Ottawa should force Google and Facebook to pay their share
Not only does Canada’s current law, largely written for a pre-digital world, fail to offer sufficient protections for domestic publishers, it also perversely gives foreign competitors a leg up.
The extraordinary disruption of global media by online giants Facebook and Google has set off a legislative frenzy around the world. As these companies continue to strengthen their effective duopoly on digital advertising, leaving local media behind, governments are struggling to manage the impact on domestic economies and democracies.
Of course, we, like all traditional media companies, have a particular interest in how government responds, but all citizens have a stake.
Australia, which recently launched an investigation into the impact of Google and Facebook on that country’s media ecosystem, is just the latest nation pushing to ensure that, at the very least, domestic publishers have a chance to compete fairly.
Dozens of jurisdictions have passed legislation in recent years to address this evolution and the threats it poses. So why hasn’t Canada?
After all, the impact of the duopoly’s rise has been felt just as starkly here. As revenues from print advertising continue to plummet, Facebook and Google are together capturing somewhere near 70 per cent of all internet advertising dollars spent in Canada. They have come to dominate the field, though they are primarily distributing rather than creating content, and until recently, gave little or no priority to quality democracy-enriching journalism over, say, democracy-undermining propaganda. This is clearly a trend about which governments ought to be concerned.
Yet not only does our current law, largely written for a pre-digital world, fail to offer sufficient protections for domestic publishers, which hire domestic staff to tell domestic stories, but it also perversely gives foreign competitors a leg up.
For instance, Section 19 of the Canadian tax code allows companies to deduct advertising as a business cost only if the ads are placed in a Canadian publication. Yet, bizarrely, there is no Canadian preference in digital advertising. As the government-commissioned report on the future of news media in Canada, The Shattered Mirror, pointed out, “a Canadian advertiser cannot deduct expenses when buying space in The New York Times but can when placing an ad on nyt.com.” This, the report rightly concluded, is “neither fair nor sensible.”
Moreover, Facebook and Google conduct lucrative business in Canada, yet because they are headquartered elsewhere pay neither corporate tax nor GST/HST here, again putting domestic publishers at a competitive disadvantage. A number of jurisdictions, including New Zealand, Norway, South Korea, Japan, Switzerland, South Africa, Israel and the European Union, have taken measures to redress similar unfairness in their own laws, mostly by choosing to tax based on the location of the advertiser rather than that of the publisher. A number of reports, including The Shattered Mirror, have sensibly suggested that Canada do the same.
Yet the new federal culture policy, announced in September by Heritage Minister Melanie Joly, ignores the report Ottawa commissioned, doing nothing to eliminate the tax advantages enjoyed by these multinational online companies. So Facebook and Google, which lobbied aggressively as Ottawa worked out its new policy, continue their government-aided clobbering of the domestic competition, at a cost to Canadian jobs, Canadian culture and Canadian journalism.
The mere push for reform in other countries has prompted Google and Facebook to launch significant initiatives to fund local journalism. And where the tax laws have been changed, these companies have continued to do business. It’s not at all clear what risk there would be in pushing to level the playing field, as so many other countries have done. The benefits of such an effort, on the other hand, are self-evident, in terms of both public revenues and a more robust Canadian media sector, with all of the economic and democratic benefits that entails.
The international movement to push back against the Google/Facebook duopoly stems from a belated realization that, in the border-blurring digital era, old culture laws too often inadvertently imperil domestic media and the stories they tell. The playing field is perversely tilted. Why does the Trudeau government, unlike so many of its counterparts, seem so unconcerned?