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.

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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

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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.

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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.

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advertisement…broadcastbyaforeignbroadcastingundertaking”.Allthatmattersisthatitisanadvertisement,andthatitistransmittedbyaservicethatisaforeignbroadcastingundertaking.Theformoftheadvertisementitselfisnotaconsideration.

• AnothergeneralquestioniswhethertheadsaretargetedtoaCanadianmarket.Withalloftheseservices,algorithmsthattrackusers’internetbehaviourcanensurethatadsbylocalretailersinCanadaaretargetedtotheirdomesticmarket.

YOUTUBE

ThecontentprovidedonYouTubeclearlylieswithintheCRTC’sdefinitionofbroadcasting:videoiswhatinternetconsumersgotoYouTubetosee.Thereisasectionoftextcommentsattachedtoeachvideo,butthecommentsareclearlysupplementarytothevideo–withoutthevideothecommentsaremeaningless,whereasthevideoitselfismeaningfulcontenteveniftherearenotextcomments.YouTubeisclearlyaNewMediaBroadcastingUndertakingandthecostofadvertisingplacedonYouTubeisclearlynon-deductible31.

FACEBOOK

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.

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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

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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.