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THEDEDUCTIBILITYOFFOREIGNINTERNETADVERTISING
PeterMiller,P.Eng.,LL.B.
DavidKeeble,B.A.,B.Mus.
January2017 – Final Edition
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PRÉCIS
Thethesisofthispaper1isthatadvertisingpurchasedonforeigninternet-deliveredmediathatactasbroadcastandnewspaperservices2shouldnotcontinuetobedeemedadeductibleexpenseundertheCanadianIncomeTaxAct(ITA).
Startinginthe1960s,thefederalgovernmentintroducedanumberofamendmentstotheIncomeTaxAct(section19)toeliminateorlimitthedeductibilityofadvertisingexpensesonforeignnewspapers,periodicalsandbroadcasters,henceprovidingamaterialincentiveforadvertiserstochooseCanadianalternatives.ThepurposeoftheseprovisionsoftheITAissocioeconomic-toprotectCanadianmediafromunfaircompetitionfromforeignmedia,preserveCanadianjobsandvoices,andkeepCanadianmediaCanadian.
Asitstands,theCanadaRevenueAgency(CRA)allowsfulltaxdeductibilityofadvertisingexpensesonforeigninternet-deliveredmedia.CRA’sinterpretationoftheITAinthisrespecthasnotbeenupdatedsince1996,anditisbasedon(a)caselawpriortothatdate(someofitfromasearlyas1935)and(b)definitionsof“newspaper”and“broadcasting”thatdonotreflectdevelopmentsintheseon-linemediasince1996.
Thispapertakesthepositionthatitistimetoconsidernewdevelopmentsanddefinitions,andworkfromanewinterpretationreflectingcurrentinternetrealities.Suchrealitiesinclude,first,thelegalinferencethatmuchifnotmostinternetadvertisingbyCanadiansisonmediathatare,byreasonablecurrentdefinition,foreignbroadcastandnewspaperservicesand,second,thepolicyconsequenceofthedirectanddemonstrablenegativeimpactthisdiversionofadvertisingrevenueishavingonCanadianowned-and-controlledbroadcastersandprintmedia.
AnewinterpretationneednotrequireamendmenttotheIncomeTaxAct.
Thebasiclegalreasoningofthepaperis:
1. TheIncomeTaxActstatesthat“nodeductionshallbemadefor…anadvertisementdirectedprimarilytoamarketinCanadaandbroadcastbyaforeignbroadcastingundertaking”,definedthereinas“anetworkoperationorbroadcastingtransmittingundertakinglocatedoutsideCanada”.
2. TheCRTC’soriginalNewMediaExemptionOrder(1999)(nowcalledtheExemptionOrderforDigitalMediaBroadcastingUndertakings)establishedthatmostinternet-deliveredmediaarebroadcastingundertakings,specifically,“digitalmediabroadcastingundertakings”(DMBU),basedonthedefinitionof“broadcasting”intheBroadcastingAct.
a. Someservicesareexcluded–e.g.thosewhosecontentis“stillimagesconsistingpredominantlyofalphanumerictext”–butmostofthesignificantadvertisingcarriersareDMBUs.
b. The1999CRTCdecisionalsoruledthatdeliveringcontentovertheinternetis“transmission”withinthemeaningoftheBroadcastingAct,andthereforeitfollowsthat“broadcastingtransmittingundertaking”,thetermusedintheITA,isincludedinthetermDMBU.
3. Therefore,foreignDMBUsare“foreignbroadcastingundertakings”forthepurposesoftheIncomeTaxAct,andadvertisementsplacedwithforeignDMBUsdirectedprimarilytoamarketinCanadaarenotdeductibleexpenses.
1TheAuthorsacknowledgewithappreciationthefinancialsupportofFriendsofCanadianBroadcastinginthepreparationofthisPaper.2Specificexamplesarediscussedbelow.
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4. TheIncomeTaxAct(ITA)alsoestablishesthatadvertisinginforeignnewspapersisnotdeductible.TheCRA’sreferencedefinitionof“newspaper”(itisnotdefinedintheITA)doesnotdealexplicitlywiththequestionofinternetdelivery.
5. Accordingly,theneedforanewinterpretationofthedefinitionofnewspaperandperiodicalisproposedhere,reflectingthecurrentrealitythatthesemediaaredeliveredovertheinternetaswellasthroughphysicalmeans.Anewinterpretationisjustifiedandnecessarybecause:
a. CRA’scurrentinterpretationof“newspaper”undertheITAisalsonotbasedondefinitionsderivedfromlegislation,butratheronWebster’sDictionaryasitwasin1996.
b. CRA’sinterpretationalsoappliesonlyto“websites”astheyexistedin1996,nottothecurrentrealityofmediadelivery.
c. Mostadvertisershavealreadysubstitutedplacementoninternetmediaforthephysicalforms,showingthattheyarefunctionallythesame.
Thebasicpolicyreasoningofthepaperis:
1. TheoriginalpolicyrationalebehindtheadvertisingtaxdeductibilityprovisionsoftheITAremainsequallyasrelevant,ifnotmorerelevant,withregardtointernetmedia.
2. AswasthecasewithborderTVandradiostationsandforeignnewspaperstargetingCanadians,foreigninternetmediaoperateinCanadawithminimalinvestmentinCanadianjobs,infrastructure,andCanadiancontent.WhileforeignservicesmayprovideaccesstoCanadiancreators,allowingtaxdeductibilityforspendingonsuchentitiesresultsinunfaircompetitionwithCanadianequivalentsandlostrevenuesandjobs,aswellaslossesofCanadianprogrammingandnews.
3. InthetwodecadessinceCRA’scurrentinterpretationoftheITA,internetadvertisinghasrisenfromaninconsequentialvolumeandpercentageofoverallCanadianadvertisingtomorethan$4.6billionin2015–orwelloverathirdofallCanadianadvertisingrevenues.Almost90%ofCanadianinternetadvertisingaccruestoforeign-ownedinternetsitesandplatforms,withasignificantmajorityofrevenuesgoingtotopUS-ownedinternetplatformssuchasGoogle,YouTubeandFacebook.
4. Whenbroadcastadvertisingdeductibilityruleswereintroducedin1976throughBill-C-58(section19.1oftheITA),USBorderTVstationswereestimatedtobedrawing$10millionannuallyfromtotalCanadiantelevisionadvertisingspendingof$100millionatthetime.
5. Ifthis10%losswasconsideredaseriousproblemin1976,today’sone-thirdlossshouldbeconsideredanationalmediacrisis.
6. TheeconomicchallengescurrentlyfacingCanadianbroadcastersandnewspapers,andtheconsequentialcutstolocalnewscoverage,inparticular,suggestthatCanadianlocalmediaisindeedincrisis.
7. ThereisadirectcorrelationbetweenlossesinCanadianmediaadvertisingrevenueandgainsinforeign-basedinternetmediaadvertisingrevenue.EnforcingcurrentadvertisingtaxdeductibilityprovisionsoftheITAwithrespecttoforeign-basedinternetmediawouldhelpreversethistrend.
8. Inaddition,atatimeoflimitedgrowthintheCanadianeconomy,therewouldbeanetfiscalbenefitintermsofincreasedtaxrevenues,totheextentthatCanadianadvertiserscontinuedtoadvertiseonforeign-basedinternetmedia,despitethelackofataxdeduction.
Thesuggestedre-interpretationoftheadvertisingtaxdeductibilityprovisionsoftheITAwouldresultinontheorderof50%-80%ofcurrentinternetadvertisingexpendituresbeingdeemednon-deductible.
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Conservativelyestimatingthat10%ofthesenownon-deductibleforeigninternetadvertisingexpendituresshiftbacktoCanadianmedia,thiswouldrepresentaninfluxof$250to$450millionannuallyinincrementaladvertisingrevenueforaCanadianmediasectorthatisunderseriousthreat.
FortheCanadiangovernment,re-interpretingS.19oftheITAassuggestedwouldalsobringdemonstrablefiscalbenefits.
Asat2016,asmuchas$4.4billioninadvertisingexpenditureswouldnolongerbetaxdeductible–representingapotentialgainincorporatetaxpayableof$1.15billion.Amassivepolicyproblem(thelossoflocalmedia&andnews)couldbesolvedinawaythatactuallysavedgovernmentmoney.
ApolicydecisiontoamendtheadvertisingtaxdeductibilityprovisionsoftheITAtoapplytoallforeigninternetmedia,whetherdeemedbroadcast,printornot,mayalsobeworthyofconsideration.Weresuchadecisiontobemadebygovernment,theincrementalbenefittoCanadianmediacouldrepresentontheorderof$500millionannually,andthefiscalbenefitasmuchas$1.3billion.
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TABLEOFCONTENTS
Précis........................................................................................................................................................2
TableofContents..................................................................................................................................5
ThePolicyRationale...........................................................................................................................6
TheIncomeTaxAct..............................................................................................................................9
InterpretationoftheIncomeTaxAct..........................................................................................10
Definitionof“Broadcasting”...........................................................................................................11BroadcastingPublicNoticeCRTC1999-84(DMEO)...................................................................................11Transmission..........................................................................................................................................12Program.................................................................................................................................................12ReceptionbythePublic..........................................................................................................................13BroadcastReceivingApparatus..............................................................................................................14“PublicPlace”andotherExclusionsfromtheDefinition........................................................................14
Determinationof“foreign”.............................................................................................................14TargetedtoaCanadianMarket.................................................................................................................16
DefinitionofNewspaperandPeriodical....................................................................................17
Application&Implementation......................................................................................................18TradeIssues...............................................................................................................................................18DeductibilityofSpecificSitesandServices................................................................................................19YouTube..................................................................................................................................................20Facebook................................................................................................................................................20GoogleSearch........................................................................................................................................21MusicStreamingServices.......................................................................................................................22Magazines..............................................................................................................................................22
Conclusion............................................................................................................................................23
AppendixA–Section19oftheIncomeTaxAct(current)....................................................25
AppendixB–The1996InterpretationDocument.................................................................31
AppendixC–ExcerptsFromBroadcastingPublicNoticeCRTC1999-84/TelecomPublicNoticeCRTC99-14Ottawa,17May1999.....................................................................33
AppendixD-McCarthyTétraultAnalysis,19.1.......................................................................36
AppendixE-McCarthyTétraultAnalysis,19...........................................................................37
AppendixF-AbouttheAuthors....................................................................................................43
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THEPOLICYRATIONALE
ThepurposeoftheadvertisingdeductibilityprovisionsoftheITAistoprotectCanadianmediafromunfaircompetitionfromforeignmedia,andtherebypreserveCanadianjobsandvoices.Theydothisbylimitingoreliminatingthedeductibilityofadvertisingexpensesonforeignnewspapers,periodicalsandbroadcasters,henceprovidingamaterialincentiveforadvertiserstochooseCanadianalternatives.
Inthe1960sand70s,USborderTV&andradiostations,aswellasAmericannewspapersandmagazines,cametorealizethattheycouldlucrativelytargettheCanadianmarketwithzerotominimalincrementalinvestmentincontentandinfrastructure.
TVandradiostationsinmarketslikeBuffaloandRochester,NewYork,Bellingham,WashingtonandBurlington,VermontstartedtoselladvertisinginneighbouringmajorCanadianmarketssuchasToronto,Vancouver,andMontreal,undercuttingCanadianstations,withnoincrementalinvestmentotherthanthecostofsales.Bythetimebroadcastadvertisingdeductibilityruleswereintroducedin1976throughBill-C-58(section19.1oftheITA),USBorderTVstationswereestimatedtobedrawing$10millionannuallyfromathentotalCanadianTVadvertisingspendof$100million.3
Similareffectsweresufferedbyprintmedia,resultingin,amongotherthings,Ottawa’seffortstoshutdownTimeMagazine’s“splitrun”–whereintheUSversionofthemagazinewasreprintedandredistributedinCanadawithCanadianadvertisements.4NotethatnoneofthesepolicyeffortswereaimedatdenyingforeignmediaaccesstotheCanadianmarket;theyweremerelyaimedataddressingtheunfaircompetitionthatarosefromforeignmediacompetingdirectlywithCanadianmediaforadvertisingrevenue,withoutthesameinvestmentinCanadianjobsandinfrastructure,oritsculturalanddemocraticvalue.Essentially,theconceptof‘dumping’,historicallyappliedinthecaseofgoodssoldinCanadaforlessthantheirtruecost,foundparallelsinadvertisingontelevisionandprintintellectualproperty,wheretheincrementalcostsofprovidingcontentinCanada,andsellingadvertisingonitdirectedtoCanadians,wasalmostnil.TheadvertisingdeductibilityprovisionswereintroducedasafocusedmeasuretoprotectandadvanceCanada’seconomic,culturalanddemocraticinterests.Whilenotexplicitlystated,intheabsenceofprovisionstothecontrary,itmustbeassumedthatthislegislationwasintendedtobetechnology-neutral.5
3ValueofPublicSupportforBroadcasters–SimultaneousSubstitutionandTax-basedAdvertisingIncentive,Nordicity,November4,2011.http://www.cbc.radio-canada.ca/_files/cbcrc/documents/latest-studies/nordicity-value-public-support-en.pdf4See,forexample,McCarthyTétraultAnalysis,atAppendixE:‘Thepurposeofsection19wassocioeconomicratherthanfiscalinnature.Itsoriginalobjectivesweretwofold:toplaceacurbonadvertisingbyCanadiantaxpayersinnon-CanadiannewspapersandperiodicalsaimedatCanadianmarketsvia“splitruns”(apracticewhichplacesCanadianpublicationsatacompetitivedisadvantage)andtoremovethelikelihoodofthecontrolovernewspapersandperiodicalspublishedinCanadafallingintoforeignhands(asituationconsideredprejudicialtoCanada'snationalinterests).’5Theso-calledSupremeCourt“copyrightpentalogy”–fivecopyrightjudgmentsreleasedconcurrentlybytheCourtinJuly2012–confirmedtheimportanceaccordedbytheCourttotheprincipleoftechnologicalneutrality.Seeforexample,EntertainmentSoftwareAssociationv.SocietyofComposers,AuthorsandMusicPublishersofCanada,2012SCC34,[2012]2SCR231,wherethecourtstatesatpara9:
“SOCANhasneverbeenabletochargeroyaltiesforcopiesofvideogamesstoredoncartridgesordiscs,andboughtinastoreorshippedbymail.YetitarguesthatidenticalcopiesofthegamessoldanddeliveredovertheInternetaresubjecttobothafeeforreproducingthe
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In1996,giventhestateoftheinternetatthattime,theCRAdeterminedthatforeignwebsitescouldnotbeconsideredforeignnewspapersorbroadcasters,andthereforeallowedfulltaxdeductibilityofadvertisingexpensesonsuchsites.
InthetwodecadessinceCRA’sinterpretation,theinternethasemergedasadirectandmaterialcompetitortotraditionalprintandbroadcastingmedia,aswellasanaggregatoranddistributerofthem.
InternetadvertisinghasrisenfromaninconsequentialvolumeandpercentageofoverallCanadianadvertisingtomorethan$4.6billionin2015,orwelloverathirdofallCanadianadvertisingrevenues.In2016,Canadianinternetadvertisingrevenueisprojectedtoincrease21%to$5.55billion.Double-digitpercentageincreaseshavebeenthenormfortwodecades,withlittleindicationtheyareabouttoend.6
Meanwhile,asoverallCanadianadvertisingspendingtrackstheeconomyatarelativelyfixedratio,7thegrowthoftraditionalmediahasstalledandcollapsed.Printwasthefirsttraditionalmediasegmenttosuffer,giventhatthefirstwaveoftheinternetconsistedprimarilyofalphanumericandstaticimages,withadvertising(searchandclassifieds)competingdirectlywithnewspapers.NewspaperadvertisingpeakedinCanadaat$2.66billionin2005andhasdeclinedtounder$1.3billiontoday.8
Televisionwasthesecondtraditionalmediasegmenttosuffer,withprivateover-the-airtelevisionrevenuedecliningfromapeakof$2.14billionin2011to$1.76billionin2015,andspecialtytelevisionstartingtoshowadvertisingrevenuedeclinesasof2014.9Inaggregate,CanadianTVadvertisingrevenuepeakedat$3.55billionin2011anddeclinedto$3.22billionin2015.10TheseadvertisingrevenuedeclinesarenowaccompaniedbydeclinesinsubscriptionrevenueasOver-the-Top(OTT)televisionserviceslikeNetflixincreasetheirpenetration.ThesetrendsreducethecapacityofthebroadcastingsystemtosupportCanadiancontent.11
Radioisthemostrecenttraditionalmediasegmenttoseeevidenceofthisimpact.TheCRTCreportsasmalladvertisingrevenuedecline,fromapeakof$1.62billionin2013to$1.60billionin2015.12.Goingforward,thegrowthofstreamingaudio,growthofmobileadvertising,smartphoneusageandtheconnectedcarareexpectedtoincreasedownwardpressureonradioadvertising.
Until2016,theCanadianInternetAdvertisingBureau(IAB)publishedacompellinggraphthattrackedtheyear-over-yeartrendamongmajormedia.Startingin2016,dataforonlyInternetandTVadvertisingwerepublished.Thefollowingisfromthe2015andSeptember2016IABReports:
workandafeeforcommunicatingthework.Theprincipleoftechnologicalneutralityrequiresthat,absentevidenceofParliamentaryintenttothecontrary,weinterprettheCopyrightActinawaythatavoidsimposinganadditionallayerofprotectionsandfeesbasedsolelyonthemethodofdeliveryoftheworktotheenduser.Todootherwisewouldeffectivelyimposeagratuitouscostfortheuseofmoreefficient,Internet-basedtechnologies.”
6DatafromtheInternetAdvertisingBureau(Canada)(IAB)AnnualInternetAdvertisingRevenueReport,2016.September8,2016(IABReport).Currentgrowthislargelydrivenbymobile,whichgrew70%in2015,asopposedto3%foronline.Mobilehasgrownfroma3%shareofInternetrevenuesin2011toa35%sharein2015.7Aratiothathasneverthelessdeclinedoverthelastthreedecades.See,forexample,ProgressAmidDigitalTransformation,ScotiabankEquityResearch,November,2013.p.18.8IAB2015Report&industryfigures.9CRTCstatisticalsummaries.Specialtyservicenationaladvertisingrevenuedeclinedfrom$1.27billionin2013to$1.2in2015.10IAB2012&2106Reports.11Seeforexample,CanadianTelevision2020:TechnologicalandRegulatoryImpacts,PeterMiller&Nordicity,January2016.12CRTCstatisticalsummaries.
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Thedeclineoftraditionalmediaadvertisinginfavouroftheinternetmightnotbeoftaxpolicyconcern,butforatroublingeconomicreality.13
Almost90%ofCanadianinternetadvertisingaccruestoforeigninternetsitesandplatforms,withtwothirdsofexpendituresgoingtotopUS-ownedinternetplatformsGoogleandFacebook.14
ThereasonisnotafailureonthepartofCanadianmediatotransitiontotheinternetage,ortomeetCanadians’needs.Thereason,adaptingthewellknowntradeterm,isthe‘dumping’ofadvertisinginventoryintothe
13ThedeclineofCanadiannewsmediahasbeencalledacrisis.Suchacrisismeritsapolicyresponse.WhiletheCRTChasmadesomemovestosupportprivatelocalTV,thisisseenasaninterimfixatbest,andinanyevent,doesnotaddressprintmedia.ForfurtherbackgroundonthestateofCanada’snewsmedia,seeMediaMath:Democracy,NewsandPublicPolicyinCanada,June19,2016,Canada’sPublicPolicyForumandNearTermProspectsForLocalTVinCanada,PeterMiller&Nordicity,November5,2015.14IABreportsthattheTop10InternetAdvertisingEarnersbringingin86%ofallCanadianinternetAdRevenuesin2015,andthetop20,90%.Thisisanincreasefromtheequivalent2009numbersof77%and87%.The2016IABReportdoesnotidentifythesecompanies,buttheyareunderstoodtobemostlyUS-ownedandcontrolled,apresumptionreflectedinviewingstats.TheCanadianMediaConcentrationProject,GrowthoftheNetworkMediaEconomyinCanada,1984-2015,identifiesGoogleandFacebookaloneasrepresenting66.5%ofinternetadvertisingrevenuesin2015;withidentifiedCanadianmediarepresenting8.2%.ThisrepresentsamaterialshiftawayfromCanadianmediainasingleyear,as2014#shad64.1%and9.9%respectively(withthelattermissingin2014amajorFrenchCanadianMediaGroup,GroupCapitalesMédia).InternetrevenuesofCanadianradioandtelevisionaregenerallynotpubliclyreported,butarebelievedtorepresentunder5%oftraditionaladvertisingrevenue.Assuminga5%level,Canadianmediawouldrepresentapproximately11%oftotalinternetadvertisingrevenueinCanada.
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Canadianmarketplacebyforeign-basedinternetconglomerates,whichdonotcontributethesamelevelofinvestment,jobsandCanadiancontentasCanadianmedia.15
ThisisexactlywhattheadvertisingdeductibilityprovisionsoftheITAweredesignedtoaddress.
Failuretoupdatetheseprovisionstoreflectcurrentreality,whileunderstandable,hasalreadycausedsignificantlossestotheCanadianeconomy,inCanadianeconomicvalue,reducedsupportforCanadiancontent,andmostalarmingly,hasreducedthecapacityofCanada’sprivatenewsmediatocoverandreportnewstoCanadians,particularlylocalnews.Continuedfailuretoupdatetheapplicationoftheseprovisionsismorethanalosteconomicopportunity.Shouldcurrenttrendscontinue,thelackofamodernizedadvertisingtaxdeductibilityregimewillcallintoquestiontheabilityofCanadianowned-and-controlledmediatoprovideevenmodestlevelsoflocalnewscoverage.TheresultwouldbethatCanadianswouldincreasinglyhavetoobtaintheirnewsfromforeignsources.Foranindependentdemocracytorelyonforeignnewssourcesfordomesticnewscoverageshouldbeunthinkable.AndwhiletheCBCcananddoesplayanincreasingroleinprovidingnewstoCanadians,lossofdiversityofCanadiannewsservicesandthenotionthatthepublicbroadcastercouldbecometheprimary,andinsomemarkets,onlyCanadiannewssource,isnotonemostCanadians(orParliamentarians)arelikelytofindacceptable.
THEINCOMETAXACT
AppendixAofthispapercontainsthefulltextofSection19.1and19.01oftheIncomeTaxAct.Therearemanydetailedprovisions,buttheessentialmeaningofthesesectionsis:
Fornewspapers,advertisingexpensesaredeductibleonlyiftheadvertisementisplacedin:
• anissuethatiseditedandpublishedinCanada,• andtypesetandprintedinCanadaortheUnitedStates,• ofanewspaperwhosepublicationrightsareownedbyaCanadiancitizen,orcorporationthatis
effectivelycontrolledbyCanadians,oritisplacedin• anissuethatispublishedlessthantwiceayear,witheditorialcontentdevotedtoCanada.
Forbroadcasting,advertisingexpensesarenotdeductibleif:
• theadvertisingisplacedina“broadcastingtransmittingundertaking”ornetwork(twoormoreundertakingswhosecontentiscontrolledbyanetworkoperator)locatedoutsideCanada,and
• theadvertisementisdirectedprimarilytoamarketinCanada.
Thequestionsraisedbytheseprovisionsare,withinthemeaningoftheIncomeTaxAct,(a)isbroadcastingstillbroadcastingwhenitistransmittedovertheinternet,and(b)isanewspaperoraperiodicalstillanewspaperorperiodicalwhenitisdeliveredovertheinternet?
15WhilesomeforeignInternetcompaniesmakeinvestmentsinCanada,thelevelofsuchinvestmentpalesincomparisontoCanadiancompanies.Forexample,Google,whichhasR&DandYouTubefacilitiesinCanada,reportedlyemploysontheorderof800Canadians.Google’sCanadianInternetadvertisingrevenuesareestimatedatover$2billionin2015–morethaneitherCanadianconventionalTVadvertising,radioadvertisingandmorethanprintadvertising.Bycontrast,CanadianconventionalTValoneemployscloseto6,000people,almosteighttimesGoogle’sestimatedCanadianemployment.(Source:CRTCStatisticalSummaries.)
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Severalsubsidiaryquestionsneedtoberaisedtodeterminethedeductibilityofanexpense,forexample,whatconstitutes“locatedoutsideCanada”,buttheprimaryquestionisoneofdefinitionofthesechangingmedia.
INTERPRETATIONOFTHEINCOMETAXACT
Sections19.1and19.01oftheIncomeTaxAct,governingbroadcastingandnewspapersrespectively,datebacktothe1960sand70s.Asrecentlyas2001,whentheITAwasamendedtoincludeSection19.01(1)(onperiodicals),internetadvertisingwasnotsignificant,andtheissueofadaptingdefinitionstoreflecttheinternetwasnotdiscussed–onlytraditionalmediawerepartofthediscussionatthattime.ItisthereforeunderstandablethattheITAdoesnotcontainclarifyingdefinitionsexplicitlyincludingorexcludinginternetactivities.
TheonlysignificantdocumentthatbearsonthequestionofadefinitionwasaletterissuedbytheIncomeTaxRulingsandInterpretationDirectorateonOctober24,1996(fulltextinAppendixB).Thiswasnotanofficialadvancerulingbutprovided“generalcomments”inresponsetoataxpayerrequestforclarification.Italsostatedthatthecommentsrepresentedacurrentpositiononlyandmightnotreflectfutureviews.
Theissuewas:“Whethersection19or19.1oftheIncomeTaxActappliestodenyadeductionforexpensesincurredbyaCanadiantaxpayertoadvertiseonaforeignownedWorldWideWebsiteontheinternet.”TheletterstatedthatSections19and19.1didnotapply,because“Awebsiteisnotanewspaper,aperiodicalorbroadcastingundertaking.”
Withinthecontextofthetime–twentyyearsago–thisinterpretationmadesense.Atypical“website”in1996didnotperformthefunctionsofprintmediaorbroadcasting.In1996,websitesgenerallycontainedcontentmadeuponlyoftextandstillimagesformattedwiththeHTMLpresentationlanguage.Consumerinternetspeedsdidnotpermitthereliabletransmissionofvideoandaudiotomostusers;thewidespreaduseofhigh-speedbroadbandinternetconnectionscamesomeyearslater.Moreover,theonlyeffectivemeansforusinginternetcontentwasthepersonalcomputer;mobilesmartphonesandtablets,whichacceleratedthepopularityofonlineperiodicalsandnewspapers,didnotyetexist.Therefore,whiletheinterpretationwasappropriatefor1996technology,itdoesnotapplytomediain2017.Eventheterm“website”isoutmoded.Itdoesnotreflectcurrentpractice,inwhichcontentisdistributedovertheinternetusingavarietyoftechnologiesandprogramlanguagesthatpermitextensiveuseofvideoandaudio,andtoawidevarietyofdevices.Whilea1996websitecouldnotprovidebroadcasting,newspapersandperiodicals,internetmediain2017can,anddo.AnewinterpretationoftheITAisrequired,onethatacknowledgesthisreality.
The1996interpretationacknowledgesthat“newspaper”wasnotdefinedintheITA.Itthereforedrawsadefinitionfromathen-currenteditionofWebster’sDictionaryandfromacourtcasedecisionwrittenin1935.Thesedefinitionswereappropriateintheirtimebutclearlycouldnotreflecttherealityof,forexample,theonlinedeliveryoftheWallStreetJournal,theNewYorkTimes,orTorontoStarToucheightdecadeslater.Thesecurrentdeliverymechanismsareunquestionablynewspapers,andarebrandedassuch–theyaredigital‘electroniceditions’,withthesamenameastheirphysicalequivalents.Theycontainthesamecontentasthephysicaleditions,adaptedtodeliveryovertheinternetandenhancedwithaudio,video,andapplications,suchaspuzzles,thatprovideuserassistanceandtheopportunitytocomment.Aninterpretationthatencompassesthesechangesisrequired.
The1996interpretationcommentsnotedthattheirdefinitionofbroadcastingwasbasedon“diversedefinitionsofwordsusedinparagraphs19.1(1)and(4)oftheAct.”Thiswasappropriate,sincenoothersourcewasreadily
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availablein1996.In1999,however,theCRTCprovidedadefinitionofbroadcastingtransmittedovertheinternetinitsNewMediaExemptionOrder16.SincetheCRTCisthebodychargedwithinterpretingthemeaningof‘broadcasting’inCanadianlaw,itsdefinitionsshouldbeusedtointerprettheIncomeTaxAct.17
DEFINITIONOF“BROADCASTING”
Thelimiteddefinitionof‘broadcasting’intheITAisappropriate,giventhattheBroadcastingAct(1991)providesadetaileddefinition,andcreatesabody–theCanadianRadio-TelevisionandTelecommunicationsCommission(CRTC)–whoseroleincludesinterpretationofthatAct.
Threeyearsafterthe1996commentscitedabove,theCRTCdealtwiththequestionofbroadcastingovertheinternet,andissuedadecisioninBroadcastingPublicNoticeCRTC1999-84(orDMEO–textoftherelevantsectioninAppendixC)inwhichtheCommissiondeterminedthatbroadcastingovertheinternetwasindeedbroadcasting,sincetheinternetrepresentedsimplyanotherformoftelecommunication:
‘TheCommissionnotesthatthedefinitionof"broadcasting"includesthetransmissionofprograms,whetherornotencrypted,byothermeansoftelecommunication.Thisdefinitionis,andwasintendedtobe,technologicallyneutral.Accordingly,themerefactthataprogramisdeliveredbymeansoftheinternet,ratherthanbymeansoftheairwavesorbyacablecompanydoesnotexcludeitfromthedefinitionof"broadcasting".’
TheCRTC’s‘technologyneutral’approachwasbaseddirectlyontheBroadcastingActandisbothaprincipleofsoundregulationandabasicprincipleofstatutoryinterpretation.ThereisnolegalbasisforCRAtoreadtheIncomeTaxActdifferently.18
TheDMEOhasbeenre-examinedseveraltimessince1996,andtheoriginaldeterminationhasstoodthetestoftime.Ithasoccasionallybeenchallenged,butnearlytwodecadeslater,andgiventhejudicialdeferencegivenitbytheCourts,thatpositionmustberegardedasthepositionoftheGovernmentofCanada,andthereforeappropriatefortheinterpretationoftheIncomeTaxAct.Indeed,thereisnocontradictionbetweenthetwoinstruments:theDMEOamplifiesthedefinitionsintheITA.
BROADCASTINGPUBLICNOTICECRTC1999-84(DMEO)
TheCommission’sdeterminationfollowsasimplelogic:
TheBroadcastingActdefines“broadcasting”asthe“transmissionofprograms,whetherornotencrypted,byradiowavesorothermeansoftelecommunicationforreceptionbythepublicbymeansofbroadcastingreceivingapparatus,butdoesnotincludeanysuchtransmissionofprogramsthatismadesolelyforperformanceordisplayinapublicplace.”
Thisdefinitioncontainsseveralelements,whicharetreatedseparatelyinthedecision:
1. Has“transmission”takenplacewhentheprogramisdeliveredovertheinternet?
16Called,atthetime,theNewMediaExemptionOrderbutnowknownastheExemptionOrderfordigitalmediabroadcastingundertakingsorDMEO.SeeBroadcastingOrderCRTC2012-409.17AlimitednumberofotherCanadianstatutes(e.g.thefederalCopyrightActortheOntarioLibelandSlanderAct)containdefinitionsofbroadcastingthatparalleltheBroadcastingActorexpandonittosuittheirpurposes,butitisreasonabletoconcludethatthelegislationthatgovernsbroadcastingshouldprovidetherulingdefinition.18Seenote5,supra.
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2. Whatmediaactivitiesconstitute“programs”,whosetransmissionisthereforebroadcasting?3. Doestheuseofprogramsdeliveredovertheinternetconstitute“receptionbythepublic”?4. Arethedevicesusedininternetreception,“broadcastingreceivingapparatus”?5. Whatisexcludedfromthedefinitionbytheprovisionabout“displayinapublicplace”?
TRANSMISSION
TheCommissionrejectedtheproposalthatnotransmissioncouldtakeplaceontheinternet,notingthattheBroadcastingActismeanttobetechnologicallyneutral.“Othermeansoftelecommunication”wouldcertainlyincludetheinternet.Noristhe“on-demand”natureofthecommunicationabarrier.
39.…Thefactthatanend-useractivatesthedeliveryofaprogramisnot,intheCommission'sview,determinative.Asdiscussedbelow,on-demanddeliveryisincludedinthedefinitionof"broadcasting"....Basedonaplainmeaningoftheword,andrecognizingtheintentthatthedefinitionbetechnologicallyneutral,theCommissionconsidersthatthedeliveryofdatasignalsfromanoriginationpoint(e.g.ahostserver)toareceptionpoint(e.g.anend-user'sapparatus)bymeansoftheinternetinvolvesthe"transmission"ofthecontent.
ThisisparticularlysignificantbecausetheITAstates:
foreignbroadcastingundertakingmeansanetworkoperationorabroadcastingtransmittingundertakinglocatedoutsideCanadaoronashiporaircraftnotregisteredinCanada;(entrepriseétrangèrederadiodiffusion)
Theuseoftheterm“transmittingundertaking”isthuscoveredbytheCommission’sdefinition.AdigitalmediabroadcastingundertakingisabroadcastingtransmittingundertakingasdescribedintheITA.
PROGRAM
Thedefinitionof“program”iskey,andresultsintheonesignificantexclusionofinternetmediafromthedefinitionof“broadcasting”.Ifwhattheinternetservicetransmitsdoesnotinclude“programs”thenitisnotbroadcasting.IntheoriginalDMEO,theCRTCsaid:
34.Theterm"program"isinturndefinedinsection2oftheActas:
soundsorvisualimages,oracombinationofsoundsandvisualimages,thatareintendedtoinform,enlightenorentertain,butdoesnotincludevisualimages,whetherornotcombinedwithsounds,thatconsistpredominantlyofalphanumerictext.
Explicitstatutoryexclusionsfromthedefinitionofbroadcasting
35.TheCommissionnotesthat,asstatedabove,muchofthecontentavailablebywayoftheinternet,Canadianorotherwise,currentlyconsistspredominantlyofalphanumerictextandisthereforeexcludedfromthedefinitionof"program".Thistypeofcontent,therefore,fallsoutsidethescopeoftheBroadcastingAct.
13
Thisdefinitionisexclusionary–“program”includeseverykindofcontentthatisnotexcluded:allsoundsandvisualimages–exceptthosethat“consistpredominantlyofalphanumerictext.”19AstheCommissionnoted,in1999agreatdealofinternetcontentconsistedpredominantlyoftext.Thatisfarlesstruetoday.Certainlyontheservicesthatattractthemostviewersandthereforeattractthemostadvertising,thereisagreatdealofaudio,video,andimagesthatarenottext.
Evenacursoryexaminationofdifferentkindsofadvertising-carryinginternetservicesavailabletodayrevealsawidespectrum–from,attheextremes,sitesthatarepredominantlyvideo,suchasYouTube,tosomeinformationalsitesthatrelyexclusivelyontext.InbetweentheseareserviceslikeGooglesearch,Facebook,Instagram,andTwitter,consistingofpostscontainingvideo,audio,non-alphanumericimagesaswellastext.Whethersuchin-betweenservicestransmit“programs”andconstitute“broadcasting”requiresamoredetailedexamination.Keycasesarediscussedbelowunder“DeductibilityofSpecificSitesandServices”.
RECEPTIONBYTHEPUBLIC
TheCRTCalsodealtwiththeargumentthatmuchinternet-transmittedcontentwasnot“forreceptionbythepublic”becauseitwasdeliveredon-demand,andwas,tosomeextent,customizable.SincetheCommissionhadbeenlicensingon-demandservicesforsometimein1999,itdidnotconsiderthataspectoftheinternettoprovidearelevantexclusion.
44.…TheCommissionnotesthatthelegislatorcouldhave,butdidnot,expresslyexcludeon-demandprogramsfromtheAct.Asnotedbyoneparty,themereabilityofanend-usertoselectcontenton-demanddoesnotbyitselfremovesuchcontentfromthedefinitionofbroadcasting.TheCommissionconsidersthatprogramsthataretransmittedtomembersofthepublicon-demandaretransmitted"forreceptionbythepublic".
45.TheCommissionconsiders,however,thatsomeinternetservicesinvolveahighdegreeof"customizable"content.Thisallowsend-userstohaveanindividualone-on-oneexperiencethroughthecreationoftheirownuniquelytailoredcontent.(emphasisadded)IntheCommission'sview,thiscontent,createdbytheend-user,wouldnotbetransmittedforreceptionbythepublic.TheCommissionthereforeconsidersthatcontentthatis"customizable"toasignificantdegreedoesnotproperlyfallwithinthedefinitionof"broadcasting"setoutintheBroadcastingAct.
46.Bycontrast,theabilitytoselect,forexample,cameraanglesorbackgroundlightingwouldnotbyitselfremoveprogramstransmittedbymeansoftheinternetfromthedefinitionof"broadcasting".TheCommissionnotesthatdigitaltelevisioncanbeexpectedtoallowthismorelimiteddegreeofcustomization.Inthesecircumstances,wheretheexperienceofend-userswiththeprograminquestionwouldbesimilar,ifnotthesame,thereisnonethelessatransmissionoftheprogramforreceptionbythepublic,and,therefore,suchcontentwouldbe"broadcasting".
Facebookandothersocialmediaprovideaninterestingexample.Whileusersdocreateor,moreusually,retransmitcontent,theindividualuserhasnotsignificantlycustomizedwhattheythemselvessee–theyhavesimplyprovided“profiles”thatarethenusedbytheapplicationtoselectandblendastreamofitemsforeachuser.Itwouldthereforeseemlikelythatthemostpopularsocialmediawouldbeincludedin“broadcasting”,at
19Thisalsomeansthatthetransmissionofstillimages,whetherornotaccompaniedbyaudioandincludinggraphicimages,constitutesabroadcastingundertaking.WhiletheCommissionhaschosentoexemptsuchundertakingsfromlicensing,thisdoesnotchangetheirlegalstatusasbroadcastingundertakings.Seehttp://www.crtc.gc.ca/eng/archive/1993/PB93-51.htm
14
leastinsomeoftheirmodesofcommunication.TheFacebook“newsfeed”and“livestreaming”shouldbeconsideredbroadcasting,while“messaging”,aformofone-to-onecommunication,wouldnotusuallybeforreceptionbythepublic,andthereforewouldnotbebroadcasting.
Whiletheremightthereforebeargumentastothedeductibilityofadvertisingplacedontheprivatecommunicationaspectofforeignsocialmediaservices,theissueislargelyacademic.Advertisingisnotgenerallyplacedin“messaging”applications.Ifprovided,itisplacedalongsidecontentthatisclearlypartofabroadcastingoffering,andisthereforenon-deductible.
BROADCASTRECEIVINGAPPARATUS
ThispartoftheAct’sdefinitionofbroadcastingisnotveryusefulsinceitisclearlyacirculardefinition,i.e.theBroadcastingActsaysthecontentisbroadcastingifit’sreceivedon“broadcastreceivingapparatus”,and“broadcastreceivingapparatus”isdefinedbyitsusetoreceive“broadcasting”.
TheCommissionthereforedeterminedthatthevariousdevicesusedtoreceivecontentfromtheinternetwere“broadcastreceivingapparatus”whentheywereusedtoreceivebroadcasting.
“PUBLICPLACE”ANDOTHEREXCLUSIONSFROMTHEDEFINITION
TheCommissionrejectedtheargumentthattheinternetwas“apublicplace”36.…inthesenseintendedbytheAct.Programsarenottransmittedtocyberspace,butthroughit,andarereceivedinaphysicalplace,e.g.inanofficeorhome.
Itconfinedtheuseofthisexceptiontonarrowcircumstances:
- 37…toaparticularservicedeliveredviatheinternetthatisaccessiblebyend-usersonlyinaterminalorkiosklocatedinapublicplace,suchasapubliclibrary.
DETERMINATIONOF“FOREIGN”
TheITAdefines“foreignbroadcastingundertaking”asanetworkoperationorabroadcastingtransmittingundertakinglocatedoutsideCanada.Theterm“locatedoutsideCanada”isnotdefinedandthereforemustbedefinedbasedonbroadercurrentandhistoriccontext.
OnequickwaytodeterminethelocationofacompanyanditsservicesistolookattheWikipediaentry–whichthecompanyitselfcouldeditifitdeemeditinaccurate.Forthemajorprovidersofinternet-deliveredadvertising,sampleresultsinclude:
GoogleisanAmericanmultinationaltechnologycompanyspecializinginInternet-relatedservicesandproductsthatincludeonlineadvertisingtechnologies,search,cloudcomputing,software,andhardware.(https://en.wikipedia.org/wiki/Google)
FacebookisanAmericanfor-profitcorporationandonlinesocialmediaandsocialnetworkingservicebasedinMenloPark,California,UnitedStates.(https://en.wikipedia.org/wiki/Facebook)
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Twitterisanonlinenewsandsocialnetworkingservicewhereuserspostandreadmessagesrestrictedto140-characters,whicharecalled"tweets".…TwitterInc.isbasedinSanFranciscoandhasmorethan25officesaroundtheworld.(https://en.wikipedia.org/wiki/Twitter)
SharesforthesecompaniestradeonNASDAQ,theNYSE,andtheHamburgstockexchange.Itisevidentthatthecommonunderstandingofthepublic,tacitlysupportedbythefirmsthemselves,isthatthesearenotCanadianentities.TheCRAcouldthereforejustifiablyuseitsdiscretiontodeemsuchglobalinternetconglomeratesas“locatedoutsideCanada”.
Amorelegalisticapproach,consistentwithhistoricinterpretations,is,however,alsoavailableandinformative.
Whenbroadcastingsolelyinvolvedovertheairtransmission,thelocationofthetransmitteralongwiththemajorityoforiginatingbroadcastingoperationseasilydefinedthelocationoftheundertaking.ThefactthataforeignbroadcastingundertakingmighthavehadsomephysicalpresenceinCanada,suchasasalesteamorevenjournalists,didnotchangethisdetermination.Theabsenceofanactualtransmitterdoesnotchangethisdeterminationeither,giventheCommission’sconclusionthatthat“thedeliveryofdatasignalsfromanoriginationpoint(e.g.ahostserver)toareceptionpoint(e.g.anend-user'sapparatus)bymeansoftheinternetinvolvesthe"transmission"ofthecontent”andthusconstitutesbroadcasting.20
TheDMEOitself,whenissued,didnotdealwithhowtodeterminewhatDMBUswereforeign.First,sinceitexemptedalldigitalmediabroadcastingundertakingsfromlicensingorregulation,whetherdomesticorforeign,nodefinitionofforeignwasrequired.Second,theBroadcastingActalreadydealswiththequestionofnationality.21
Thustheinterpretationof“locatedoutsideCanada”,undertheITA,shouldrelyonacommonsenseviewofitsordinarymeaning,withinthecontextofhowbroadcastingisnowdefined.
ItcouldbearguedthatifaDMBUreceivingtheadvertisingdoesnotmeettherequirementsofaCanadianlicenseeundertheBroadcastingAct,intermsofitsownership,thenthatalonecoulddeterminethematter–thatis,undertheITA,advertisingexpensescouldbedeemednon-deductiblesincethebroadcastingundertakingis“locatedoutsideCanada”,inthemoregeneralsenseoftheterm.
Given,however,theCommission’sdefinitionofinternet“transmission”,anotherinterpretationof“locatedoutsideofCanada”asitisusedintheITAcouldbewheretheoriginatingpointofthecontent,thehostormainserversarelocatedoutsideofCanada.
Afurtherinterpretationcouldfocusonthelocationofphysicalinfrastructure,includingwherethemajorityofequipmentandemployeesarelocated.
KeyhereistoaddresssituationswhereaCanadianinternetcorporationisessentiallyashellforaservicewhosecontentisassembledandtransmittedfromabroad–thecasewithmuchoftheInternetmediaavailableinCanada.
Thuswebelievethetestfor“locatedoutsideofCanada”mightappropriatelystartwiththeseconddeterminingfactornotedabove,namelythelocationoftheoriginatingservers.In2009,theFederalCourtofAppealdealtwith
20DMEO,citedabove.21Section3(1)(a)oftheBroadcastingActstatesthat“theCanadianbroadcastingsystemshallbeeffectivelyownedandcontrolledbyCanadians”.SpecificrulesonCanadianownershiparesetoutintheDirectiontotheCRTC(IneligibilityofNon-Canadians)P.C.1997-486,1997-04-08.
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areferencefromtheCRTConwhetherISPswereengagedinbroadcasting.Initsdecision,theCourtquotedParagraph95oftheSupremeCourt’sCAIPdecision,whichcontainedaconclusiononlocation:
95.Havingproperlyinstructeditselfonthelaw,the[Copyright]Boardfoundasafactthatthe“conduit”beginswiththehostserver.Noreasonhasbeenshowninthisapplicationforjudicialreviewtosetasidethatconclusion.22
Inotherwords,whileatransmissionontheinternetcantakemanyroutesfromoriginationtouser,includingtemporarystorageinaContentDeliveryNetwork,thetransmissionbeginswiththefirstserverinthecontentchain–ifthatisoutsideCanada,thensoisthebroadcastingtransmittingundertaking.WhentheoriginationpointofthetransmissionisoutsideCanada,thoughitmaybecachedonfacilitiesandhaveadvertisementsinsertedinsideCanada,itdoesnotoriginatehere.Asbeforewithovertheairbroadcasting,themerepresenceofsomephysicalfacilitiesorinfrastructureinCanadasodoesnotmakeaninternetbroadcasterCanadian.However,incasesofsomedoubt,amulti-layeredtest,thatalsofactorsinownershipandcontrol,whereacorporateheadquartersarelocated,andwherethemajorityofemployeeswork,couldhelpensure“locatedinCanada”isgivenanordinaryandappropriatemeaning.
Asasidenote,itappearsthatmanyinternetservicesthatserveCanadadonotcollectGST/HSTfortheirsaleshere.Itisdue,buttheyarenotobligedtocollectitbecausetheyhave“nofacilitiesinCanada.”ThereforebydefinitionsuchservicesareservingCanadiansfromabroadandtheirtransmissionsareforeign.
TARGETEDTOACANADIANMARKET
Thisisasubjectonwhichthereisalreadycaselaw,whichneednotbedifferentbecausethetransmissiontakesplaceovertheinternet.
Asapracticalmatter,thewayadvertisingontheinternetisnowsold–themicro-targetingofspecificgeographies,and(notdemographics,but)specificinterestprofiles–allowsCanadianadvertisersonbothforeignanddomesticmediatotargetCanadianswithimmenseprecision.Bydefinition,CanadianadvertisersadvertisingonsuchforeignmediaaretargetingCanadians.
Ofcourse,therearemanyformsofadvertisingontheinternetthattargetspecificgroupsofconsumersbasedontheirinternetactivity,withorwithouttheconsumers’knowledge.OnecanimaginethattheargumentwillbemadethatthesearenotdirectedtoaCanadianmarket,becausepeoplemayreceivethemanywhereintheworld.Andasamatteroffact,itwouldbepossible–thoughprobablyimpractical–withouttheco-operationofallpartiestothetransmission,todeterminethelocationofthosewhoreceivedtheadvertisements.
However,thesituationisnodifferentfromthatofabusinessbuyinganadinonetelevisionmarket,knowingthattheadwill‘spill’intoanothermarketviaonthestation’scableandDTHcarriage.Insuchcases,itisfairtosaythattheadisalsodirectedatthesecondmarketifpeopleinthatmarketcanavailthemselvesoftheservicebeingadvertised,becauseoftheCanadianadvertiser’sabilitytoservethatmarket,whetherthroughphysicalore-commercemeans.
AppendixDcontainstextofananalysisbyMcCarthy-Tétraultofacourtdecisiononthisgeneralquestion.Itisusefulinthatitestablishesthat“directedtotheCanadianmarket”isnotdependentontheuseoftechnologythatensurestheadcanonlybeseenbyCanadians,orevencontentintheadidentifyingtheproductortheserviceas
22SocietyofComposers,AuthorsandMusicPublishersofCanadav.CanadianAssn.ofInternetProviders,2004SCC45(“SOCANv.CAIP”).
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Canadian.Instead,itcanbebasedonsomepartofthecontentoftheadortheserviceitselfthatmakesitmoreusefultoCanadiancustomers–inthiscaseaCanadiantelephonenumber.
DEFINITIONOFNEWSPAPERANDPERIODICAL
Theissuehereiswhethertheapplicabledefinitionsrestricttheterms“newspaper”and“periodical”tophysicalmedia,andexcludeinternet-deliveredmedia.
“Newspaper”isnotdefinedintheIncomeTaxAct.TheITAreferstotheForeignPublishersServicesActforthedefinitionof“periodical”.ItisdefinedthereinSection2:
periodicalmeansaprintedpublicationthatappearsinconsecutivelynumberedordatedissues,publishedunderacommontitle,usuallyatregularintervals,notmorethanonceeveryweek,excludingspecialissues,andatleasttwiceeveryyear.Itdoesnotincludeacatalogue,adirectory,anewsletteroranewspaper.(périodique)23
Theonlyrestrictiveelementofthisdefinitionistheword“printed”,whichisnotitselfdefined.Wemightmaketheargumentthatthetermdoesnotnecessarilyimplytheuseofpaperorotherphysicalmedia,sincemanydictionarydefinitionsdonotincludethatelement.Forexample,Merriam-Websterprovidesthis(somewhatcircular)definitionof“printing”:
theprocessofproducingbooks,magazines,etc.byusingmachinery
buttheCambridgeDictionary,likesomeotherapparentlyolderdefinitions,makesreferencetophysicalproduct:
theactivityorbusinessofproducingwritingorimagesonpaperorothermaterialwithamachine:
Ononelevel,thedistinctionbetweenphysicalanddigitalmediaisbesidethepoint.TheNewYorkTimesisclearlyanewspaper.Ithasaphysicaleditionandanelectronicedition.Botharebrandedthesame,bothareproducedfromthesamecontentcreatedbythesamejournalists,thoughformatteddifferentlyandinsomecasesenhancedbyvideo–whichcannotbeplacedinthephysicaleditionusingcurrenttechnology.24Itsonlineeditionissimplycalled“TheNewYorkTimes”.Theperiodical,the“NewYorker”alsohasidenticalnamesforonlineandphysicaleditions.
Atminimum,therefore,technologicalneutralityshouldrequirethataperiodicalornewspaperthatisinbothphysicalanddigitalformshouldbedeemeda“printedpublication”ineitherorbothformats.
Beyondthis,however,someaspectsoftheexistingdefinitionsbecomemoredifficultintheabsenceofaphysicalproduct.Unders.19(1)and(5)oftheITA,thedeterminationofwhatis“foreign”activitydependstosomedegreeonthelocationoftheactivitiesthatproducethephysicaleditions,e.g.typesettingactivityandprintingonpaper.Digitalelectronicequivalentsofthesefunctionsexist:physicaltypesettingisreplacedbydigitaltypesetting(orformatting),whichrequireshumandesigndecisionswhichtakeplaceinaphysicallocation.25
23http://laws-lois.justice.gc.ca/eng/acts/f-29.6/FullText.html24Althoughthistooischanging.Thephysicaleditionmayinfuturebeaflexible,refreshabledisplaydevicethatresemblespaperbutfunctionslikeanelectronicscreen.25Onecouldalsoreasonablyarguethattheselatterdigitalactivitiesarenoteven“typesetting”withintheanalogousmeaningtothatofanaloguetypesetting.
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Whilesomeoftheselatteralgorithm-based“digitaltypesetting”activitiesmightarguablyoccurinCanadaoncontentdeliveredtoCanadians,iftheinitialorprimaryhumandesigndecisionsforaggregatingcontentwithinapublicationoccurredinaforeignjurisdiction,thenthepublicationmightreasonablybeconsideredforeign.
Whatisclearlyneededisaninterpretivepracticethat,asinthepast,reliesoncontemporarycommon-sensedefinitionsderivedfromsourcesoutsidetheITA.Itshouldnotbenecessarytorewritethedefinitions,sincethosepartsthatarerelevanttodigitalmediashouldbedeemedtechnologicallyneutral.TheexistingdefinitionsofCanadiannewspapersandperiodicalscanbeinterpretedfordigitalmediabyreframingthoseelementsthattodatehavebeendeemedapplicableonlytophysicalmediaandconsidering:
• Therequirementsfor80%original(i.e.Canadian)content• CanadianownershipasdetailedintheITA(seeAppendixA)• EditorialcontrolbyCanadians.
APPLICATION&IMPLEMENTATION
EnforcementoftheadvertisingtaxdeductibilityprovisionsoftheITAinrespectofforeigninterned-basedmediawouldbeanon-trivialexercise.
Withbillionsofdollarsatstake,andthepossibilityoflitigationandthreatsoftraderetaliation,thetemptationtosidewiththe“certainty”ofthestatusquowouldbehigh.
AsCanadaentersintoapotentiallymorefractioustraderelationshipwiththeUnitedStates,however,advancingtheCanadianpublicinterestinastrongCanadianmediasectorshouldbecomeanevengreaterimperative.
Determinationsontheapplicabilityand/orextentofapplicabilityoftheadvertisingdeductibilityprovisionstodifferenttypesofinternetmediawouldlikelyberequired.Wedonot,however,believethatthelatterwouldbeundulyonerousordifficult.Specificexamplesofdeterminingdeductibilityforsomeofthemajorinternetmediaareprovidedfurtherbelow.
TRADEISSUES
ItisreasonabletoassumethatanewinterpretationoftheadvertisingtaxdeductibilityprovisionsoftheITAcouldraisetradeissues.
TheUSadvancesitseconomicinterestsaggressively,andthepotentialthatbillionsofdollarsaccruingtoUSinternetconglomeratesmaybeatriskcouldattractimmediateattentionandreactionatthehighestlevels.ThepossibilitythatCanada’smovescouldsetaprecedentforothernationswouldnotbelostinthisequation.
Wehavegonedownthisroadbefore.
Theinclusionofthe‘culturalexemption’intheFTA,andsubsequentlyNAFTA,washardfoughtandyetdoesnotofferfullprotectiontoCanada.26
Theultimatenegotiatedcompromiseonsplit-runmagazinesmaybeamoredirectanalogytothecurrentsituation;inthattradedispute,Canadaheldfirmandachievedacompromisethatstandstoday27.
26Thisisbecause,ifinvoked,itpermitsretaliationofequivalentcommercialeffect.
19
Theauthorsacknowledgethatsomekindofcompromisemightultimatelybesoughtinthissituation.28SuchacompromisemaybedrivenbyCanadianinterestsaswellasU.S.–forexample,Canadianadvertisers29mayarguethatthereisnorealCanadianequivalenttothereachandratingpointsachievableonU.S.internetmedia.
However,ourviewisthatwhilesuchconsiderationsmayultimatelytemper,theyshouldnotprecludeseriousconsiderationoftheneedforneworre-interpretedadvertisingtaxdeductibilityprovisions,andtheiradoption.
Thisisbasedbothontheeconomic,culturalanddemocraticimportanceoftheissuetoCanada,andbecausewebelievethattheadvertisingtaxdeductibilityprovisionsoftheITAhavealwaysbeen,andwouldremainunderanewinterpretation,consistentwithCanada’sobligationsunderNAFTAandotherinternationaltradeagreements.
AstaxationisgenerallycarvedoutofbothNAFTAandGATS,andthisisclearlyataxmatter,NAFTAshouldnotapplyandtheculturalindustriesexemptionshouldnotcomeintoplay.30
Moreover,tore-interprettheIncomeTaxActwouldbenomorediscriminatorythantheexistingenforcedrule,thathasstoodup,andmoreoverbeensanctionedinanexplicitU.S.-Canadaagreement.Afterall,theruledoesnotspecificallyapplytoU.S.mediainterests;itappliesonlytothetaxtreatmentofexpensesincurredbyCanadiancompaniesinacquiringadvertisinginventoryfromsuchU.S.interests.
ThisdoesnotmeanthatifCRAweretomovetoenforcetheadvertisingtaxdeductibilityprovisionsoftheITAassuggestedinthispaper,therewouldnotbetradeconcerns.Itdoes,however,meanthatCanadawouldbeabletorespondfromafirmlegalposition.
DEDUCTIBILITYOFSPECIFICSITESANDSERVICES
Thispaperdoesnotarguethatallforeigninternet-deliveredadvertisingexpensesarenon-deductibleundercurrentlaw.Thebenefitsofasingleblanketruleofnon-deductibilityonforeigninternet-deliveredadvertisingareevident,andthegovernmentcouldconsideramendmentstolegislationtobringthisabout.Underthecurrentrules,however,itappearsthatdeductibilitymustbedecidedonacase-by-casebasis,dependingonthecontentofthesiteorservicethatpresentstheadvertising.
Thissectionofthepaperlooksathowthesecasesmightplayoutwithadvertisingonthemostpopularsites.
Itissignificantthattheformofadvertisingisnotimportant;theonlyconsiderationiswhetheritisprovidedalongsidecontentthatconstitutesbroadcasting,anewspaperoraperiodical.Ofcourse,incurrentpractice,muchinternetadvertisingisamixofmedia,andthoseadsthatappearassimpletextoftenlinktoothermedia.
• Section19.1oftheITAusesthelanguage,“foradvertisingspaceinanissueofanewspaper”,anddoesnotlimitnon-deductibilitybasedonwhatgoesintothatspace.ThewordinginSection19.1(1)is,“foran
27BillC-55,whichwasamendedtoallowforeignpublisherslimitedaccesstotheCanadianmarket,providedtheyestablishamajorityofCanadiancontentandnewperiodicalsbusinessesinCanada.Seehttp://www.lop.parl.gc.ca/content/lop/researchpublications/prb9925-e.htm28Weareremindedofthefederalgovernment’sdecisiontolimittaxdeductibilityofentertainmentexpensesto50%from80%effectiveFebruary22,1994.(Section67.1oftheITA.)Evidently,thegovernmentlookedtocontainsuchexpenses,butfeltitcouldnotreasonablyrulethemineligibleintheirentirety.29ThefederalgovernmentisamongthoseadvertisersthathavereportedlyincreasedadvertisingonU.S.Internetsites,tothedetrimentofCanadianmedia.Seehttp://www.cbc.ca/news/politics/newspapers-canadian-heritage-public-policy-forum-digital-news-gathering-Internet-1.374358030See,forexamplehttp://www.ucalgary.ca/biztechlaw/node/285.ThefactthattheenactmentoftheadvertisingtaxdeductibilityprovisionsoftheITAprecededthecomingintoforceofNAFTA(January1,1994)alsocomesintoplay.WhiledetailedanalysisofTradeLawimplicationsisbeyondthescopeofthispaper,itisalsoworthnotingthattaxmeasuresfavouringCanadianculturalindustries,suchastaxcreditsforfilmandtelevisionproduction,havewithstoodtradescrutiny.
20
advertisement…broadcastbyaforeignbroadcastingundertaking”.Allthatmattersisthatitisanadvertisement,andthatitistransmittedbyaservicethatisaforeignbroadcastingundertaking.Theformoftheadvertisementitselfisnotaconsideration.
• AnothergeneralquestioniswhethertheadsaretargetedtoaCanadianmarket.Withalloftheseservices,algorithmsthattrackusers’internetbehaviourcanensurethatadsbylocalretailersinCanadaaretargetedtotheirdomesticmarket.
YOUTUBE
ThecontentprovidedonYouTubeclearlylieswithintheCRTC’sdefinitionofbroadcasting:videoiswhatinternetconsumersgotoYouTubetosee.Thereisasectionoftextcommentsattachedtoeachvideo,butthecommentsareclearlysupplementarytothevideo–withoutthevideothecommentsaremeaningless,whereasthevideoitselfismeaningfulcontenteveniftherearenotextcomments.YouTubeisclearlyaNewMediaBroadcastingUndertakingandthecostofadvertisingplacedonYouTubeisclearlynon-deductible31.
Facebookisthesecond-largestinternetadrevenuegeneratorintheUnitedStates,afterGoogle,andisthevenueformanyadvertisementsdirectedtoCanadians.
Adsappearthroughoutthesite’svariouspagesandareamixofstaticimagesplacedtoonesideofthescreenanddynamicadsthatareinsertedintotheuser’sNewsFeed,wheremostusersspendthelargestproportionoftheirFacebooktime.
Onbalance,FacebookisaDMBU.TheNewsfeedisamixoftextandimages,andtheimagesareamixofvideoandstatic,non-alphanumericpictures,withanoccasionalalphanumericimage.Typically,users‘share”’itemstotheirfeeddrawnfromsomewhereelse–onlinenewspapersandperiodicals,YouTube,broadcastsources,bloggersandavarietyofusercomments.
Fromapurescreenspaceperspective,itcouldbearguedthatalargeproportionofwhatFacebookpresentsistext–buttheprevalenceandattractivenessofimagesmakesthatargumentunconvincing.TextcanstandonitsownmoreoftenthanitdoesonYouTube,buttypicallythevideo/audioorimage(ofcats,dogs,music,etc.)iskeytotheuserexperience.Itisveryraretoseeatextpostingwithoutanimage,andthegreatmajorityofimagesarenotalphanumerictext.Thus,usingtheCommission’sterminology,videosandimagesareclearlythe“thefocusofattention”,meaningFacebookcannotbeconsideredto“consistpredominantlyofalphanumerictext.”
SomepartiesmightalsorevivetheargumentcitedintheCRTC’sNewMediaExemptionOrderof1998thatbecauseeachuser’sexperienceisdifferent,thisisnotbroadcasting.TheCommissiondealtwiththatinitsdecision,however,andmadeitclearthatunlesstheusersthemselvescustomizedtheirowncontentandaltereditinatrulyinteractiveway–asinagame–thatcustomizationmadenodifference.
Therefore,sinceFacebooktransmitscontentthatfallswithinthedefinitionofprogramming,itisaDMBU.
31Thislegalconclusiondoesnotsuggestthat,inprovidingaccessanddistributionforCanadians,YouTubedoesnotmakeadistinctcontributiontotheCanadianculturalandsociallandscape.
21
GOOGLESEARCH
GoogleSearchisalsoamajorgeneratorofadrevenue.Itisasomewhatmoredifficultcasetoanalyze,ascanbeseenbythesamplescreenshottotheright.
Inthisexample,asearchfor“snowblower”onthe“All”setting,hasresultedinareturnedscreenthatcontains:
1. Fiveimageswithaccompanyingtext,allofthemfroma“.ca”address.
2. Fourparagraphsoftext,twofromadvertisementstaggedas‘paid”,twofromretailers(allCanadian)
3. Fivemoreimagesofsnowblowers,thesewithouttext.
Whenthesamesearchisdoneunderthesetting,“Images”,theentirescreenisImagesbuttheadvertisingislessapparent–thoughtherearebrandedretailersacrossthetopofthescreen.
Usingthesettingsfor“Videos”or“Shopping”thescreengivesroughlyequalprominencetoimagesandtext,thoughonemightarguethattheuser’sinterest,inthiscase,isprimarilyintheinformationcontainedinthetext.
GivenCRA’sdefinitionalapproach,GoogleSearchisnotaperiodical,sinceitdoesnotproduceregularissues.Someinformationalaspectsareakintoanewspaper.
Isitbroadcasting?
AccordingtotheBroadcastingAct,itisbroadcastingifthecontenttransmittedfitsthedefinitionof“program”,i.e.“soundsorvisualimages,oracombinationofsoundsandvisualimages,thatareintendedtoinform,enlightenorentertain,butdoesnotincludevisualimages,whetherornotcombinedwithsounds,thatconsistpredominantlyofalphanumerictext.”
Thepageshownaboveapparentlycontainsbothprogramandnon-programcontent.Thenon-alphanumericimagesareprograms,andthoseimagesthatarepredominantlyalphanumerictextarenot.TheIncomeTaxActestablishesthatadsarenon-deductiblewhencarriedbyaforeignbroadcaster–butwhatisGoogleSearch?AccordingtotheBroadcastingAct,itisabroadcasterwhenittransmitsprograms,andsomepart–butnotall–ofeachpageittransmitsisprogramming.So,canGoogleSearchbeboth–abroadcasterandanon-broadcaster–simultaneouslywiththesamepageofcontent?
Wenotethatatypicallicensedbroadcastingundertakingsuchasatelevisionstationmayspendsomepartofitstimetransmittingimagesthatarealphanumeric–e.g.aweatherprediction,ora‘Jeopardy’questionslide–but
22
theundertakingdoesnotceasetobeabroadcasterforthattimeandpurpose.Onlyservicesthatareexclusivelyalphanumeric,liketheservice“Text-TV”(nowdefunct)havebeenpermittedtooperatewithoutabroadcastlicenceorauthorization.
Inaddition,theCommissiondeterminedoverthecourseofanumberofdecisionsinthelate1990sandearly2000s(astowhethercertainservicesshouldbedeemedalpha-numeric)thattheterm‘predominantly’,“hasnospeciallegaldefinitionandisusedinitsordinarysense,i.e.thatwhichismoreinfluentialormorepowerful.”Inexaminingprogramguidechannels,whichcombinedvideoandtextinafixedformat,itdecidedthatevenwhereanimageoccupiesonlyone-quarterofthescreen,ifitis“thefocusofattention,”itisa“program”32.
Inthatcase,ofcourse,the“image”theCommissionwasexaminingwasaTVscreeninafixedformat.ServicesontheInternet,however,provideastreamofcontentinanever-changingformat.Imagesareoftencombinedwithtextoralternatedwithtext.Itisthereforeworthnotingthatthepredominancetestfor“program”intheBroadcastingActdoesnotapplytoaserviceasawholebutrather,inthecaseofscreenbasedcontent,tothevisualimagesthattheserviceprovides.AliteralinterpretationoftheBroadcastingActwouldthereforedeterminethataserviceisbroadcastingifittransmitsany“programs”withinthestream;alessdemandinginterpretationwouldusetheCommission’stestthataserviceisbroadcastingiftheimagesarethe“focusofattention”.
Thus,itwouldappearthatCRAhasthediscretiontodeemGoogleSearchaDMBUinitsentiretybecauseatleastsomeofitssearchpagesarelegally“programs”.Therefore,theadsonthosepagesarebroadcastbyaforeignbroadcastingundertaking,andtheircostsarenon-deductible.
Alternatively,intheabsenceofdetailedanalysisofGoogleSearchusagepatterns,weareleftwithatleasttwoindicesthatsuggestCRAshouldexerciseitsdiscretiontodeemGoogleSearchtobepredominantlybroadcasting:
1. BytheCRTC’smeasureof“thefocusofattention”,evenrelativelylittleon-screenuseofvideoorimagesrenderstheservicenon-alphanumeric;and
2. AsCanadians’internetusegravitatesmoreandmoretoaudioandvideocontent,useofsearchisgravitatinginthesamedirection.
Undersuchaninterpretiveapproach,CRAmightdeemGoogleaDMBUonlyinrespectofthosesearchesthatcanbedeemed“programs”,anda“newspaper”inrespectofmanyifnotmostofthosesearchesthatarenot.
MUSICSTREAMINGSERVICES
OnlineservicessuchasSpotify,GooglePlay,andAppleMusicprovidestreamingmusic.Thecontentofsuchservicesisclearlycomprisedof‘programs’”withinthemeaningoftheBroadcastingAct,andanyadvertisingonthemthatisinsomewaydirectedtoaCanadianmarketshouldbenon-deductible.
MAGAZINES
OnlinemagazinesarethefunctionalandliteralequivalentsofpapermagazinesandshouldbeconsideredperiodicalsforthepurposesoftheIncomeTaxAct.Subjecttothecurrentdefinitionsof‘foreign”’asappliedtopapermagazines,theiradvertising,ifdirectedtoamarketinCanada,shouldbeconsiderednon-deductible.Examplesabound,fromHarperstoYachtingMonthly.
32BroadcastingDecisionCRTC2005-120.
23
TextureisaCanadianaggregatingservicethatoffersapackagedsubscriptiontomanymagazinesthroughportabledevicesliketabletsandsmartphones.Thevariouspackagesofcontentinthisservicearedescribedas“magazines”withoutmodificationofthatterm.Theycarrythesamenames,thesameissuesandeventhesamefrontcoversastheirprintedequivalents.TextureprovidesamixofCanadianandforeignmagazines.
AsinthecaseofGoogleSearch,itwouldappearthatCRAwouldhavesomediscretionintheapplicationoftheperiodicaladvertisingdeductibilityrules,dependingonwhetheradvertisingwasdeemedtobeplacedoninaforeignmagazineorontheaggregatingserviceitself.
CONCLUSION
TheconclusionofthispaperisthatCRA’s1996interpretationof“websites”needsrevisiting,andthatundercurrentcircumstances,advertisingpurchasedonforeigninternet-deliveredmediaactingasbroadcastandnewspaperservicesshouldnotbeadeductibleexpenseundertheIncomeTaxAct(ITA).
TheupholdingofthisconclusionwouldbeofmajorbenefittoCanadianmedia,andCanadiansgenerally.33
ForCanadianmedia,itcouldbethesinglegreatestfactorinreversingrevenuedeclinesandensuringviabilityforCanadianlocalprint,TVandradiooperations–andtheircontributionstoCanadianculture,newsanddemocracy.HundredsofmillionsofdollarscouldmovebackfromforeigntoCanadianowned-and-controlledmediacompanies–stabilizingandgrowingtheirrevenues,andallowingthesecompaniestoreversejobcutsandre-investinCanadiancontent,includingjournalism.
Specifically,thesuggestedre-interpretationoftheadvertisingtaxdeductibilityprovisionsoftheITAwould,weestimate,resultinontheorderof50%-80%ofcurrentinternetadvertisingexpendituresbeingdeemednon-deductible.34
Conservativelyestimatingthat10%ofthesenownon-deductibleforeigninternetadvertisingexpendituresshiftbacktoCanadianmedia,thiswouldrepresentaninfluxof$250to$450millionannuallyinincrementaladvertisingrevenue.35
FortheCanadiangovernment,re-interpretingS.19oftheITAassuggestedwouldbringdemonstrablefiscalbenefits.
Asat2016,asmuchas$4.4billioninadvertisingexpenditureswouldnolongerbetaxdeductible–representingapotentialgainincorporatetaxpayableof$1.15billion.36MonieswouldshifttoCanadianlocalmediawithout
33Tradethreats,potentialthreatsbyforeigninternetmediatopulloutoftheCanadianmarketplace,andcomplaintsfromCanadianadvertiserswouldneedtobeanticipatedandaddressed.Weneverthelesssubmitthat,forforeigninternet-deliveredbroadcastandnewspaperservices,itwouldbearelativelysmallfinancialimpact,giventhatmanyCanadianadvertiserswouldlikelyremainonforeigninternetmedia,despitealackoftaxdeductibilityandtherelativelylowproportionateimportanceofCanadianmarketplacetosuchglobalplayers,generally.34Asnoted,advertisingdeductibilityonforeigninternetsiteswouldneedtobeinterpretedonacase-by-casebasis.WewouldenvisageCRAissuinginterpretivebulletinsthatwouldprovidespecificguidanceontheextentofdeductionpermittedondifferentclassesofinternetmediaorpotentiallycompanies.ForeignvideoandnewspapersiteslikeYouTube,CrackleandNewYorkTimes.comwouldbe100%nondeductible,whilealphanumericlearningorinformationsiteswouldbe100%deductible.SiteslikeFacebookandGoogleSearchmightbedeemedpartiallydeductible,accountingforthelowerendofthisrange.35BasedonIAB’sestimateof$5.55billionin2016Canadianinternetadvertisingrevenue.36Thisassumesanaveragecorporatetaxrateof26%,andthatonly20%ofinternetadvertisingwouldretainadvertisingdeductibility(roughlyhalfofthiswouldbeCanadian,theotherhalfforeign).Whileitisimpossibletopredictthebehaviourofinternetmediaoradvertisers,itisreasonabletoassumethatamaterialportionofnewlyineligibleadvertisingonforeigninternetmediawouldshiftbacktoCanadianmediawhile
24
additionalgovernmentgrantsortaxcredits.Amassivepolicyproblem(thelossoflocalmedia&andnews)couldberesolvedinawaythatactuallysavedgovernmentmoney.
ApolicydecisiontorevisetheadvertisingtaxdeductibilityprovisionsoftheITAtoapplytoallforeigninternetmedia,whetherdeemedbroadcast,printornot,isalsoworthyofconsideration,butwouldrequireamendmentstotheITA.37Shouldsuchadecisionbemadebygovernment,theincrementalbenefittoCanadianmediacouldrepresentontheorderof$500millionannually,andthefiscalbenefitasmuchas$1.3billion.
alargerportionwouldremain.Evenifonly50%ofcurrentinternetadvertisingexpendituresweredeemedtobenondeductible,thatwouldstillleaveafiscalbenefittotheTreasuryofover$700million.Moreover,ifforeigninternetmediadroppedtheiradvertisingratestoaccountforanylackoftaxdeductibility,themajorityofthefiscalbenefitwouldstillaccruetothegovernment.37DepartmentofFinanceOfficialsacknowledgedthisinanappearancebeforetheHouseofCommonsStandingCommitteeofCanadianHeritageReviewofMediaandLocalCommunities,December1,2016.Theynotedthatmeasuresforprintandbroadcastoutletsareconsidered"cultural"supportthroughthetaxsystemputinplacealongtimeagoandthatextendingittoonlineplatformswouldbeapolicydirectionthegovernmentwouldhavetotake.Thelesseroptionofreinterpretingcurrentprovisionswasnotdiscussedonthatoccasion.
25
APPENDIXA–SECTION19OFTHEINCOMETAXACT(CURRENT)
Limitationreadvertisingexpense—newspapers
19(1)Incomputingincome,nodeductionshallbemadeinrespectofanotherwisedeductibleoutlayorexpenseofataxpayerforadvertisingspaceinanissueofanewspaperforanadvertisementdirectedprimarilytoamarketinCanadaunless
(a)theissueisaCanadianissueofaCanadiannewspaper;or
(b)theissueisanissueofanewspaperthatwouldbeaCanadianissueofaCanadiannewspaperexceptthat
(i)itstypehasbeenwhollysetintheUnitedStatesorhasbeenpartlysetintheUnitedStateswiththeremainderhavingbeensetinCanada,or
(ii)ithasbeenwhollyprintedintheUnitedStatesorhasbeenpartlyprintedintheUnitedStateswiththeremainderhavingbeenprintedinCanada.
Marginalnote:Wheres.(1)doesnotapply
(3)Subsection19(1)doesnotapplywithrespecttoanadvertisementinaspecialissueoreditionofanewspaperthatiseditedinwholeorinpartandprintedandpublishedoutsideCanadaifthatspecialissueoreditionisdevotedtofeaturesornewsrelatedprimarilytoCanadaandthepublishersthereofpublishsuchanissueoreditionnotmorefrequentlythantwiceayear.
Marginalnote:Definitions
(5)Inthissection,
Canadianissueofanewspapermeansanissue,includingaspecialissue,
(a)thetypeofwhich,otherthanthetypeforadvertisementsorfeatures,issetinCanada,
(b)allofwhich,exclusiveofanycomicssupplement,isprintedinCanada,
(c)thatiseditedinCanadabyindividualsresidentinCanada,and
(d)thatispublishedinCanada;(éditioncanadienne)
Canadiannewspapermeansanewspapertheexclusiverighttoproduceandpublishissuesofwhichisheldbyoneormoreofthefollowing:
(a)aCanadiancitizen,
(b)apartnership
(i)inwhichinterestsrepresentinginvalueatleast3/4ofthetotalvalueofthepartnershippropertyarebeneficiallyownedby,and
26
(ii)atleast3/4ofeachincomeorlossofwhichfromanysourceisincludedinthedeterminationoftheincomeof,
corporationsdescribedinparagraph(e)orCanadiancitizensoranycombinationthereof,
(c)anassociationorsocietyofwhichatleast3/4ofthemembersareCanadiancitizens,
(d)HerMajestyinrightofCanadaoraprovince,oramunicipalityinCanada,or
(e)acorporation
(i)thatisincorporatedunderthelawsofCanadaoraprovince,
(ii)ofwhichthechairpersonorotherpresidingofficerandatleast3/4ofthedirectorsorothersimilarofficersareCanadiancitizens,and
(iii)that,ifitisacorporationhavingsharecapital,is
(A)apubliccorporationaclassorclassesofsharesofthecapitalstockofwhicharelistedonadesignatedstockexchangeinCanada,otherthanacorporationcontrolledbycitizensorsubjectsofacountryotherthanCanada,or
(B)acorporationofwhichatleast3/4oftheshareshavingfullvotingrightsunderallcircumstances,andshareshavingafairmarketvalueintotalofatleast3/4ofthefairmarketvalueofalloftheissuedsharesofthecorporation,arebeneficiallyownedbyCanadiancitizensorbypubliccorporationsaclassorclassesofsharesofthecapitalstockofwhicharelistedonadesignatedstockexchangeinCanada,otherthanapubliccorporationcontrolledbycitizensorsubjectsofacountryotherthanCanada,
and,forthepurposesofclause(B),wheresharesofaclassofthecapitalstockofacorporationareowned,ordeemedbythisdefinitiontobeowned,atanytimebyanothercorporation(inthisdefinitionreferredtoasthe“holdingcorporation”),otherthanapubliccorporationaclassorclassesofsharesofthecapitalstockofwhicharelistedonadesignatedstockexchangeinCanada,eachshareholderoftheholdingcorporationshallbedeemedtoownatthattimethatproportionofthenumberofsuchsharesofthatclassthat
(C)thefairmarketvalueofthesharesofthecapitalstockoftheholdingcorporationownedatthattimebytheshareholder
isof
(D)thefairmarketvalueofalltheissuedsharesofthecapitalstockoftheholdingcorporationoutstandingatthattime,
andwhereatanytimesharesofaclassofthecapitalstockofacorporationareowned,oraredeemedbythisdefinitiontobeowned,byapartnership,eachmemberofthepartnershipshallbedeemedtoownatthattimetheleastproportionofthenumberofsuchsharesofthatclassthat
(E)themember’sshareoftheincomeorlossofthepartnershipfromanysourceforitsfiscalperiodthatincludesthattime
27
isof
(F)theincomeorlossofthepartnershipfromthatsourceforitsfiscalperiodthatincludesthattime,
andforthispurpose,wheretheincomeandlossofapartnershipfromanysourceforafiscalperiodarenil,thepartnershipshallbedeemedtohavehadincomefromthatsourceforthatperiodintheamountof$1,000,000;(journalcanadien)
substantiallythesame[Repealed,2001,c.17,s.11(2)]
UnitedStatesmeans
(a)theUnitedStatesofAmerica,butdoesnotincludePuertoRico,theVirginIslands,GuamoranyotherUnitedStatespossessionorterritory,and
(b)anyareasbeyondtheterritorialseaoftheUnitedStateswithinwhich,inaccordancewithinternationallawanditsdomesticlaws,theUnitedStatesmayexerciserightswithrespecttotheseabedandsubsoilandthenaturalresourcesofthoseareas.(États-Unis)
Marginalnote:Interpretation
(5.1)Inthissection,eachofthefollowingisdeemedtobeaCanadiancitizen:
(a)atrustorcorporationdescribedinparagraph149(1)(o)or(o.1)formedinconnectionwithapensionplanthatexistsforthebenefitofindividualsamajorityofwhomareCanadiancitizens;
(b)atrustdescribedinparagraph149(1)(r)or(x),theannuitantinrespectofwhichisaCanadiancitizen;
(c)amutualfundtrust,withinthemeaningassignedbysubsection132(6),otherthanamutualfundtrustthemajorityoftheunitsofwhichareheldbycitizensorsubjectsofacountryotherthanCanada;
(d)atrust,eachbeneficiaryofwhichisaperson,partnership,associationorsocietydescribedinanyofparagraphs(a)to(e)ofthedefinitionCanadiannewspaperinsubsection(5);and
(e)aperson,associationorsocietydescribedinparagraph(c)or(d)ofthedefinitionCanadiannewspaperinsubsection(5).
Marginalnote:Trustproperty
(6)Wheretherightthatisheldbyanyperson,partnership,associationorsocietydescribedinthedefinitionCanadiannewspaperinsubsection(5)toproduceandpublishissuesofanewspaperisheldaspropertyofatrustorestate,thenewspaperisnotaCanadiannewspaperunlesseachbeneficiaryunderthetrustorestateisaperson,partnership,associationorsocietydescribedinthatdefinition.
Marginalnote:Graceperiod
(7)ACanadiannewspaperthatwould,butforthissubsection,ceasetobeaCanadiannewspaper,isdeemedtocontinuetobeaCanadiannewspaperuntiltheendofthe12thmonththatfollowsthemonthinwhichitwould,butforthissubsection,haveceasedtobeaCanadiannewspaper.
28
Marginalnote:Non-Canadiannewspaper
(8)Whereatanytimeoneormorepersonsorpartnershipsthatarenotdescribedinanyofparagraphs(a)to(e)ofthedefinitionCanadiannewspaperinsubsection(5)haveanydirectorindirectinfluencethat,ifexercised,wouldresultincontrolinfactofapersonorpartnershipthatholdsarighttoproduceorpublishissuesofanewspaper,thenewspaperisdeemednottobeaCanadiannewspaperatthattime.
NOTE:Applicationprovisionsarenotincludedintheconsolidatedtext;
seerelevantamendingActs.R.S.,1985,c.1(5thSupp.),s.19;
1994,c.7,Sch.II,s.14;
1995,c.46,s.5;
2001,c.17,s.11;
2007,c.35,s.13.
PreviousVersion
Marginalnote:Definitions
19.01(1)Thedefinitionsinthissubsectionapplyinthissection.
advertisementdirectedattheCanadianmarkethasthesamemeaningastheexpressiondirectedattheCanadianmarketinsection2oftheForeignPublishersAdvertisingServicesActandincludesareferencetothatexpressionmadebyorunderthatAct.(annoncedestinéeaumarchécanadien)
originaleditorialcontentinrespectofanissueofaperiodicalmeansnon-advertisingcontent
(a)theauthorofwhichisaCanadiancitizenorapermanentresidentofCanadawithinthemeaningassignedbytheImmigrationActand,forthispurpose,“author”includesawriter,ajournalist,anillustratorandaphotographer;or
(b)thatiscreatedfortheCanadianmarketandhasnotbeenpublishedinanyothereditionofthatissueoftheperiodicalpublishedoutsideCanada.(contenurédactionneloriginal)
periodicalhasthemeaningassignedbysection2oftheForeignPublishersAdvertisingServicesAct.(périodique)
Marginalnote:Limitationreadvertisingexpenses—periodicals
(2)Subjecttosubsections(3)and(4),incomputingincome,nodeductionshallbemadebyataxpayerinrespectofanotherwisedeductibleoutlayorexpenseforadvertisingspaceinanissueofaperiodicalforanadvertisementdirectedattheCanadianmarket.
Marginalnote:100%deduction
(3)AtaxpayermaydeductincomputingincomeanoutlayorexpenseofthetaxpayerforadvertisingspaceinanissueofaperiodicalforanadvertisementdirectedattheCanadianmarketif
29
(a)theoriginaleditorialcontentintheissueis80%ormoreofthetotalnon-advertisingcontentintheissue;and
(b)theoutlayorexpensewould,butforsubsection(2),bedeductibleincomputingthetaxpayer’sincome.
Marginalnote:50%deduction
(4)Ataxpayermaydeductincomputingincome50%ofanoutlayorexpenseofthetaxpayerforadvertisingspaceinanissueofaperiodicalforanadvertisementdirectedattheCanadianmarketif
(a)theoriginaleditorialcontentintheissueislessthan80%ofthetotalnon-advertisingcontentintheissue;and
(b)theoutlayorexpensewould,butforsubsection(2),bedeductibleincomputingthetaxpayer’sincome.
Marginalnote:Application
(5)Forthepurposesofsubsections(3)and(4),
(a)thepercentagethatoriginaleditorialcontentisoftotalnon-advertisingcontentisthepercentagethatthetotalspaceoccupiedbyoriginaleditorialcontentintheissueisofthetotalspaceoccupiedbynon-advertisingcontentintheissue;and
(b)theMinistermayobtaintheadviceoftheDepartmentofCanadianHeritageforthepurposeof
(i)determiningtheresultobtainedunderparagraph(a),and
(ii)interpretinganyexpressiondefinedinthissectionthatisdefinedintheForeignPublishersAdvertisingServicesAct.
Marginalnote:Editionsofissues
(6)Forthepurposesofthissection,
(a)whereanissueofaperiodicalispublishedinseveralversions,eachversionisaneditionofthatissue;and
(b)whereanissueofaperiodicalispublishedinonlyoneversion,thatversionisaneditionofthatissue.
NOTE:Applicationprovisionsarenotincludedintheconsolidatedtext;
seerelevantamendingActs.2001,c.17,s.12.
Marginalnote:Limitationreadvertisingexpenseonbroadcastingundertaking
19.1(1)Subjecttosubsection19.1(2),incomputingincome,nodeductionshallbemadeinrespectofanotherwisedeductibleoutlayorexpenseofataxpayermadeorincurredafterSeptember21,1976foranadvertisementdirectedprimarilytoamarketinCanadaandbroadcastbyaforeignbroadcastingundertaking.
30
Marginalnote:Exception
(2)Incomputingincome,adeductionmaybemadeinrespectofanoutlayorexpensemadeorincurredbeforeSeptember22,1977foranadvertisementdirectedprimarilytoamarketinCanadaandbroadcastbyaforeignbroadcastingundertakingpursuantto
(a)awrittenagreemententeredintoonorbeforeJanuary23,1975;or
(b)awrittenagreemententeredintoafterJanuary23,1975andbeforeSeptember22,1976iftheagreementisforatermofoneyearorlessandbyitsexpresstermsisnotcapableofbeingextendedorrenewed.
Marginalnote:Definitions
(4)Inthissection,
foreignbroadcastingundertakingmeansanetworkoperationorabroadcastingtransmittingundertakinglocatedoutsideCanadaoronashiporaircraftnotregisteredinCanada;(entrepriseétrangèrederadiodiffusion)
networkincludesanyoperationinvolvingtwoormorebroadcastingundertakingswherebycontroloveralloranypartoftheprogramsorprogramschedulesofanyofthebroadcastingundertakingsinvolvedintheoperationisdelegatedtoanetworkoperator.(réseau)
NOTE:Applicationprovisionsarenotincludedintheconsolidatedtext;
seerelevantamendingActs.1974-75-76,c.106,s.3;
1977-78,c.1,s.13;
1985,c.45,s.126(F).
31
APPENDIXB–THE1996INTERPRETATIONDOCUMENT
Source:TaxnetProTM©2016ThomsonReutersCanadaLimited.
Legislation
9618735--Deductibilityofadvertisingexpenses—internet
Date:October24,1996
Reference:19,19.1
SUMMARY:Whethersection19or19.1oftheIncomeTaxActappliestodenyadeductionforexpensesincurredbyaCanadiantaxpayertoadvertiseonaforeignownedWorldWideWebsiteontheinternet.
Pleasenotethatthefollowingdocument,althoughbelievedtobecorrectatthetimeofissue,maynotrepresentthecurrentpositionoftheDepartment.
PRINCIPALISSUES:
Whethersection19or19.1oftheActappliestodenyadeductionforexpensestobeincurredbyaCanadiantaxpayertoadvertiseonaforeignownedwebsite.
POSITION:
No
REASONS:
Awebsiteisnotanewspaper,aperiodicalorbroadcastingundertaking.
5-961873XXXXXXXXXXL.RoyAttention:XXXXXXXXXX
October24,1996
DearSir\Madam:
Re:Deductibilityofadvertisingexpenses
ThisisinreplytoyourfacsimileofMay24,1996inwhichyourequestedarulingonwhetherexpensesbyaCanadiantaxpayertoadvertiseonaforeignownedwebsitewouldbedeductibleundertheIncomeTaxAct(the"Act").
Advanceincometaxrulings,inadditiontotherebeingachargefortheservice,aregivenonlyinrespectofproposedtransactionsinvolvingspecifictaxpayersandwillonlybeprovidedinresponsetoarequestforanadvanceincometaxrulingsubmittedinaccordancewiththeInformationCircular70-6R2datedSeptember28,1990,andtheSpecialReleasetheretoissuedonSeptember30,1992,issuedbyRevenueCanada,Customs,ExciseandTaxation.Nevertheless,wecanprovideyouwiththefollowinggeneralcomments.
32
Advertisingexpensesrelatedtotheincomeearningprocessaregenerallydeductible.However,pursuanttosection19ofAct,nodeductionshallbemadeinrespectofanotherwisedeductibleexpenseofataxpayerforadvertisingspaceinanissueofanon-CanadiannewspaperorperiodicalforanadvertisementdirectedprimarilytoamarketinCanada.
Also,subsection19.1(1)oftheActprovidesthatincomputingincome,nodeductionshallbemadeinrespectofanotherwisedeductibleexpenseofataxpayerforanadvertisementdirectedprimarilytoaCanadianmarketandbroadcastbyaforeignbroadcastingoutlet.
Thewords"newspaper"and"periodical"arenotdefinedintheAct.TheWebster'sNinthNewCollegiateDictionaryhasthefollowingmeaningfortheword"newspaper":
"apaperthatisprintedanddistributedusu.dailyorweeklyandthatcontainsnews,articlesofopinion,features,andadvertising".
TheSupremeCourt,intheKingv.MontrealStockExchange,(1935)4D.L.R.630(S.C.C.),gavethemeaningofnewspaperforthepurposesoftheExciseTaxActasfollows:
"apaperprintedanddistributedatstatedintervals...toconveynews...andothermattersofpublicinterest".
TheDepartmenthastakenthepositionthataperiodicalisapublication,otherthananewspaper,theissuesofwhichappearatregularintervalsoflessthanayear.
Consequently,basedonthosedefinitions,itisourviewthatgenerallysection19oftheActwouldnotapplytoexpensesincurredbyaCanadiantaxpayertoadvertiseonaforeignownedwebsite,sincethewebsitewouldnotbeanewspaperoraperiodical.
Concerningtheissueofbroadcasting,subsection19.1(4)oftheActdefines"foreignbroadcastingundertaking"tomeananetwork(asdefinedundersubsection19.1(4)oftheAct),operationorabroadcastingtransmittingundertakinglocatedoutsideCanadaoronashiporaircraftnotregisteredinCanada.Basedondiversedefinitionsofwordsusedinparagraphs19.1(1)and(4)oftheAct,itisourviewthatsection19.1oftheActwouldnotapplytoexpensesincurredbyaCanadiantaxpayertoadvertiseonaforeignwebsitesinceawebsiteisnotabroadcastbya"foreignbroadcastingundertaking".
Asexplainedinparagraph21ofInformationCircular70-6R2datedSeptember28,1990,theabovecommentsdonotconstituteanadvanceincometaxrulingandarenotbindingontheDepartment.Wetrustthatourcommentsareofassistancetoyou.
Yourstruly,
forDirectorFinancialIndustriesDivisionIncomeTaxRulingsandInterpretationsDirectoratePolicyandLegislationBranch
33
APPENDIXC–EXCERPTSFROMBROADCASTINGPUBLICNOTICECRTC1999-84/TELECOMPUBLICNOTICECRTC99-14OTTAWA,17MAY1999
Isnewmedia"broadcasting"?
StatutoryDefinitions
33."Broadcasting"isdefinedinsection2oftheBroadcastingActasfollows:
[a]nytransmissionofprograms,whetherornotencrypted,byradiowavesorothermeansoftelecommunicationforreceptionbythepublicbymeansofbroadcastingreceivingapparatus,butdoesnotincludeanysuchtransmissionofprogramsthatismadesolelyforperformanceordisplayinapublicplace.
34.Theterm"program"isinturndefinedinsection2oftheActas:
[s]oundsorvisualimages,oracombinationofsoundsandvisualimages,thatareintendedtoinform,enlightenorentertain,butdoesnotincludevisualimages,whetherornotcombinedwithsounds,thatconsistpredominantlyofalphanumerictext.
Explicitstatutoryexclusionsfromthedefinitionofbroadcasting
35.TheCommissionnotesthat,asstatedabove,muchofthecontentavailablebywayoftheinternet,Canadianorotherwise,currentlyconsistspredominantlyofalphanumerictextandisthereforeexcludedfromthedefinitionof"program".Thistypeofcontent,therefore,fallsoutsidethescopeoftheBroadcastingAct.Accordingly,theremainderofthissectioncontemplatesinternetcontentthatconsistsonlyofaudio,video,acombinationofaudioandvideo,orothervisualimagesincludingstillimagesthatdonotconsistpredominantlyofalphanumerictext.
36.Itwassubmitted,amongotherthings,thatinformationdisplayedontheinternetcanbeconsideredtobesolelyfordisplayinapublicplaceandthereforeexcludedfromthedefinitionof"broadcasting".Certainly,theCanadianpublicexpresseditsviewthattheinternethasauniqueabilitytofostercitizenengagementandpublicdiscourse.WhiletheCommissionagrees,itconsidersthattheinternetisnotinandofitselfa"publicplace"inthesenseintendedbytheAct.Programsarenottransmittedtocyberspace,butthroughit,andarereceivedinaphysicalplace,e.g.inanofficeorhome.
37.TheCommissionconsiders,however,thattheexceptiontothedefinitionof"broadcasting"forprogramstransmittedfordisplayinapublicplacewouldapply,assuggestedbyoneparticipant,toaparticularservice
34
deliveredviatheinternetthatisaccessiblebyend-usersonlyinaterminalorkiosklocatedinapublicplace,suchasapubliclibrary.
Technologicalneutralityof"broadcasting"
38.TheCommissionnotesthatthedefinitionof"broadcasting"includesthetransmissionofprograms,whetherornotencrypted,byothermeansoftelecommunication.Thisdefinitionis,andwasintendedtobe,technologicallyneutral.Accordingly,themerefactthataprogramisdeliveredbymeansoftheinternet,ratherthanbymeansoftheairwavesorbyacablecompany,doesnotexcludeitfromthedefinitionof"broadcasting".
39.Somepartiesarguedthatthereisno"transmission"ofcontentovertheinternet,andtherefore,thereisno"broadcasting".Thefactthatanend-useractivatesthedeliveryofaprogramisnot,intheCommission'sview,determinative.Asdiscussedbelow,on-demanddeliveryisincludedinthedefinitionof"broadcasting".Further,theCommissionconsidersthattheparticulartechnologyusedforthedeliveryofsignalsovertheinternetcannotbedeterminative.Basedonaplainmeaningoftheword,andrecognizingtheintentthatthedefinitionbetechnologicallyneutral,theCommissionconsidersthatthedeliveryofdatasignalsfromanoriginationpoint(e.g.ahostserver)toareceptionpoint(e.g.anend-user'sapparatus)bymeansoftheinternetinvolvesthe"transmission"ofthecontent.
40.Somepartiessubmittedthatthedefinitionof"broadcastingreceivingapparatus"wasnotintendedtocapturedevicessuchaspersonalcomputersorWebTVboxeswhenusedtoaccesstheinternet.TheCommissionnotesthatthedefinitionof"broadcastingreceivingapparatus"includesa"device,orcombinationofdevices,intendedfororcapableofbeingusedforthereceptionofbroadcasting".TheCommissionconsidersthataninterpretationofthisdefinitionthatincludesonlyconventionaltelevisionsandradiosisnotsupportedbytheplainmeaningofthedefinitionandwouldunderminethetechnologicalneutralityofthedefinitionof"broadcasting".IntheCommission'sview,devicessuchaspersonalcomputers,ortelevisionsequippedwithWebTVboxes,fallwithinthedefinitionof"broadcastingreceivingapparatus"totheextentthattheyareorarecapableofbeingusedtoreceivebroadcasting.
Transmissionofprogramsforreceptionbythepublic
41.Itisthereforenecessarytoconsiderwhetherthetransmissionofsoundsorvisualimages(oracombinationofsoundsandvisualimages)thatdonotconsistpredominantlyofalphanumerictextbymeansoftheinternetcanbesaidtoinvolvethetransmissionofprogramsforreceptionbythepublic.
42.Anumberofpartiessubmittedthatcontentthatis"customizable"doesnotconstitute"broadcasting".TheCommissionnotesthatpartieshaveusedtheterm"customizable"tomeandifferentthings.Forexample,somepartiescitedthenon-simultaneouscharacteristicofinternetservicesasabasisforwhichsuchservicescannotbeconsideredtobe"broadcasting".
35
43.TheCommissionconsidersitimportanttodistinguishbetweentheabilitytoobtaininternetcontent"on-demand"-thenon-simultaneouscharacteristicofinternetservices-andtheabilityoftheend-userto"customize",orinteractwith,thecontentitselftosuithisorherownneedsandinterests.
44.IntheCommission'sview,thereisnoexplicitorimplicitstatutoryrequirementthatbroadcastinginvolvescheduledorsimultaneoustransmissionsofprograms.TheCommissionnotesthatthelegislatorcouldhave,butdidnot,expresslyexcludeon-demandprogramsfromtheAct.Asnotedbyoneparty,themereabilityofanend-usertoselectcontenton-demanddoesnotbyitselfremovesuchcontentfromthedefinitionofbroadcasting.TheCommissionconsidersthatprogramsthataretransmittedtomembersofthepublicon-demandaretransmitted"forreceptionbythepublic".
45.TheCommissionconsiders,however,thatsomeinternetservicesinvolveahighdegreeof"customizable"content.Thisallowsend-userstohaveanindividualone-on-oneexperiencethroughthecreationoftheirownuniquelytailoredcontent.IntheCommission'sview,thiscontent,createdbytheend-user,wouldnotbetransmittedforreceptionbythepublic.TheCommissionthereforeconsidersthatcontentthatis"customizable"toasignificantdegreedoesnotproperlyfallwithinthedefinitionof"broadcasting"setoutintheBroadcastingAct.
46.Bycontrast,theabilitytoselect,forexample,cameraanglesorbackgroundlightingwouldnotbyitselfremoveprogramstransmittedbymeansoftheinternetfromthedefinitionof"broadcasting".TheCommissionnotesthatdigitaltelevisioncanbeexpectedtoallowthismorelimiteddegreeofcustomization.Inthesecircumstances,wheretheexperienceofend-userswiththeprograminquestionwouldbesimilar,ifnotthesame,thereisnonethelessatransmissionoftheprogramforreceptionbythepublic,and,therefore,suchcontentwouldbe"broadcasting".Thesetypesofprogramswouldinclude,forexample,thosethatconsistofdigitalaudioandvideoservices.
36
APPENDIXD-MCCARTHYTÉTRAULTANALYSIS,19.1
Analysis/Commentary—CanadaTaxService—McCarthyTétraultAnalysis,19.1--LimitationsreAdvertisingExpense,publishedbyThomsonReutersCanada(TaxnetPro(c))
AdvertisingonForeignBroadcasts
LastUpdated:2016-01-12
Overview
Section19.1,proclaimedinforcefromSeptember22,1976,prohibitsthedeductionofexpensesforadvertisingdirectedprimarilytotheCanadianmarketbyforeignradioandtelevisionbroadcasters.ThisprovisionappliesonlytoadvertisingexpenseincurredonorafterSeptember22,1976,subjecttocertaintransitionalreliefrelevanttoadvertisingcontractsalreadyenteredintoonthatdate.
Application
Intermssimilartothoseinsection19,section19.1extendsthebanonforeignadvertisingdirectedprimarilyatCanadianconsumersbyCanadiantaxpayerstoadvertisementsappearingonforeignradioandtelevisionbroadcasts.ThecostofanysuchcommercialsonorafterSeptember22,1976willnotbedeductibleasadvertisingexpensebyCanadiantaxpayers(subsection19.1(1)).Excepted,however,areoutlaysorexpensesmadeorincurredbeforeSeptember22,1977inrespectofcommercialsairedpursuanttoawrittencontractdatedpriortoJanuary24,1975,ortocertainshort-termwrittenagreementsenteredintoafterJanuary23,1975andbeforeSeptember22,1976(subsection19.1(2)).
InOntarioCraftmaticLtdvMNR,[1989]2C.T.C.2342,CanadiandealersofCraftmaticproductsattemptedtodeductpaymentsmadeastheirshareofcostsinconnectionwiththebroadcastingofcertainadvertisementsbyUStelevisionstations,contendingthatsuchexpenseswerenotfor“advertising”butforpurchaseofcustomer“leads”resultingfromresponsestothetoll-freenumberdisplayedintheadsforCanadianresidents.Alternatively,thetaxpayersmaintainedthattheexpenseswerenotdirectedprimarilytoamarketinCanada.EventhoughneitherthenameoftheCanadiandealernoritstelephonenumberappearedintheads,theTaxCourtofCanadaruledthatthecostsincurredconstitutedexpensesforadvertisementwhich,becauseoftheCanadiantelephonenumber,weredirectedspecificallyattheCanadianmarket.Accordingly,theexpenseswereheldtobenon-deductiblebyvirtueofsubsection19.1(1).
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APPENDIXE-MCCARTHYTÉTRAULTANALYSIS,19
Analysis/Commentary—CanadaTaxService—McCarthyTétraultAnalysis,19--LimitationsreAdvertisingExpense,publishedbyThomsonReutersCanada(TaxnetPro)
LimitationsreAdvertisingExpense
LastUpdated:2015-10-13
Overview
Thepurposeofsection19wassocioeconomicratherthanfiscalinnature.Itsoriginalobjectivesweretwofold:toplaceacurbonadvertisingbyCanadiantaxpayersinnon-CanadiannewspapersandperiodicalsaimedatCanadianmarketsvia“splitruns”(apracticewhichplacesCanadianpublicationsatacompetitivedisadvantage)andtoremovethelikelihoodofthecontrolovernewspapersandperiodicalspublishedinCanadafallingintoforeignhands(asituationconsideredprejudicialtoCanada'snationalinterests).BothoftheseinitialobjectivesweresoughtbymeansofthesingleexpedientofdisallowingasanexpenseofCanadiantaxpayersthecostofadvertisinginforeignpublicationsaimedattheCanadianmarketorinCanadianpublicationsnoteffectivelyownedbyCanadiancitizens.Themeasurewasexpectedtorenderbothpracticessounprofitableastobeprohibitive.
AsaresultoftheCanada-UnitedStatesFreeTradeAgreement,whichcameintoeffectonJanuary1,1989,however,section19wasamendedsothatitbecameinapplicablewithrespecttonewspapersandperiodicalsdatedafterDecember31,1988whichwouldmeetthequalificationsofaCanadianissueofaCanadiannewspaperorperiodicalexceptthattheywereprinted,ortheirtypewaswhollyset,intheUnitedStates,orpartlyprintedorsetinthatcountryandtheremainderinCanada.Theanti-avoidanceruleinsubsection19(8)wasenactedbySC1995,c46(BillC-103)whichalsoamendedtheExciseTaxActtoimposeanexcisetaxonsplit-runeditionsofperiodicals.SeeFinanceCanadaNewsRelease95-050reproducedbelow.
Section19partiallyimplementedtherecommendationsoftheO’LearyRoyalCommissionwhileatthesametimeenlargingthescopethereoftoembracenewspapersaswellasperiodicals.
FollowingtheMay26,1999announcementofanagreement-in-principlebetweenthegovernmentofCanadaandthegovernmentoftheUnitedStatesconcerningtheaccessofforeignperiodicalstotheCanadianadvertisingservicesmarket,itwasannouncedinaCanadianHeritageNewsReleasedatedJune4,1999thatthegovernmentshadsignedaformalAgreementonPeriodicals.AspartofthisAgreement,CanadaagreedtoamendBillC-55(theForeignPublishersAdvertisingServicesAct)aswellastheIncomeTaxAct.Accordingly,section19wasamendedin2001,applicableinrespectofadvertisementsplacedinanissuedatedafterMay2000,sothatadvertisementsinperiodicalsareexcludedfromtheambitofsection19.Rulesconcerningthedeductibilityofexpensesforcertainadvertisementsinperiodicalscontainingspecifiedlevelsoforiginaleditorialcontentarenowsetoutinsection19.01.Section19.01permitsfulldeductibilityofexpensesforadvertisementspublishedinissuesofperiodicalsthatcontainatleast80percentoriginaleditorialcontent,and50percentdeductibilityforadvertisingexpensesinotherperiodicals,regardlessoftheownershipoftheperiodical.Section19willnotprecludethedeductionofanotherwisedeductibleadvertisingexpenseforanadvertisementinanon-CanadiannewspaperorperiodicalthatisdirectedatamarketlocatedoutsideCanada(seeforexampleCRAViewsDocNo2004-0071381E5).
Application
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Asalreadyexplained,section19isintendedtoprecludeobjectionablepracticeswithsocialoreconomicconsequences.Ifitsobjectivesareattained,itfollowsthatitwillhavenoincometaxconsequenceswhateverandwillbewithoutapplicationinpractice,beingprohibitiveinnatureratherthanoperational.However,theprincipalfeaturesofthisprovision—whichappliestoanyissueofa“non-Canadian”newspaper—arebrieflyreviewedbelow.
StatutoryExceptions
A“Canadianissue”ofa“Canadiannewspaper”(discussedbelow)isexceptedfromtheoperationofsection19byparagraph19(1)(a).Amostsignificantexceptiontothesectionisfoundinparagraph19(1)(b)applyingtoanissueofanewspaperwhichwouldqualifyasaCanadianissueofaCanadiannewspaperexceptforthefactthat:(i)itstypewaswhollysetintheUnitedStates,orwaspartlysetintheUnitedStatesandtheremainderinCanada,or(ii)itwaswhollyprintedintheUnitedStates,orpartlyprintedinthatcountryandtheremainderinCanada.Forthepurposesofsection19,“UnitedStates”doesnotincludePuertoRico,theVirginIslands,GuamoranyotherUnitedStatespossessionorterritorybutincludesareasbeyondtheterritorialseasoftheUnitedStateswithinwhichitmayexerciserightswithrespecttotheseabedandsubsoilandthenaturalresourcesthereofaccordingtointernationalandUnitedStateslaw.
PriortotheamendmentsmadeapplicableinrespectofadvertisementsplacedinanissuedatedafterMay2000,theintroductorywordstosubsection19(1)referredtoanissueofanewspaperorperiodical,paragraph19(1)(a)referredtoaCanadianissueofaCanadiannewspaperorperiodicaldatedafter1975,andparagraph19(1)(b)referredtoanissueofanewspaperorperiodicaldatedafterDecember31,1988thatwouldbeaCanadianissueofaCanadiannewspaperorperiodicalexceptforthecircumstancesdescribedinsubparagraphs19(1)(b)(i)and(ii)discussedabove.
Exceptedfromtheeffectofsection19priortoJanuary1,1976wasanynewspaperorperiodicalwhich,thoughforeign-owned,wasregularlypublishingspecialCanadianeditionsthroughoutthe12monthsprecedingApril26,1965(theBudgetdate)andcontinuedtodosothereafterwithoutinterruption,providedthattheCanadianeditionswereatleastpartlyeditedinCanadaandwereprintedandpublishedinCanada(formersubsec19(2)).
Alsoexceptedfromtheapplicationofsection19arespecialtwice-yearly(orlessfrequent)issuesofforeignpublications(subsec19(3)).
“CanadianIssue”
ApplicableinrespectofadvertisementsplacedinanissuedatedafterMay2000,a“Canadianissue”ofanewspaperisdefinedinsubsection19(5)tomeananissue(includingaspecialissue)meetingthefollowingfourconditions:
(iv) itstype(exceptthetypeforadvertisementsorfeatures)mustbesetinCanada;
(ii)alloftheissue(exclusiveofanycomicssupplement)mustbeprintedinCanada;
(iii)itmustbeeditedinCanadabyindividualsresidentinCanada;and
(iv)itmustbepublishedinCanada.
Asformerlydefinedinsubsection19(5),a“Canadianissue”ofanewspaperorperiodicalwasoneofwhichthetype(exceptforadvertisementsorfeatures)wassetinCanadaandwhichwasprintedinCanada(exceptforcomics),
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editedinCanadabyCanadianresidents,andpublishedinCanada(formerpara(a)ofthedefinition).Twoexclusionsapplicabletoperiodicalswereprovidedforinformersubparagraphs(b)(v)and(vi)ofthedefinition,notablyinthecaseofanissueofaperiodicalthecontentsofwhich,excludingadvertisements,weremorethan20percentthesameasthecontentsofoneormoreissuesofoneormoreperiodicalsprinted,editedorpublishedoutsideCanada.
“CanadianNewspaper”
ForanewspapertoqualifyasCanadian,theexclusiverightofpublicationmustbelongtoCanadiancitizens,HerMajestyinrightofCanadaoraprovince,amunicipalityinCanada,orotherentitiesmeetingspecifiedrequirements.Ifthepublicationrightisheldbyanassociationorsociety,atleastthree-fourthsofitsmembersmustbeCanadiancitizens.Ingeneralterms,ifsuchrightisheldbyapartnershiporcorporation,atleastthree-fourthsoftherealownershipmustbelongtoCanadiancitizensorqualifyingcorporations.(Furtherdiscussionisprovidedbelowunderseparateheadings.)Ifsuchrightisthepropertyofatrustorestate,itdoesnotqualifyunlesseachbeneficiarythereoffallsintooneoftheforegoingcategories(subsec19(6)).
PriortoamendmentsmadeapplicableinrespectofadvertisementsplacedinanissuedatedafterMay2000,subsection19(5)definedtheterm“Canadiannewspaperorperiodical”inthesamemanner.
DeemedCanadianCitizens
Aspecialdeemingrulewasaddedinsubsection19(5.1),applicablegenerallyinrespectofadvertisementsplacedinanissuedatedafterJune1996.However,initsapplicationtoadvertisementsplacedinanissuedatedafterJune1996andbeforeJune2000,referencesinthesubsectionto“Canadiannewspaper”aretobereadasreferencesto“Canadiannewspaperorperiodical”.
AccordingtotheMarch16,2001ExplanatoryNotes,subsection19(5.1)extendsthemeaningofCanadiancitizenforsection19purposestoensurethatCanadianpensionfundsandcertainotherentities(asdescribedinparagraphs(a)to€)thatmayownCanadiannewspapersareconsideredtobeCanadiancitizensforthepurposeoftheownershiprequirements.Inthecaseofperiodicals,theamendmentappliesfromJuly1996toMay2000,asnationalityofownershipceasestoberelevantinthecontextofperiodicalsafterMay2000.
ThefollowingentitiesaredeemedtobeCanadiancitizensforpurposesofsection19:
•pensiontrustsorpensioncorporationsdescribedinparagraph149(1)(o)or(o.1)formedinconnectionwithapensionplanexistingmainlyforthebenefitofCanadiancitizens;
•anRRSPorRRIFtrusthavingaCanadiancitizenasitsannuitant;
•amutualfundtrust,exceptwherethemajorityofitsunitsareheldbycitizensorsubjectsofaforeigncountry;
•atrustofwhicheachbeneficiaryisaperson,partnership,associationorsocietydescribedinanyofparagraphs(a)to€ofthedefinition“Canadiannewspaper”;and
•aperson,associationorsocietydescribedinparagraph€or(d)ofthedefinition“Canadiannewspaper”(ie,thefederalorprovincialgovernmentoramunicipalityinCanadaandassociationsorsocietiesofwhichatleast¾ofthemembersareCanadiancitizens).
ExclusiveRighttoPublishHeldbyaPartnership
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Whereapartnershipholdsanexclusiverightofpublication,paragraph(b)ofthedefinition“Canadiannewspaper”requiresthatinterestsinthepartnershiprepresentinginvalueatleastthree-fourthsofthetotalvalueofthepartnershippropertybebeneficiallyownedbyCanadiancitizens,corporationsdescribedinparagraph€ofthedefinition,oracombinationofCanadiancitizensandsuchcorporations,andthatatleastthree-fourthsoftheincomeorlossofthepartnershipfromanysourcemustbeincludedindeterminingtheincomeofsuchpersonsorcombinationsofsuchpersons.Priortothe2001amendmentsmadeapplicableasdescribedabove,paragraph(b)ofthedefinition“Canadiannewspaperorperiodical”setouttheserequirementsinrespectofapartnershipholdinganexclusiverightofpublicationthatwasacquiredafterJuly13,1990.Theserequirementscouldhaveappliedwithrespecttorightsreferredtoinparagraph(b)thatwereacquiredafter1988wheretheacquireroftherightsoelectedbynotifyingtheMinisterofNationalRevenueinwritingbefore1992(bysection159ofSC1993,c24,ifsuchanelectionwasmadebeforeDecember11,1993,itwasdeemedtohavebeenmadebefore1992).
Priortothe1991amendments,itwasrequiredthatatleastthree-fourthsofthemembersofapartnershipowninganexclusiverighttopublishbeCanadiancitizensandthatinterestsinthepartnershiprepresentingatleastthree-fourthsofthetotalvalueofthepartnershippropertybebeneficiallyownedbyCanadiancitizens.
ExclusiveRighttoPublishHeldbyaCorporation
Wheretheexclusiverighttopublishisheldbyacorporation,paragraph€ofthedefinition“Canadiannewspaper”requiresthatthecorporationbeincorporatedunderCanadianorprovinciallawsandthatitschairpersonorotherpresidingofficerandatleastthree-fourthsofitsdirectors(orsimilarofficers)beCanadiancitizens.Inaddition,subparagraph€(iii)setsoutrequirementsconcerningownershipofthecorporation’ssharecapital.Theserequirementswereformerlysetoutinthedefinition“Canadiannewspaperorperiodical”.WithrespecttorightsthatareacquiredafterJuly13,1990(oracquiredafter1988wheretheacquirermakesatimelyelectioninwriting)apubliccorporationmusthaveaclassorclassesofitsshareslistedonadesignatedstockexchangeinCanada(formerlyaprescribedshareexchangeinCanada;seethecommentarytosection262)andmaynotbecontrolledbycitizensorsubjectsofacountryotherthanCanada.SeethespecialapplicationrulediscussedbelowconcerningtheacquisitionofrightsbycitizensorsubjectsofacountryotherthanCanadaorcorporationscontrolledbysuchindividuals.
Ifthecorporationisnotapubliccorporation,atleastthree-fourthsofitsshareswithfullvotingrightsandshareshavingatotalfairmarketvalueofatleastthree-fourthsofthefairmarketvalueofallthecorporation’sissuedsharesmustbebeneficiallyownedbyCanadiancitizensorbypubliccorporationsdescribedabove.Aspecial“see-through”ruleisprovidedforthesepurposeswheresharesofaclassofacorporation’scapitalstockareownedordeemedtobeownedbyaholdingcorporationotherthanapubliccorporationwithshareslistedonadesignatedstockexchange(formerlyaprescribedstockexchange;seethecommentarytosection262).Theruletreatseachshareholderoftheholdingcorporationasowningthatproportionofthecorporation’ssharesofthatclassthatthefairmarketvalueoftheholdingcompanysharestheshareholderthenownsisofthefairmarketvalueofalltheissuedandoutstandingsharesoftheholdingcompany.Similarly,wheresharesofaclassofacorporation’scapitalstockareownedordeemedtobeownedbyapartnership,eachmemberthereofisdeemedtoowntheleastproportionofsharesofthatclassthatthemember’sshareofthepartnership’sincomeorlossfromaparticularsourcefortherelevantfiscalperiodisofthepartnership’sincomeorlossfromthatsourceforthatfiscalperiod.Furthermore,forpurposesofdeterminingthisproportion,wherethepartnership’sincomeandlossfromanysourceforafiscalperiodarenil(sothatthemember’sincomeinterestwouldnotbedeterminable),thepartnershipisdeemedtohavehadincomefromthatsourceforthatperiodequalto$1,000,000.
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Priortotheseamendments,itwasmerelyrequiredthatatleastthree-fourthsoftheshareshavingfullvotingrightsandsharesrepresentingatleastthree-fourthsofthecorporation’spaid-upcapitalbebeneficiallyownedbyCanadiancitizensorbycorporationsotherthancorporationscontrolledbycitizensorsubjectsofacountryotherthanCanada.
SpecialApplicationRule
WhereafterJuly13,1990anindividualwhoisacitizenorsubjectofacountryotherthanCanada(oracorporationcontrolledbysuchanindividualorindividuals)acquiresinanarm’slengthtransactionmorethanone-fourthofacorporation’sshareshavingfullvotingrightsorshareshavingatotalfairmarketvalueofmorethanone-fourthofthefairmarketvalueofallthecorporation’sissuedshares,thecorporationofwhichsuchsharesareacquiredandanycorporationcontrolledbyitaredeemedtohaveacquiredatthattimeanypublication/productionrightreferredtothedefinitionthatitthenowns.
SavingProvision
Becausethestatusof“Canadiannewspaper”(previously,of“Canadiannewspaperorperiodical”mightbeunavoidably,iftemporarily,lost(forexamplethroughthedeathoftheowneroroneofthepartownersofthepublicationright),a12-monthgraceperiodisallowedthroughoutwhichthepreferredstatusisregardedascontinuing,thusaffordinganopportunityforthepublicationtoregainitsCanadianstatuswithoutinterruption,ifpossible(subsec19(7)).SeeforexampleCRAViewsDocNo2003-0048425.
Anti-avoidanceRule(subsection19(8))
Subsection19(8)deemsanewspapernottobeaCanadiannewspaperatanytimethatapersonorpartnershipnotdescribedinpara(a),(b),(c),(d)or€ofthedefinition“Canadiannewspaper”hasanyinfluence(directorindirect)thatwouldresultincontrolinfactofapersonorpartnershipholdingapublicationright.PriortotheamendmentsmadeapplicableinrespectofadvertisementsplacedinanissuedatedafterMay2000,subsection19(8)deemedanewspaperorperiodicalnottobeaCanadiannewspaperorperiodicalwheresuchapersonorpartnershiphadanysuchinfluence.ThisruleappliedgenerallyafterDecember15,1995.HoweveritdidnotapplywheretheinfluencethatwouldresultincontrolinfactaroseasaconsequenceofatransactionorseriesoftransactionscompletedbeforeApril1993.
ThefollowingFinanceCanadaNewsRelease(No95-050,datedJune15,1995)explainsthecontextinwhichformersubsection19(8)wasenacted.
NOTICEOFWAYSANDMEANSMOTIONTOAMENDTHEEXCISETAXACTANDTHEINCOMETAXACTTABLEDINTHEHOUSEOFCOMMONS
MinisterofNationalRevenue,DavidAnderson,onbehalfofFinanceMinisterPaulMartin,todaytabledintheHouseofCommonsaNoticeofWaysandMeansMotiontoamendtheExciseTaxActandtheIncomeTaxAct.
TheamendmentsproposedinthemotionwillimplementtwomeasuresthatwereannouncedbyCanadianHeritageMinisterMichelDupuyinDecember1994inthegovernment’sresponsetotheReportoftheTaskForceontheCanadianMagazineIndustry.Thesemeasuresmaintainthegovernment’slong-standingpolicyrespectingCanadianmagazinesandunderscorethefederalcommitmenttosupportthecontinuedexistenceofaviableandoriginalCanadianmagazineindustry.Theyincludeanexcisetaxonsplit-runeditionsofperiodicalsandananti-avoidancerulerelatingtothedeductibilityofadvertisingexpenseinnon-Canadiannewspapersandperiodicals.
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TheproposedamendmentstotheExciseTaxActwillimposeanexcisetaxattherateof80%ofthevalueofalltheadvertisementscontainedinaCanadiansplit-runedition.Asplit-runeditionisaneditionthatisdistributedinCanada,thatcontainsmorethan20%editorialmaterialthatisnotoriginaltotheCanadianmarketandthatcontainsoneormoreadvertisementsdirectedatCanadians.
Thetaxwillbepayablebytheresponsiblepersoninrespectofthesplit-runedition.Dependingonthecircumstances,theresponsiblepersonwillbethepublisher,apersonconnectedwiththepublisher,thedistributor,theprinterorthewholesaleroftheedition.Personsconnectedwiththeresponsiblepersonwillbejointlyandseverallyliableforpaymentofthetax.
Certainexistingsplit-runperiodicalswillbegivenlimitedgrandfatheringtreatment.Theywillbeexemptedfromthetaxbasedonthenumberofsplit-runeditionsthatweredistributedinCanadaduringthetwelve-monthperiodendingonMarch26,1993.
Thenewexcisetaxwillapplytosplit-runeditionsthatarepublishedafterthelegislationimplementingthetaxreceivesRoyalAssent[December15,1995]
TheproposedamendmenttotheIncomeTaxActwilladdananti-avoidanceroletosection19oftheAct.Thatsectionprovidesrulesrestrictingthedeductibilityofexpensesoftaxpayersinrespectofadvertisinginnon-CanadiannewspapersorperiodicalswheretheadvertisingisdirectedprimarilytoamarketinCanada.Thepurposeofthenewanti-avoidanceprovisionistoensurethatCanadiannewspapersandperiodicalsarecontrolledinfactbyCanadians.
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APPENDIXF-ABOUTTHEAUTHORS
DAVIDKEEBLE,B.A.(POLISCI);B.MUS.(COMPOSITION)
DavidKeeblehasbeenanindependentconsultantsince1998.PriortothathewasSeniorDirectorofStrategicPlanningandRegulatoryAffairsfortheCBC,andbeforethat,anExecutiveProduceratCBCRadio.HealsoservedasSeniorVice-PresidentofPolicyandRegulatoryAffairsattheCanadianAssociationofBroadcasters(CAB)from2004to2006.
Hisconsultingpracticehasincludedmajorstudiesforgovernmentdepartmentsandagencies,aswellasbroadcastersanddigitalmediacompanies,publicandprivate.FortheOntarioMinistryofTourismandCulture(“MTC”),hewroteamajorstudyofdigitalmedia,co-wrotewithPeterMillerarecent(2010)studyonthefutureofbroadcasting,assistedwithstrategyandpresentationmaterialsforCRTCappearances,analyzedbroadcastingbusinessplansand,withPeterMiller,developedafiveyearstrategicplanfortheOntarioMediaDevelopmentCorporation(“OMDC”).
FortheCRTC,hehasundertakenmanystudies,whichinrecentyearsincludedapaperonthepotentialextensionofthesimultaneoussubstitutionregime,genredefinition,andtwostudiesoncommunitytelevision.From1999-2006,heprovidedtheExecutiveTechnologyImpactAnalysistotheCommissionandalsototheDepartmentofCanadianHeritageandBellCanada.Thisregularseriesofstudiesandpresentations,whichsynthesizedinterviewmaterialandharddataandprovidedindependentanalysis,projectedfuturebusinessandpolicyimplicationsinbothtraditionalandinteractivedigitalmedia,amongothertopics.
FortheDepartmentofCanadianHeritage,heco-researchedandco-wroteamajorstudyofthetransformationofthevaluenetworksofculturalproductsasaresultofdigitaltechnology,asdescribedabove.
HealsoprovidedseveralpaperstotheLincolnCommittee(theParliamentaryStandingCommitteeonCanadianHeritage)duringtheirtwoyearstudyofthebroadcastingsystem,andcontributedtotheirfinalreport.
Intheareaofnewmedia,inadditiontotheCRTCandMinistryofCulturestudiesnotedabove,KeebledevelopedthefirstnewmediastrategyfortheCBC,severalpapersononlineandinteractivestrategyfortheCAB,andworkedwithAstralMediaontheirsubmissionstotheCRTC’s2011-12reviewoftheNewMediaExemptionOrderandtheirresponsetotheDigitalEconomyconsultation.
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PETERMILLER,P.ENG.,LL.B.
PeterMillerisacommunicationslawyerandengineerwithover25yearsofcreativeandtelecommunicationsindustryexperience,inbothprivatepracticeandseniorexecutivepositions.Since2006,hehasactedasanadvisortoselectclientsinthepublicandprivatesectors,specializingontheimpactofdigitaltechnology.
Peter’slegalpracticeislargelyfocussedonmedia,butiswiderangingintermsofthetypesofclientsandnatureofassignments.Clientshaveincludednumerousprivateentities,suchasBell,CHCH-TV,CMPA,Corus,Shaw,Astral,Acadia,Newcap,RogersMediaandsmallerindependentandethnicbroadcasters,aswellasnumerouspublicentities,includingtheCRTC,CanadianHeritage,CMF,CompetitionBureau,CityofMississauga,OMDCandtheOntarioMinistryofTourism,CultureandSport.Assignmentsthemselveshaveincludedlegalandregulatoryadvocacythroughpublicpolicy,strategicplanningandeconomicimpactexercises.
Overthepastdecade,Peterhasresearchedandauthoredanumberofpublicandprivatereportsrelatingtocreativeindustries,digitalmediatrends,convergenceandthefutureproductionandmedialandscape.TheseincludefourstudiesontheCanadianProgramRightsMarket(2007,2011,2012&2014),threebroadcastingenvironmentalscans(2014&2016onTV;2014onradio),twostudiesofover-the-airOTATelevision(2009&2015),oneongenreprotection(2013),oneonoverthetop(OTT)television(2015),andtwoonNewMediaandConvergence(2007),inadditiontostudiesundertakenwithDavidKeeble.
AdditionalBackground
Peter'sprofessionalbackgroundincludesprivatepracticeincommunicationslaw,andseniorbroadcastexecutivepositions.
FromJune2008toMay2009,PeterwasChiefOperatingOfficerforS-VOX,theVisionTVgroupofcompanies.Inthiscapacityheoversawtheorganization’soperationsandbroadcastinfrastructureaswellasitsmarketing,communications,advertisingsales,businessdevelopment,legal,regulatoryandaffiliaterelationsfunctions.
From2002to2005,PeterheldthepositionofVicePresident,PlanningandRegulatoryAffairsforCHUMLimited,wherehewasthekeystrategicadvisoronindustrydevelopmentsandgrowthopportunitiesforCHUMLimited,aswellasbeingresponsibleforallfacetsofCRTCregulatoryaffairsandgovernmentrelations.PriortojoiningCHUMin1998,PeterwasSeniorVice-PresidentandGeneralCounseltotheCanadianAssociationofBroadcasters(CAB),responsibleforallpolicyandlegalissuesforradio,specialtyandtelevision.
PeterMillerbeganhiscareerintelephonenetworkdesignatBellNorthernResearchinOttawa.HisexperiencealsoincludesservingasaParliamentaryAssistantintheHouseofCommons.
Peterisafrequentindustrycommentatorwhohasbeenactivelyinvolvedinnumerousindustryboardsandcommittees.PeteristhepastChairofInteractiveOntario,pastchairoftheCABSpecialty&PayServicesBoard,pasttreasurerofCanadianDigitalTelevisionandacurrentmemberoftheCentreforAddictionandMentalHealthConstituencyCouncilandTorontoFilmBoard.
FormoreinformationonPeter,pleasecontacthimatinfo@petermiller.ca.
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