body that will be responsible for recognizing journalism organizations as being eligible for any of the three measures—

[Pierre Poilievre, Conservative, Carleton, ON]

Which is exactly what I just said. It's precisely what I just said.

[The Chair, Liberal, Wayne Easter]

No, he was referring to an independent body. You've been a cabinet minister. You know how government works. Eventually, executive council is always responsible for all the things that are done, and you're stretching the line.

[Pierre Poilievre, Conservative, Carleton, ON]

Actually, the irony is, Mr. Chair, with respect, what you just said confirms everything I just uttered. You're right. The cabinet is going to be responsible for determining...which is what you just said. The cabinet is going to be responsible for determining which organization is and which is not a qualifying journalism organization, and a minister will be responsible for determining which will be a registered journalism organization.

You have exactly confirmed my worst suspicions. This is a political process designed by the government to determine which journalistic outlets can get this benefit and which cannot.

[The Chair, Liberal, Wayne Easter]

I try to chair independently, but I disagree entirely with you.

Mr. Leblanc, and then we'll go to the next question.

[Pierre Leblanc]

On the last point, it's the Minister of National Revenue who administers the entire income tax system. I don't think she is going to be assessing all the tax returns that are, for most of us, due tomorrow. It's the Canada Revenue Agency that administers the tax system. It's the Canada Revenue Agency that registers charities. It's the Canada Revenue Agency that registers Canadian amateur athletic associations. It's the Canada Revenue Agency that, under the proposal, would register journalism organizations, making sure they check the boxes, so that the measure is properly targeted: are they non-profit, do they keep proper books and records? It's that sort of thing that the measure has in mind.

[The Chair, Liberal, Wayne Easter]

Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

The current impression is that the text seems too vague. It refers to the appointment of an administrative entity but the wording is so vague that it is impossible to determine the nature or identity of that entity. The only thing we learn on page 207 is that it will be independent. However the bill as such is very vague. It does not specify whether it will be an independent entity and does not indicate either if the relevant provisions will be included in the bill or in regulations, as that is possible. We thus have the impression that things are vague and that there are still a lot of factors to be determined going forward.

This legislative proposal seems rushed and it seems to have been prepared in the wrong order. We should first have established this panel of independent experts, then included the independent entity in Bill C-97, or in regulations. Things were simply poorly executed, but that is not the fault of the people we have in front of us today. Clearly things were done in the wrong order and did not follow a process which would satisfy all of the members of the committee, including myself.

Ms. Lavoie, my question is about the credit for the employees. The bill proposes that there be a $55,000 cap for each salary that can be deducted as a labour expense, if I understood correctly. How did we arrive at this amount? Would it be possible to know more? Is this the result of consultations on the average salary in journalism organizations?

[Maude Lavoie]

The industry was indeed consulted.

According to Statistics Canada, the average salary for a Canadian journalist is approximately $45,000. The $55,000 mentioned in the bill takes us above that average salary. In addition the credit does not apply only to reporters' salaries, but also to those of all employees in the press room. The amount selected makes it possible to cover a large part of journalists' salaries and is a ceiling to limit the total cost of the credit.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Will the credit apply only to employees who earn a maximum of $55,000, or is it a maximum eligible amount? For example, can the employer deduct a maximum amount of $55,000 for an employee who earns $70,000?

[Maude Lavoie]

It is indeed the initial $55,000 of employees' salaries that is eligible.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Fine. Thank you, Ms. Lavoie.

[The Chair, Liberal, Wayne Easter]

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

The way I understand it there are three different measures. I want to focus on the eligible newsroom employees. The way I read the definition, persons who own and operate their own weekly in a rural community like a small paper, say, in Okotoks or in Brooks, or somewhere like that, would very likely not be eligible for any of these measures. The weeklies are like the bread and butter in the smaller communities. The way I read many of the provisions here, none of this applies to any of them. Am I reading that correctly? A lot of them are owner-operated. The way I read it, owners would be excluded out of all of this.

[Blaine Langdon]

In developing these measures, we did look to set in place some criteria that would help us distinguish between a journalism organization and an individual who might be, for example, writing a blog. That's why in terms of the definition of a qualified Canadian journalism organization, we did set out the requirement that the organization employ at least two journalists who are different from the owner. We felt that we had set the bar sufficiently low to capture most community news organizations and that is certainly one of the intentions of these measures. It is not to just extend this to large daily publications but as well to weekly news organizations.

That said, we are certainly looking to get the advice of the independent advisory council as to whether or not what we've set out there is appropriate, or whether it should be changed.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

That's not quite how I read this. It says “a minimum of 26 hours”...“the individual is employed”, and sometimes that individual is not employed. The owners, and they're also operators, may hire a few freelancers, so those freelancers would then meet the requirements of this, but the owners themselves wouldn't.

Then on the other part of the definition, it talks about “in the case of a corporation”. It says, “the chairperson or other presiding officer, and at least 3/4 of the directors or other similar officers, are citizens of Canada”.

In the case of some of these weeklies, they don't have that. They have an owner who is doing it. I understand that some measures are for not-for-profits, so the only way they can apply to them is if they convert their corporation to a not-for-profit. Then why are you the owner-operator of a not-for-profit? It changes their business model, quite frankly. Is that the intention of this, also, to change the business model of weeklies in the smaller communities?

[Trevor McGowan]

There are a couple of things just to make sure we're talking about the same thing. There are three separate measures, each providing support to Canadian journalism. The labour tax credit that I think we're talking about, providing up to $55,000 of salary, is mainly in clause 23 of the bill. That doesn't have a requirement that you be a not-for-profit. The not-for-profit requirement is in the qualified donee measure. So that's one thing.

In addition, the general rule, as my colleague noted, requires that there be at least two arm's-length employees, and that's for each of the three measures.

Lastly, you had mentioned that for the “eligible newsroom employee” definition, which is relevant solely to the labour tax credit, it applies in respect of employees and not independent contractors. I just want to be clear on that point, so if you have a freelancer who is not an employee, then the labour tax credit would not be available.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Could I ask you, then, about the qualifying journalism organization, because it says, “production of original written news content”. It goes on and it specifically excludes aid to publishers, so anybody who has received money under “an amount from the Aid to Publishers component of the Canada Periodical Fund”.

I'm trying to figure out who would actually qualify for any of this. I went to look for a list of these aids to publishers, and they had a bunch of trade publications, Maclean's and other organizations. So they would not be eligible for this labour tax credit. Is that how I'm reading this? It's in the same proposed subsection here.

[Trevor McGowan]

Right. There is a requirement that it not have received funds in respect of the year from that fund.

Generally—and hopefully this is helpful—in terms of the organization of the rules, the “qualified Canadian journalism organization” definition is to be found in proposed subsection 248(1) of the bill. It provides the general definition of what is a “qualified Canadian journalism organization” that is relevant to each of the three measures: the qualified donee measure, the labour tax credit and the digital news subscription credit.

But then each of the measures has its own set of restrictions that can apply. For example, for the qualified donee measure, there is the not-for-profit restriction. And this labour tax credit contains a number of other restrictions, including the one relating to the Canada periodical fund.

Again, I think my colleague Maude can provide more details on that, but I just want to point out that it's the receipt in the taxation year of amounts from the Canada periodical fund. It's not going to disqualify an organization if they received an amount in a previous tax year, or historically. They're not tainted forever. It's a receipt in the year from the fund.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Just on the back end, under “qualified Canadian journalism organization”, there are three definitions:

(v) it is primarily engaged in the production of original news content, which

(A) must be primarily focused on matters of general interest and reports of current events, including coverage of democratic institutions and processes, and

(B) must not be primarily focused on a particular topic such as industry-specific news, sports, recreation, arts, lifestyle or entertainment,

I'm trying to figure out who actually counts in there, because every single magazine or newspaper.... I still actually read some of these ones on paper. The “not” in proposed item 248(1)(a)(v)(B) covers pretty much everything I know out there. I know that Maclean’s can't get it anymore. I think they would have been the target of some of this, at least, because they receive cash from the aid to publishers. I looked it up online because it's posted, and they do. Actually, many of them are Rogers-based companies. A lot of those publications have either been shut down or sold off.

I'm just trying to figure out what organizations will actually qualify for this. Do you have any of those in mind? I understand that there's a panel and a prescribed body and all that other stuff, but who would qualify for it under these very strict criteria? It doesn't seem like it would be very many but just a small few.

[The Chair, Liberal, Wayne Easter]

Mr. Langdon, go ahead.

[Blaine Langdon]

I think we would look at it as casting the net as broadly as possible to capture organizations that are general news organizations. With your daily publications, notwithstanding the fact that they will cover industry-specific news, sports, recreation, arts, lifestyle or entertainment, their primary focus is the production of original news content. The “not” paragraph is meant to say that you cannot be focused narrowly on one of these subjects. An arts news publication would likely not qualify; again, this is not prejudging the work of the panel.

As I mentioned earlier, our focus in designing these measures was to cover or to target news organizations—again, your daily news organizations and your community news organizations—and to try to ensure that they would be eligible for these measures, while at the same time trying to place limits on every individual or every publication, be it a trade publication or otherwise, being able to take advantage of the tax assistance. So again, in terms of general interest news, notwithstanding the fact that they have coverage of a variety of different topics, that's what we were looking at. We feel that the vast majority of existing written-news organizations should qualify under what we've set up, but recognizing that perhaps we've not gotten it right, there will be an expert panel put in place that will provide us with advice and guidance as to how these requirements need to be reframed or not.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

So the panel would be the one deciding what “primarily” means? If you're too focused on, say, sports in your publication, then they would say, no, you can't do that, or...? This says “industry-specific news, sports, recreation, arts, lifestyle or entertainment”, which is really broad. It's incredibly broad. Basically, it leaves the panel with the ability to just decide that, you know, five out of 20 pages in your publication are about about sport or lifestyle, and that's too much. When you see the aid to publishers list, you have publications like L'actualité, Chatelaine and others. Those are already excluded from there.

I'm just trying to understand this. You said you cast a broad net, but it's the opposite of what I'm reading here. To me it seems like a very small net. A very small, select group of people and organizations would be eligible under this criteria, because “primarily” is a pretty broad definition. As well, “original news content” means you're not relying on a wire to feed stories into it.

Would it be possible under this legislation, in the framework that's being provided for here, for a currently Canadian-based online news service, such as The Post Millennial, which has original content being produced in a web format, to then just reproduce exactly the same material in a print format and then be eligible for the tax credit, the registration and the subsidizing of the employees' salaries?