Mr. Speaker, my remarks today will focus on Bill C-103, an act to amend the Excise Tax and the Income Tax Act. This bill's purpose is twofold: to put an end to the distribution of split run editions in Canada by imposing a tax at the rate of 80 percent of the value of all the advertisements contained in these editions and, second, strengthen section 19 of the Income Tax Act so that tax deductions for advertising in Canadian newspapers or periodicals really apply only where the advertisement is placed in newspapers and periodicals owned by Canadian interests or ones with Canadian content.
How is split run edition defined in the legislation? Split run edition of a periodical means an edition of an issue of the periodical that is distributed in Canada, in which more than 20 percent of the editorial material is the same as editorial material that appears in the original foreign issue, and which contains advertising sold in Canada.
Let us now ask ourselves what justifies the government in taking such action. Is it acting out of sudden concern for Canadian culture or is this a positive step taken by the heritage minister? No such thing. As usual, instead of acting on its own initiative, the government is merely reacting to legitimate pressure exerted by the Canadian periodical industry for many years.
In fact, after Time Warner announced its intention to print a split run edition of Sports Illustrated in Canada, the Canadian magazine publishing community reacted strongly to this announcement, especially since this would considerably reduce Time Warner's advertising expenditures, thereby draining the magazine advertising market.
The magazine industry began to exert this pressure, and sounded the alarm back in the spring of 1993. It would have been appropriate for the government to act then, since the Mulroney government had all the tools required to do so at the time. Instead, he shirked his responsibility and appointed a task force on the Canadian periodical industry. The Liberal Party, which then formed the opposition, denounced the Conservatives' failure to act regarding that issue, as well as their lack of energy in defending Canadian culture. Who would have thought that, once in office, the Liberals would do nothing in the first two years of their mandate for Canadian culture, except to sell it piece by piece on a silver platter to American interests.
In March 1994, the task force released its report. It was not until June 1995, over a year later, that the government replied to the recommendations contained in that report by tabling Bill C-103, which we are debating today. Now that we understand what brought on this legislation, let us ask this question: Why did the Canadian periodical industry object to a split-run edition of Sports Illustrated on our market? First, because the situation of the Canadian market for magazines is precarious and even fragile.
Indeed, in 1991, more than half of the 1,440 magazines sold in Canada had never generated any operating profit, while such profits for the industry as a whole stood at 2.36 per cent. To make things even worse, these operating profits were on a downward trend. From 1987 to 1991, operating profits for English language magazines went from 5.2 per cent to 2.6 per cent, while those for French language magazines went down from 8 per cent to 2.7 per
cent. In fact, the Canadian market for magazines must face the same pressures as our audio-visual industry.
The six main factors which make this industry fragile were well summarized by the task force in its report entitled A matter of Balance .
These factors are as follows: First, there is the massive penetration of imported magazines. According to the task force, foreign magazines account for 81.4 per cent of all magazines sold in newsstands, and for a little more than half of the total number of mass circulation English language magazines in Canada. As in the case of the audio-visual industry, that foreign penetration is mostly of American origin. For example, English language foreign magazines sold in Canada total close to 236 million copies, of which 233 million come from the United States. Therefore, Canada annually imports 25 times more magazines from the U.S. than it exports.
Second, because of Canada's relatively small population and the fact that it is split into two different linguistic groups, the potential number of readers here is only one tenth of that in the United States. This severely limits the potential circulation of our magazines, as well as the revenues which can be generated from advertising.
Third, Canadians are interested in foreign cultural products and are therefore avid readers of American magazines.
The fourth factor is the price of imported magazines compared to Canadian ones, which have to try to be competitive. However, it must be recognized that foreign magazines, which have a greater potential number of readers, generate more advertising revenues and, consequently, produce magazines which may be more appealing and which are certainly cheaper.
Fifth, competition by foreign magazines at the newsstand. Over 81 per cent of English magazines which can be found in newsstands are imported from the United States. I believe that magazine subscriptions depend, to a large extent, on the visibility of the magazine at the newsstand.
Sixth, the ban on tobacco advertising in Canada was very costly for Canadian magazines, depriving them of at least $10 million in revenues, based on statistics for the last year when advertising was allowed. Meanwhile, this type of advertising was still allowed in the United States earning American magazines $224 million in 1992. Obviously, such an injection of money makes it possible to sell the product much cheaper.
To protect the magazine industry, Canada took measures which, for years, satisfied the industry. The first one was the postal subsidy, which is 100 years old and which I will come back to later. The second one is section 19 of the Income Tax Act, which allows taxpayers to be granted a tax deduction if they advertise in a Canadian magazine defined as being 75 per cent Canadian owned with 80 per cent Canadian editorial content.
However, this measure is affected by the bill before us which is aimed at tightening this provision, following a recommendation to this effect by the task force. A number of witnesses reported that Taxation Canada was lax in controlling the application of this provision. Several taxpayers are said to have claimed advertisements in magazines which did not meet either of the above mentioned section 19 criteria.
The third measure is Canadian custom tariff 9958 preventing split run editions from entering Canada. Spilt run magazines printed outside Canada were not allowed in. For thirty years, this legislation kept them from entering Canada, but Sports Illustrated , using technology, outsmarted Canada in its efforts to protect its periodical industry, transmitting via satellite the American content of the magazine to be printed in Canada.
The bill before us today redresses this situation. If it passes, which remains to be seen, the distribution of split run editions will be banned or those involved will have to pay an 80 per cent excise tax on advertising revenues derived from this transaction.
Without the prospect of earning a lot of money at the expense of Canadian culture, Sports Illustrated should disappear soon.
The Bloc Quebecois agrees with the last two measures the government is proposing in the bill we are debating today, that is the tax and the limited application of section 19 of the Income Tax Act.
We will support the government in its efforts to abolish this loophole which allowed Sports Illustrated to squeeze out of Canadian magazines 250,000 dollars' worth of advertising for each issue published.
However, we feel that the government is stopping half way. The task force did recommend other measures to support the Canadian magazine industry. We would like the government to follow up on these recommendations as soon as possible.
Let us come back for a few minutes to the postal subsidies program. Created more than a hundred years ago, this assistance program is really useful for readers. It allows all Canadians to receive magazines, books and newspapers through the mail since it helps pay for the real cost of transporting such reading material. Not so long ago, that program's budget was $220 million a year.
At the beginning of the eighties, the government and the Magazine Association of Canada began negotiating the updating of that program. They even agreed on a replacement formula. But then the federal government decided to make some arbitrary cuts. The replacement program was never implemented. Nonetheless,
the resource envelope of postal subsidies will decrease from its 1990 level of $220 million to $50 million in 1996-1997.
In its report, the task force wrote this about postal subsidies, and I quote: "The viability of the Canadian magazine and periodical industry depends heavily on the postal subsidy. Canadian newsstands, particularly in the English language market, are dominated by foreign publications: only 18.6 per cent of the English language consumer magazines sold at newsstands are Canadian. The task force strongly urges the government to recognize the vital importance of this program to the industry and to preserve it for future years".
The Bloc Quebecois invites the government to follow up on the task force recommendation to freeze funds for the postal subsidy program at the level they were in 1995.
The task force on periodicals put forward another measure on which the government remains surprisingly silent: the abolition of the GST on all reading materials. The task force wrote in its report, and I quote: "The government should give serious consideration to eliminating any sales tax on reading materials in any new tax regime that includes exemptions".
This tax must be eliminated for several reasons. First, it was a Liberal promise. In March 1994, Carol Martin, a reporter, wrote in The Canadian Forum about the magazine situation. He was reminding us that the Liberal caucus had adopted the following resolution, and I quote:
"A Liberal government would reaffirm the historical principles embodied in tax free stages for the printed word and remove the goods and services tax, GST, on reading materials".
According to the Magazine Association of Canada, 50 million U.S. copies will not pay the GST and thus enjoy an undue advantage of 7 per cent over their Canadian counterparts.
The subscription loss due to the introduction of the GST is another reason for eliminating this tax. The Canadian magazine industry had predicted that it would lose one percentage point of subscribers for each tax point that was introduced. Unfortunately, the facts proved it was right. During the first year of the GST implementation, the subscriber rate fell 6 per cent.
Finally, among the G-7 partners, Canada holds, with Germany, the sad record of the highest tax on any reading material.
Another recommendation by the task force deserves consideration, and the Bloc Quebecois urges the government to implement it as soon as possible, given its financial situation. Here it is: "That the federal and provincial governments, their agencies and corporations, make every effort to support the Canadian magazine industry by placing magazine or periodical advertisements directed at the Canadian market in a way that is consistent with federal government policy regarding Canadian periodical publishing".
That recommendation is all the more meaningful when we realize that the Canadian government is one of the 30 biggest advertisement buyers in Time Magazine , a grandfathered split run periodical. Through its action, the government undermines its own directives concerning advertisements in foreign magazines.
Finally, the Bloc Quebecois would have liked the Minister of Canadian Heritage to draw a lesson from his last two years' experience and swiftly implement the following recommendation made by the task force: "That the Investment Canada Act be amended to provide that, when the Minister responsible for that Act issues an opinion or takes any step or makes any recommendation in connection with matters relating to Canada's heritage or national identity concerning magazines or periodicals and the applicability of the Investment Canada Act, he or she do so with the concurrence of the Minister of Canadian Heritage".
It is indeed surprising that the bill before us today remains silent on this crucial point for the heritage department, all the more so because that recommendation was not included in the report by accident. Here, in fact, is the underlying anecdote.
In March 1993, when Time Warner thought about launching a split run edition of Sports Illustrated in Canada, they went to see Investment Canada. Time Warner wanted to know if Investment Canada would consider the coming of the split run edition of Sports Illustrated magazine as a new business and, in that case, subject to an investigation, or if instead it would consider it simply as the continuance of Time Warner's activities in Canada. At the time, Investment Canada informed Time Warner that it considered the coming of Sports Illustrated as the continuance of Time Warner's activities in Canada.
When Canadian magazines owners heard that Investment Canada had given its approval to the coming of a split run edition of Sports Illustrated , they naturally went to the minister who was supposed to be their natural defender, the Minister of Communications. However, nobody in the communications department was aware of the authorization given to Time Warner by Investment Canada, neither the minister nor the deputy minister.
Now I would like to let the members of the task force speak, since they reflect my way of thinking and that of the Bloc Quebecois. I quote: "Indeed, the Task Force considers it essential that the Minister responsible for the Investment Canada Act obtain the concurrence of the Minister of Canadian Heritage before issuing an opinion on the applicability or non-applicability of the
Act or taking any other step related to a proposed investment in the magazine or periodical publishing and distribution sector".
By the way, I would like to take this first opportunity I get to remind the minister that we are still waiting for the government publishing policy he promised us following the Ginn Publishing incident. Now, our neighbours to the South, through their trade secretary, Mickey Kantor, have reacted to this bill now before the House. The Canadian government which has always been very impressed by this U.S. spokesperson until now, must not give in this time. We must see the process through and see to it that this bill is given assent.
If the government does not put an end right now to these split runs like Sports Illustrated , if it does not set Time Warner straight right now, the task force on the Canadian magazine industry believes that, first, 94 per cent of all profitable magazines would move to zero operating profit; second, the viability of the Canadian periodical publishing industry would be at risk; and third, as the task force put it, and I quote: ``The Canadian magazine industry would be seriously hurt by the entry of split-runs, and its important contribution to Canadian communication and cultural development would be diminished''.
I am worried. I am afraid that the government will backtrack and I even doubt whether it will go through with this bill.
In the last few years, in culture, the Canadian government has shown so many times that it was putty in the hands of the United States that I fear the worst.
On September 15, at the Canadian Conference of the Arts held in Toronto, the heritage minister gave a so-called major speech on culture before an attentive audience. However, during his speech, he barely mentioned this bill which is one of the most important cultural initiatives undertaken by his government since it came into office. I have carefully read and reread his speech, from beginning to end. I would like to say a few words about that speech to you and to those who are listening today because the truth has to be told about the Liberals who were very quick to criticize when they were in opposition, but who have become a very passive and wait-and-see government. There is a clear lack of leadership from this government, particularly in the area of culture.
Two aspects of the minister's speech captured my attention. First, the Minister of Canadian Heritage shared his feelings about our neighbours to the south. He reminded us, among other things, that, for many Americans, the word culture has no particular meaning, that it is only the forces of the products and of the entertainment industry that count.
Concerning the information highway, the minister said, and I quote: "We certainly have to keep in mind that the United States have already indicated, in international negotiations or through retaliation measures, their intention to limit the development of our Canadian cultural policy." Continuing his overview of our cultural policy, he then talked about the film and video sector. On that subject, he accused previous governments of not having done enough in this area. He said, and I quote: "Today, a large part of this sector is owned by foreign interests and most of the revenues from this sector leave the country."
He added: "As for our relationship with the American film industry, it is a different story. You are all aware of the American presence in our movie theatres and in our video market and you are also aware of the unsolved problem with regard to film distribution-We want a film industry that is truly Canadian- This requires fundamental changes in the American mentality and in the way Americans do business. They should stop considering Canada as being part of the American market. They know better than anyone how to finance new productions through the marketing of commercial rights. They also know that our ability to do the same is limited by the lack of a level playing field."
To conclude his thoughts about the United States, the minister said that he hopes, one day, to share the opinion and the optimism of Robert Lantos, president of Alliance Communications, who said at the Montreal World Film Festival that he sees encouraging signs on the Hollywood hills.
In view of these signs, the Minister of Canadian Heritage is considering including in our film policy measures that will improve our position vis-à-vis the Americans. He will contemplate the opportunity. With such an hypothetical political will, you will understand that the minister did not succeed in alleviating my concerns regarding the American invasion of the Canadian cultural field.
Finally, there is a last element of the minister's statement to which I would like to draw your attention. The minister quoted the red book where culture is defined in these words: "Culture embraces our shared perceptions and beliefs, common experiences and values, and diverse linguistic and cultural identities: everything that makes us uniquely Canadian. Culture is the very essence of national identity, the bedrock of national sovereignty and national pride. At a time when globalization and the information and communications revolution are erasing national borders, Canada needs more than ever to commit itself to cultural development.
Those are the fundamentals of the debate that is presently going on in Canada. In Canada, the minister speaks of Canadian culture, and that is only natural. In Quebec, there is a Quebecois culture which is just as normal and legitimate. If I take the definition of culture provided by the minister and apply it to Quebec, here is what I end up with: The Quebec culture is the sum of various artistic, linguistic and religious expressions and of the intellectual and moral values of the country which we will create on October 30, culture being what makes us different from other countries. Culture is the very essence of Quebec's national identity. Culture is
the very basis of sovereignty and pride in the country that is Quebec.
For me, there is not even the shadow of a doubt. The land north of the 45th parallel which extends from the Atlantic to the Pacific to the Arctic is composed of two countries. One has ties to the English culture and the other to the French.
In 1982, the Canadian portion outside Quebec became separatist. The constitution was unilaterally patriated and signed without the consent of Quebec. Since then, the people of Quebec have come to realize and understand fully that there is now only one founding people in this country-anglophones-and consequently, only one culture-the Canadian culture-enriched, of course, by the positive and remarkable contributions of all ethnic groups in Canada. In its very essence and uniqueness, the Canadian culture denies the Quebec culture.
The people of Quebec do not see themselves reflected in Canada's artistic, linguistic, religious, intellectual and moral expressions. The people of Quebec form a distinct society. The people of Quebec know they are different. The people of Quebec know that they must express this difference on October 30.