Mr. Speaker, the United States has an advantage. It does not need paid lobbyists. It has 52 members of the Reform Party lobbying on its behalf.
Bill C-103 is an act to defend the Canadian magazine industry and to support the government's longstanding policy on periodical publishing.
The threat is split runs, a tariff dodge aimed directly at the lifeblood of the Canadian magazine industry: its Canadian advertising base. Reports commissioned by the task force inform us that this tactic, if left unchecked, could consume as much as 40 per cent of total Canadian magazine advertising revenues, devastating the Canadian industry.
Successive Canadian governments have had a longstanding history of implementing structural measures which provide support to the Canadian magazine industry. These measures have helped the Canadian periodical industry to survive in a challenging and difficult environment.
The importance of Canadian periodicals has long been recognized. Thirty years ago the O'Leary Royal Commission on Publications observed that Canadian magazines provide the critical analysis, informed discourse and dialogue which are an indispensable part of Canadian society.
The O'Leary report on the role of publications had a mandate of finding ways of furthering the development of the Canadian identity through a genuinely Canadian periodical press. The recommendations of this report have formed the basis of federal periodical publishing policy.
As this commission pointed out in its 1961 report, the larger a periodical's circulation, the more advertising it can attract and the greater its advertising revenue. The more it can afford to spend on editorial content, the better are its chances of obtaining more circulation. In other words, advertising dollars are the key element which determines the business success of a periodical.
The O'Leary Report recommended that the Canadian periodical industry be supported by measures which would channel Canadian advertising revenues to Canadian magazines.
Two policy measures were introduced in 1965 which were designed to channel Canadian advertising revenues to Canadian magazines: section 19 of the Income Tax Act and customs tariff 9958. Section 19 of the Income Tax Act limits tax deductions of advertising expenditures to advertisements placed in Canadian magazines for advertisements directed at the Canadian market. Customs tariff 9958 prohibits the fiscal importation into Canada of split runs or special editions of periodicals with editorial content substantially the same as the original edition except for the advertising which has been purchased especially to reach a Canadian audience. These two measures created a positive environment for Canadian magazines.
Customs tariff 9958 proved to be an effective way to prevent the distribution of split run editions. However, technological progress has forced the government to review the effectiveness of code 9958 which had well served the industry for more than 30 years.
In particular, technology now permits to evade the spirit of custom tariff 9958 and the objective of the federal policy regarding periodicals.
In January 1993 Sports Illustrated announced plans for a Canadian edition to be printed in Canada which would contain advertisements directed at Canadians. Sports Illustrated Canada is printed in Canada from texts electronically transmitted from the United States. Canadian ads are then substituted for American ads and some Canadian editorial content is added, thereby bypassing the border controls provided for with the customs tariff code.
As a result it became apparent the policy measures the government currently has in place could no longer fulfil their role.
On March 26 1993, the government announced the creation of the task force on the Canadian periodicals industry. The act to amend the Excise Tax Act and the Income Tax Act implements the main recommendation contained in the report of the task force. The excise tax on split run editions of periodicals distributed in Canada will eliminate the loophole used by Sports Illustrated Canada .
Amendments proposed to the Excise Tax Act would impose a tax equal to 80 per cent of the value of all the advertisements contained in the Canadian split run edition.
Bill C-103 gives the following definition of a split run edition: An edition distributed in Canada in which 20 per cent or more of the editorial material does not originate in Canada and that contains one or more advertisement destined to Canadians.
This tax will maintain the long standing governmental policy regarding periodicals. It shows the will of the government to support the preservation in Canada of an industry that is original, viable and dynamic.
Each member of the House can choose to support the bill, supporting the livelihoods of over 6,000 Canadians employed in the domestic magazine industry while at the same time keeping news stands well stocked with a broad choice of periodicals for the Canadian reader.