Mr. Speaker, it gives me great pleasure to rise today to discuss report stage of Bill C-103, an act to amend the Excise Act and Income Tax Act.
I will spend the majority of my time today discussing Reform amendments that have been put forward to alleviate some of the serious problems or flaws that have worked their way into the bill.
As I stated during second reading, Bill C-103 will impose an excise tax in respect to split run editions of periodicals. The tax will be implemented at the rate of 80 per cent of the value of all advertisements contained within the split run edition. The split run editions are essentially periodicals distributed in Canada. More than 20 per cent of their editorial material is the same or substantially the same as the editorial material that appears in one or more periodical edition distributed primarily outside Canada and they contain advertisements that differ from country to country. Reform's amendments lie at the heart of this issue.
It is all too clear the issue of a split run edition of foreign magazines is one of predatory pricing or dumping its product on the Canadian market at unreasonably low prices as it means a siphoning off of Canadian advertising. If this is happening then punitive measures should be applied against the violators.
The ultimate question is whether publications such as Sports Illustrated are in fact dumping and in so doing bleeding the Canadian periodical advertising market dry. To effectively determine if split run periodicals dump their product on the Canadian market, we should examine the fees charged for advertising and
compare them to a competitor or another publication with similar numbers or readership.
I will use readership as a quantitative measure in comparing Sports Illustrated with two other magazines simply because the same value was selected by the Canadian Magazine Publishers Association for comparing costs of advertising between publications. Sports Illustrated Canada has a readership of just over 650,000 compared with Equinox which has a readership of 783,000 and Outdoor Canada which has a readership of 621,000. The readership numbers are relatively close for those who read the three magazines and are relatively the same cross section of the populace.
Specifically Sports Illustrated charges $5,800 for a standard, full four-colour page advertisement, while Outdoor Canada and Equinox charge $4,300 and $5,500 respectively for the same standard, full four-page edition. Therefore it would seem logical, if Sports Illustrated is dumping the amount it charges, that advertisers should not only be lower but significantly lower. This, however, is not the case. It appears the opposite is true since Sports Illustrated charged more than the other two magazines for advertising space.
Even if we look at the unit costs per 1,000 copies for the same three publications after taxes, Sports Illustrated has a higher unit cost per thousand than the other two. Again, if Sports Illustrated were dumping, these costs would be significantly lower and not higher. This evidence has been seemingly overlooked or ignored by the Liberal government.
Further evidence is based on a 1983 study that the 10 most popular United States magazines in Canada commanded a collective circulation of approximately 2.8 million. Over the last 10 years the names of the magazines have changed yet the most popular U.S. magazines in Canada today have 25 per cent less circulation than their counterparts a decade ago.
Interesting enough at the same time the top 10 Canadian magazines have increased their collective circulation by almost 15 per cent. It appears that Canadian magazines are winning the battle for readers. This is happening not because of government intervention but because of the quality of articles in the magazines.
If we look at the amount of revenue generated for split run editions through advertisement, the lion's share is remaining in the hands of Canadian based magazines. Last year Sports Illustrated had six split runs that brought in ad revenues of slightly more than $1 million, which is minuscule compared to the $867 million in the Canadian magazine industry as a whole.
A final note on this issue is that Canadian magazine publishers admitted to the Standing Committee on Finance that advertising revenues in the Canadian magazine industry have increased 4 per cent over the last year despite the alleged dumping and predatory pricing of Sports Illustrated Canada that were supposed to have taken place during this time.
Moreover, the Canadian Magazine Publishers Association agreed there was no Canadian magazine in direct competition with Sports Illustrated Canada in its unique market niche for its readers. Even if there were, the Canadian competitor would survive not because of an end to split runs of a competitor but because Canadians wanted to read it and because it was quality material. In other words it would stand on its own merits. Advertisers would be attracted to certain publications for their readership and because they were Canadian or American.
The complaints of Canadian publishers are based on a much simpler concept than predatory pricing called economies of scale. To say therefore that economies of scale inevitably doom Canadian culture is to say that domestic and foreign cultural products compete strictly on price, that is Canadians do not distinguish between them on any other basis.
If there is one truth among nationalists it is that the two are not perfect substitutes. Canadian tastes are distinct and therefore indigenous production fills a need that foreign art cannot meet, in which case Canadians would be willing to pay a premium for the product. If we are not very different from the Americans, the advantage of economies of scale should be just as open to us as to them. A perfect example of this would be Hockey News , a Canadian publication running split run editions in the United States.
Should clauses 1 and 2 not be amended as we have put forward, future Canadian publications will be prevented from expanding into the United States. Not only does the bill impede the flow of imports, it also takes away any incentive for Canadian publications to grow, to expand and to take full advantage of the U.S. market. That is shameful. For this reason Motions Nos. 1 and 2 should be passed.
Bill C-103 implements a retroactive grandfathering clause as well. Clause 1 on page 6 dealing with section 39 clearly illustrates the meanspirited nature of the government in that it sets the exemption date for the legislation approximately one week before Sports Illustrated started running its northern edition. The bill therefore aims directly at disqualifying only them. This is grossly unfair and our amendment will remedy the situation by changing the enforcement date of the legislation to the day after the act is assented to.
We on this side of the House oppose the bill for the following reasons. First, Reformers do not support the notion that state sanctioned cultural protectionism is a good policy to implement. Second, Bill C-103 conjures up the view that Canadian magazines are not of sufficient quality or merit to compete with foreign
counterparts. We on this side of the House know that this is 100 per cent false. Canadians are among the best in the world. We compete through our talent and our products, not through government sanctioned protectionism.
It is clear therefore that the Reform Party cannot support the legislation without our amendments being passed. Bill C-103 represents the worst of giving special interest groups an advantage at the expense of all taxpayers who will now pay a higher price for many magazines they choose to buy.
On behalf of my constituents in Edmonton-Strathcona I thank the Liberal government for taking even more money out of their pockets.