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Report of the Journalism and Written Media Independent Panel of Experts

July 16, 2019
Ottawa

For:
Hon. Pablo Rodriguez, Minister of Canadian Heritage and Multiculturalism
Hon. Bill Morneau, Minister of Finance

Dear Ministers:

The Journalism and Written Media Independent Panel of Experts has completed its work and is presenting to you its final report and recommendations for the effective and equitable implementation of the tax measures in support of Canadian news media provided in Budget 2019.

The Panel would like to thank the Government for introducing this program, which recognizes the important role that written journalism outlets fulfill in preserving democracy in communities across Canada. These tax credits offer important support for many organizations that provide general interest news to Canadians.

The Panel wants to stress that this program alone will not be enough to prevent the disappearance of many essential sources of information, especially small local news media outlets that are not covered by the Budget 2019 measures and that are extremely vulnerable. Other support programs should be considered. It has been well-documented that the written news media industry is in crisis. It is estimated that foreign-owned digital media such as Google and Facebook will take $7 billion in advertising dollars out of the Canadian economy this year. Daily newspaper ad revenues are half what they were a decade ago. According to data compiled by the Local News Research Project, more than 250 Canadian news outlets have closed in the past decade. The Public Policy Forum's Shattered Mirror report found one-third of journalism jobs disappeared in Canada over a six-year span. Digital-only news outlets are not filling the gap, and foreign-owned digital companies are not funding the creation of Canadian news in any significant way, despite benefiting from the work done by traditional news outlets. The tax credits program, as positive as it is, will not suffice to counter these disastrous effects.

We urge the Government to move quickly to implement these fiscal measures now that the budget legislation has been proclaimed so that news organizations facing layoffs and closures can be certain of receiving much needed help. To that end, the Panel has provided clear definitions of general news and eligible newsroom employees so that written news outlets can assess whether they are Qualified Canadian Journalism Organizations for the purposes of these tax credits and so that the Canada Revenue Agency can assess applicants, as it does for other tax credit programs. We have provided unambiguous and objective criteria that have wide agreement among the many organizations represented by the Panel. We have left little room for subjective judgment calls. Our goal was to clearly identify the news outlets eligible for this particular Government program and not to try to determine some kind of status as an "approved journalism organization."

In the interests of moving quickly, we have recommended that the tax credits be implemented and administered directly by the Canada Revenue Agency. We have recommended that the Government appoint an advisory body, with members drawn from the faculty of post-secondary journalism schools across Canada, to assist the Minister of National Revenue with this program.

We recommend that the advisory body not certify all Qualified Canadian Journalistic Organizations, but that the CRA refer matters to the advisory body when the CRA has questions about whether an application meets the journalistic criteria of the program. We will supply names of suggested appointees to this advisory body under separate cover for privacy reasons. The Government will make public the names of the final appointees.

We have made a number of other recommendations to improve this program and to further help written journalism organizations, especially smaller outlets, and those representing minority-language and ethnic communities. These publications, print and digital, are vital to their many readers, and are often the only independent news media serving a community. Most do not qualify for existing government assistance programs.

While Government help is welcome, it does not replace Government advertising or compensate for its disappearance. We urge the Government to make a commitment to spend a substantial portion of its annual advertising budget in written news media, as it once did. News outlets in print and digital formats reach larger audiences than ever. They efficiently reach Canadians and are an effective way of communicating important public messages. Yet the Government spends little on these platforms, while directing money to foreign-owned digital companies that do not fund Canadian newsrooms.

Further, a longer-term solution must be found to preserve the ability of our society to receive original, independent reporting on matters of public interest. Governments in other countries, including Great Britain and Australia, have taken a comprehensive approach to the challenges posed by foreign-owned digital firms dominating social and search media, while not facing the same regulation and taxation of legacy media companies. Organizations that benefit from Canadian news content should be required to participate in its financing. Unless this is addressed, new business models will not emerge to support independent journalism in Canada, and the result will be a less informed and less engaged public.

The need is urgent. There has been a significant amount of consultation and study over the past four years, including work done by the House of Commons Standing Committee on Canadian Heritage and the Public Policy Forum. The crisis in the written news media industry, and its causes, are well known. Possible solutions have been identified to help sustain independent journalism in Canada for the long term. We are glad the Government has acted with this program, but stress that more needs to be done.

In conclusion, the Panel would like to thank the Government for providing us with the opportunity to help shape this very important program. We remain available to answer questions regarding our report and recommendations.

Sincerely,

Bob Cox,
Chair, Journalism and Written Media Independent Panel of Experts, on behalf of Esther Enkin, Brad Honywill, Pierre-Paul Noreau, Brenda O'Farrell, Thomas Saras, Pascale St-Onge, and Pierre Sormany

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Members

Proposed interpretation rules

First step: accreditation as a Qualified Canadian Journalism Organization (QCJO)

  1. The qualified journalistic organization must devote its time primarily to the production of original written news content for Canadian audiences, regardless of the language of publication. Furthermore:
    • It has been in operation for at least 12 months before presenting its application;
    • It has published at least 10 editions in the last 12 months;
    • In the case of web sites that offer video and audio content, at least 60% of the content is written.
  2. Internal publications of companies, private or public bodies, or associations are excluded.
  3. The term written news content, as used in the legislation, covers the editorial content of a publication. It includes news, features, investigations, profiles, interviews, and analyses or commentaries, based on journalistic processes and principles, intended for a general audience.

    Journalistic processes and principles include:

    • a commitment to researching and verifying information before publication;
    • the consistent practice of providing rebuttal opportunity to those being criticized and presenting diverse perspectives and analyses;
    • an honest representation of sources;
    • a policy for correcting errors.

    The following elements are not considered as editorial content: advertisements, listings, catalogues, directories, guides, financial reports, schedules, calendars, timetables, comics, puzzles, games and horoscopes. Advertisements include promotional content, sponsored content, branded content (any content where a third party or an announcer, advertising client or business partner, participates in the development of the concept or directs or gives final approval to a large portion of this content) as well as stories produced primarily for industrial, corporate or institutional purposes.

  4. Original news content (or original editorial content) is content for which research, writing, editing and formatting are conducted by and for the organization. This original content must represent more than 50% of the publication's editorial content, over the course of the year. The rewriting, translation, reproduction or aggregation of news from external sources (including articles from news agencies or those reproduced from other publications) is not considered original news content. The publication of this type of content must not represent the principal activity of the journalistic organization, in order for it to be eligible.
  5. To be considered as an eligible QCJO, the publication must cover democratic institutions and processes.
    • Democratic institutions include legislatives bodies, municipal councils, courts of justice, school boards, etc.
    • Democratic processes have a broader scope, and include all issues of public interest that may come before government or any other public decision body.
  6. Furthermore, the publication must be considered to be of general interest. This means that:
    • it is aimed at the general public (lay persons), rather than to specialists in a specific field;
    • it covers a diversity of topics, in at least 3 of the following 9 areas: local news; national news; international news; social issues (health, education, faith and ethics, etc.); business and economy; sports; culture; science and technology; environment.
  7. Content can be of general interest even if it is intended for a local or for a specific cultural community.
  8. The expression "regularly employs" means that these journalists normally work for the given news organization, either full-time or part-time, even if their position is temporarily unoccupied.
  9. The term "journalists" should be understood in the broad sense given to it by media companies and professional associations of journalists, and includes all newsroom employees who exercise journalistic judgement in selecting, planning, assigning and producing news content, including the research and collection of facts, data analysis, writing and copy editing, fact-checking, illustration, photography and videography, graphic presentation and adaptation of news content to digital formats.

    Journalistic judgement lies in the consideration of importance, timeliness, public interest, balanced coverage, fairness, sensitivity to public mores and values, the placement and prominence of photos, titles and the elements of articles, and of artistic value.

    The following tasks do not fall within the definition of journalistic work:

    • solicitation, drafting or production of advertising;
    • advertorials, sponsored content, branded content (any content where a third party or an announcer, advertising client or business partner, participates in the development of the concept or directs or gives final approval to a large portion of the content);
    • stories produced primarily for industrial, corporate or institutional purposes;
    • editing content that is entirely or principally written by algorithms or collated by aggregation software.
  10. The term "non-arm's length" generally refers to persons who are related by family ties under Canadian tax law.
  11. The following types of publications are not eligible as Qualified Canadian Journalistic Organizations for the purposes of this law:
    • publications produced by or for an organization that primarily reports on the activities or promotes the interests of the organization itself;
    • publications produced by or for an organization providing goods or services in which the main goal of the publication is to promote the sales of these goods or services;
    • publications that receive funding from foreign entities, including foreign governments, organizations and individuals, that influence editorial content;
    • the publications of professional associations;
    • publications produced by or for a government, a Crown Corporation or a government agency;
    • publications whose editorial content is primarily reproduced or repeated from current or previous issues of the same or other publications;
    • publications with editorial content that totals more than 50% of the following, singly or in combination: listings, catalogues, directories, guides, financial reports, schedules, calendars, timetables, comics, puzzles, games and horoscopes;
    • pamphlets and other publications whose editorial content consists mainly of opinion texts;
    • publications used for the diffusion of hate content;
    • loose-leaf publications.

First program: Digital News Subscription Tax Credit

N. A.

Second program: Refundable Labour Tax Credit for QCJO's

  1. For this refundable tax credit, the legislation uses the term "eligible newsroom employees" rather than "journalists", but it specifies that only employees that devote 75% of their time to the production of original news content can be counted for the tax credit, which blends well with the definition of "journalist" found in the first section (point No. 9).
  2. These employees include managers and journalists who work in the planning and production of original news content, including research and collection of facts, data analysis, reporting, writing, fact-checking and copy editing, illustration, photography and videography, graphic presentation and adaptation of news content to digital formats.
  3. They are considered part of the "newsroom" even if they do not physically work at the media organization's offices.
  4. For this income tax credit, all employees, including those who are not at arm's length from the owner, are eligible.

Third program: QCJO registered as Qualified Donee

N. A.

Journalism and Written Media Independent Panel of Experts

Recommendations on the appointment of a second administrative panel

The Panel recommends:

  1. Applications for funding shall first be reviewed by the Canada Revenue Agency (CRA). If the CRA does not have any questions regarding journalistic criteria, the applications shall be immediately approved or rejected without referral to the second panel. If the CRA has questions regarding journalistic criteria, such as "what is general interest news" or "what is an eligible newsroom employee," it shall refer such questions to the second panel. For clarity, the second panel will not be involved in the general review or certification of applications. Its function is to rule on the journalistic criteria only when a case is referred to it by the CRA.
  2. The Government appoint an advisory body to fulfill the role outlined in Sec. 1, above. This body should be composed of up to five appointees drawn from the faculty, active or retired, of post-secondary journalism schools across Canada, with consideration for the linguistic, cultural and ethnic diversity of the country. At least one should have specific interest in news media serving ethnic and minority communities.
  3. The qualifications for panel members should include that they:
    1. support the package of tax credits to help written news outlets covering general interest news
    2. have a broad knowledge of written journalism in print and/or digital formats
    3. represent the regions of Canada
    4. reflect the diversity of Canada, including Canada's Indigenous population

General recommendations of the Journalism and Written Media Independent Panel of Experts

Many print media outlets in Canada have shuttered their doors in recent years and the dire economic circumstances that existing outlets continue to face threaten several with possible failure in the coming months. The precarious state of the economic viability of Canadian written media outlets (print and digital) is not limited to affecting the tens of thousands of individuals who work in the industry, but holds serious repercussions for all Canadians as it threatens to cripple the public's right to access credible and reliable information and denies Canadians their right to be informed about their democratic institutions at all levels.

The Budget 2019 program that offers refundable tax credits on the salaries paid to journalists, and gives tax credits to citizens (for their digital subscriptions to written news organizations or for their donations to not-for-profit news organizations) is an important measure. However, it is far from offering a sufficient solution for the loss of advertising revenues in written news media, and will not resolve the challenges the written news media and Canadians' right to be informed, unless it is amended and/or complemented by other measures. Other federal programs exist for written media and the Government should do a general review to ensure the measures provide coherent and sufficient support.

Therefore, it is the view of this Panel that the Government should consider the following recommendations:

  1. The need for immediate action is crucial, and the Government should implement the measures outlined in the 2019 Budget immediately without delay to allow media firms to apply to become a Qualified Canadian Journalism Organization by Q4 2019.
  2. The Federal Government should commit to buying substantial advertising in Canadian written media outlets, print and digital, including Indigenous and third-language ethnic press publications.

For the proposed initiative, the Government should consider the following amendments

  1. Raising the salary cap applicable for the tax credit to $85,000.
  2. Raising the percentage of salary allowable for the tax credit to 35 per cent.
  3. Increasing the digital subscription tax credit to 25 per cent from 15 per cent.
  4. Amending Subsection 149 (1) of the budget legislation to allow charitable foundations that support journalism, but do not specifically meet the criteria of being a Qualified Canadian Journalism Organization, to be recognized as qualified donees that can provide tax receipts to donors. The current legislation excludes organizations such as Les Amis du Devoir, which have a long history of supporting journalism, and which could play an important role in the future funding of journalism. (See "Appendix A")
  5. Allowing small publications, which have served established audiences for more than 10 years but do not have two regular employees for the last 12 months, to be able to count freelancers and independent contractors among journalists who regularly contribute to the creation of original content in order to allow them to be considered Qualified Canadian Journalism Organizations. This would include individuals who work as reporters, editors, page designers, photographers and columnists on a regular basis.

For small publications

Although the initiatives in the 2019 Budget legislation are a good first step, they exclude many small community news outlets. Some of these may be helped by the Canada Periodical Fund's Aid to Publishers program. However, many will have no source of Federal Government assistance. For this reason, the Panel recommends:

  1. That the federal government recognize the exceptional challenges faced by small publications that serve minority-language communities and, in keeping with its obligations to support Official Language communities, immediately dedicate a minimum of five per cent of its advertising budget to purchase advertising space in written publications that serve minority language communities to ensure its message is delivered to Official Language communities. (The five-per-cent figure is based on the fact that five per cent of Canadian citizens live in an Official Language minority situation.)
  2. An additional program be explored immediately to address the specific needs of small publications, including print and digital, focused mainly on ethnic and Indigenous publications. These publications should also receive their fair share of federal advertising dollars.

To provide further context in support of recommendations 7, 8 and 9, it should be pointed out that, according to data collected by the Local News Research Project, an initiative spearheaded by Ryerson University's School of Journalism, more than 250 Canadian news outlets have closed between 2008 and October of 2018. The vast majority of these outlets – 189 – were small community publications, including many that were independently owned.

To ensure long-term viability of the news industry

In order to address the long-term viability of the Canadian media industry, the Government should:

  1. Address the regulatory and tax laws that unduly favour foreign digital platforms over Canadian-owned media. There is a global effort to change the way that taxation works for digital companies. Great Britain's Cairncross review recently released its report, "A Sustainable Future for Journalism," after an investigation of the viability of the news market, the role of search engines and social media, and the digital ad business. Likewise, the Australian Competition and Consumer Commission recently completed a public inquiry into the impact of digital platforms on competition in media and advertising services markets, in particular in relation to the supply of news and journalistic content. Other countries are also investigating the impact of companies such as Google and Facebook on domestic media markets. Canada should do the same, with a view to making changes that reflect the rapid changes in technology and news consumption habits of Canadians, especially younger Canadians.
  2. Amend the Income Tax Act so that advertising placements with foreign, internet-delivered media are no longer deemed deductible expenses. This would extend to the Internet the same treatment that print and broadcast media have had for many years. In other words, a Canadian advertiser would not be able to deduct expenses when buying ad space in foreign media, be they digital, broadcast or print.
  3. Reform the taxation system so that media companies that benefit from the use of Canadian content contribute to its creation. This includes social media, search platforms and internet providers. This can be done by creating a dedicated fund and redirecting levies paid by these entities to support Canadian news outlets.
  4. Amend the Copyright Act so that originating news outlets are properly compensated for the creation of copyrighted news material that is duplicated across digital platforms.

The Panel also recommends

  1. A list of companies that have successfully filed for status as Qualified Canadian Journalism Organizations be publicly available.
  2. Given that the initiatives outlined in the budget legislation aim to support the creation of news content and coverage of democratic institutions, and that certain companies have eliminated jobs in their newsrooms at the same time as giving executive officers excessive compensation, this Panel strongly urges the Government to require qualifying organizations to recognize that they have an obligation to use publicly funded benefits for the intended purpose of investing in news operations by not awarding excessive compensation to executives at the same time as they receive assistance from the program.

Appendix "A"

Les Amis du Devoir (Friends of Le Devoir)

Background information

By Brian Myles, Editor, Le Devoir Inc.

July 9th, 2019

Le Devoir's Governance rests on three pillars:

  1. Le Devoir Inc: Is a for-profit corporation that publishes the print and digital editions. Le Devoir Inc. has a board of directors composed of fourteen members, seven of which are shareholders. The editor (Brian Myles) controls 51 % of the voting shares belonging to Fiducie Le Devoir.
  2. Fiducie Le Devoir: Is a perpetual Trust (not-for-profit) that owns 51 % of the voting shares in Le Devoir Inc. A board of directors of three trustees appoints the editor and acts as a watchdog to make sure Le Devoir Inc. remains truly independent (it can never be sold).
  3. Friends of Le Devoir: Is a not-for-profit corporation registered under federal law. The initial Friends of Le Devoir society was founded in 1916. Friends of Le Devoir has an independent board of directors. Its sole purpose is to:
    1. raise funds for Le Devoir Inc.;
    2. give prize money to journalism students; and,
    3. hold public debates on the state of the media/freedom of the press.

Over the past four years, Friends of Le Devoir has been the driving force behind Le Devoir's philanthropic activities, as shown below:

2015 2016 2017 2018 2019 E
Total donations $360,000 $271,000 $611,000 $550,000 * $700,000 *
* The figures include $100,000.00 per year paid by Transat to increase Le Devoir's international affairs coverage.

By our estimates, charitable tax incentives could enable Friends of Le Devoir to increase its yearly donations by a factor of 1.5 to two times. The not-for-profit corporation has two potential donors awaiting the fiscal incentives to pledge more than $500,000.00 in donations.

The recognition of Friends of Le Devoir as a qualified donor is paramount to its financial stability and to Le Devoir's future as an independent and thriving media. Friends of Le Devoir is a not-for-profit registered under federal law. It should be eligible for charitable tax incentives.

I hope the Journalism and Written Media Independent Panel of Experts l will make its recommendation accordingly. I would encourage you to share this document with other members of the panel.

Best regards,

Brian Myles
Editor, Le Devoir Inc

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