EVIDENCE

House of Commons
Standing Committee on Finance

[Recorded by Electronic Apparatus]

Tuesday, November 9, 1999

[…]

The Chair: Thank you very much, Ms. Golden and Mr. Johnson.

We will now go to the Friends of Canadian Broadcasting, Mr. Ian Morrison. Welcome.

Mr. Ian Morrison (Spokesperson, Friends of Canadian Broadcasting): Thanks, Mr. Chair and members of the committee.

The Friends of Canadian Broadcasting acknowledges the opportunity your committee has afforded to Canadians to contribute ideas to the pre-budget consultation process.

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Your 1999 approach is novel in seeking thematic advice, and we applaud that initiative, but we also believe that the process you have advanced is flawed because it pre-defines those topics deemed important while excluding fundamental economic and cultural issues that underlie the health of the Canadian community.

For example, the Canadian broadcasting and entertainment industries make an important economic, social, and cultural contribution to our country. At the leading edge of new technology, they're a critical part of the knowledge economy and they contribute significantly to employment, particularly among young people. All this is true in no small part because Canadians spend billions of dollars supporting those industries through tax dollars, cable subscriptions, and product costs, which support the advertising industry. Yet based on your July 1999 website news release, comments on this topic would appear to be off the agenda.

Such a turn of events could not happen in the United States Senate or House of Representatives committees because the American entertainment industry is that country's leading exporter and a strong contributor to its balance of payments. No prelude to an American federal budgetary process would bypass the entertainment industry. Recognition of the importance of the entertainment industry in Washington explains why the American government is so intent on winning access to foreign broadcasting and entertainment markets.

Very soon—I know you know this—the World Trade Organization will begin a round of talks to eliminate trade barriers. Canada's private broadcasting industrial lobby, the Canadian Association of Broadcasters, has already signalled its willingness to sell out to American interests and investors.

Meanwhile, budget restrictions to the parliamentary allocation to the CBC, in direct defiance of the Liberal Party's 1993 red book promise, to the tune of $400 million, are killing CBC radio services in local communities across the land, while increasing reliance on advertising is slowly choking CBC television's public service mandate. The combined effect of these federal policies is to throttle the ability of Canadians to share stories and experiences with each other. This increases regional and linguistic alienation throughout Canada.

Friends of Canadian Broadcasting therefore recommends that your committee include among its priorities the following recommendations.

The federal government should ask the CRTC to undertake a public consultation on how adequately to fund the nation-building work of the CBC. The government should instruct the CRTC, through its power of policy direction under the Broadcasting Act, to prevent cable monopolies from reducing their contributions on behalf of subscribers to the Canadian Television Fund. At least half the funds administered by that Canadian Television Fund should be reserved for productions aired by the CBC. The government should inform the CRTC that it is broadcasting policy to maximize the value of Canadian professional sports rights in the Canadian audio-visual system. The method of appointment of the CBC board of directors and its president should be reformed to ensure merit appointments at arm's length from the governing party and under the active scrutiny of the House of Commons heritage committee. And finally, the government should refuse to capitulate to regulated industry-led pressure to reduce the requirement for Canadian ownership in broadcasting and telecommunications.

Thanks, Mr. Chair. That's three and a half minutes.

The Chair: Thank you very much, Mr. Morrison.

[…]

That wraps up the presentations right now. We'll get to the interesting part now, the question and answer session. We'll begin with Mr. Solberg. It will be a 10-minute round.

Mr. Monte Solberg: Thank you very much, Mr. Chair. Thank you to all the presenters for the presentations today.

I will start simply by saying I don't think anybody in the room would deny that culture is an absolutely essential part of what makes us Canadian. I must say I'm also very encouraged to hear from so many people who are advocating tax-type changes to help them do what they want to do. I think that's very refreshing.

I want to comment first by saying that I support very strongly the idea of the elimination of capital gains taxes when it comes to making a donation to a charitable organization. I think it's a wonderful way to re-establish the connection between the income people earn and the things they believe in. I think that's unfortunately what is missing from a large part of the cultural sector today, frankly, because on the government side, or where the government kicks in and gives money to the arts, very often that connection is lost because that money is taken from people through the tax system. People have no say in it, and then it's passed on to groups that they may or may not support or projects that they may or may not support. Doing it through the tax system allows them to have that direct connection to the organizations and groups they believe in. I very much support the idea of using the tax system to do that.

I have a question for Mr. Morrison, though. Although it doesn't explicitly say in your presentation, that I can see, I take it that you're advocating a fairly large increase in spending for the CBC based on your assertion that we should eliminate advertising revenue as a way to keep the CBC going. Is that $400 million figure in there what you're advocating should be put back into the CBC in lieu of eliminating advertising revenue?

Mr. Ian Morrison: No. We're not even advocating eliminating advertising revenue, Mr. Solberg. We're advocating reducing the CBC television system's dependency on advertising revenue so that it is more free to do the kind of cultural programming that does not depend exclusively on mass audience. We noted the $400 million figure. In fact the Government of Canada has implemented your party's CBC policy, because Mr. Manning in 1993 called for that reduction in support to the CBC.

We're calling in this recommendation for the government to ask an arm's-length body—and we've identified the CRTC as qualified for this—to identify the appropriate way to finance the CBC. Most other national public broadcasters in the world: NHK, Japan; BBC, U.K.; the Deutsche Welle—I could go around the world, other than the United States—are funded through a subscription fee basis. That was in fact a recommendation of a committee chaired by Pierre Juneau a few years ago.

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We would like an objective review, not just of the amount of money that should go to the CBC but to the way it gets there, to create more stability and more assurance, because the net result of this government's policy has been to reduce the capacity of the CBC to be active in radio and television locally and regionally and to shove it into more dependency on advertising.

Mr. Monte Solberg: Remind us again why the CBC needs to have funding at all given the fact that there are so many Canadian players now in the broadcast industry, whether it's Bravo or Showcase, to appeal to some of those narrower groups you alluded to earlier. Why do we need the CBC? We have all the other networks.

Mr. Ian Morrison: Keeping in mind the necessity of being brief, I'll just give you two or three reasons.

One is that somewhat more than 80% of Canadians believe the CBC should be funded at least as well as it is now and half of them think it should be funded better. My source is a Compas poll of May 1999. Half of the supporters of your party agree with that, by the way.

Mr. Monte Solberg: Is that CBC in total? Is that radio and TV?

Mr. Ian Morrison: The whole corporation. Perhaps from that far away you can see the red on this chart.

Mr. Monte Solberg: Yes.

Mr. Ian Morrison: The network at the top is the CBC. The time span is 7 p.m. to 11 p.m., and the seven areas of the chart are the seven days of the week. What you're looking at is what is available in the Vancouver market in the month of March 1998. That is what the CBC makes available, this is what the CTV affiliate station makes available in Canadian programming during that period when people are watching, and this is what Global makes available. Canadians need Canadian choices, and they believe very strongly that this is the case.

So if the private sector were able to do that job, we would support the private sector taking over. But in every western country, other than the United States, there is a strongly funded public broadcaster. The BBC, for example, on a per capita basis gets two times the revenue from public sources that the CBC does. The figure for Germany is three times. The figure for Japan is double.

So it's not a question of no CBC. The public is on the side of a strong CBC. It's a question of taking an objective look at how to make it happen.

To an extent your party has moved in that direction. We have tracked your pronouncements on the topic and you are no longer calling for the privatization of the CBC.

Mr. Monte Solberg: Just so we're clear on this, we've always advocated that CBC radio should be maintained and that CBC television should be privatized, and that still stands—not Newsworld but the other network.

Isn't it true, though, that ratings for CBC are very near historical lows for CBC television,? And isn't that really the most important poll of all, what people will actually do?

Mr. Ian Morrison: Since the dawn of the broadcasting age, about 33% of English-Canadian viewing has been Canadian programming. That has held for decades. Of that 33% who are viewing Canadian programming, the CBC assembles a very substantial majority of it. Audiences are quite strong for American programming delivered by private broadcasters, but not for Canadian programming delivered by private broadcasters.

If we were concerned for the other official language, which the Friends of Canadian Broadcasting do not pretend to speak for, we would then say the figures are quite reversed. Viewing of Canadian programming in the French language throughout the country, particularly in the Quebec market, is extremely strong, and the leader in that Canadian programming is SRC, Société Radio-Canada.

Mr. Monte Solberg: I would expect that reflects the fact that so much French language programming in the world would probably only be available through SRC.

Mr. Ian Morrison: TVA can access it as well.

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Mr. Monte Solberg: Again to my point, though, the fact is that ratings have fallen dramatically. It seems people aren't that supportive when push comes to shove for the CBC, yet you're advocating a big injection of cash. That's ultimately what you're saying. Shouldn't there be some kind of connection between how much people are willing to watch CBC and the level of government support they get?

Mr. Ian Morrison: Since 1983 the CRTC, acting at arm's length from the government—we don't want the Prime Minister handing out broadcasting licences—has licensed approximately 60 cable-delivered specialty channels. Of those, two have been given to the CBC. That process has led to audience fragmentation, which in turn has lowered the share of all the major broadcasters. The CTV share has gone down as the share of the total, just as the CBC share has gone down.

The argument in public broadcasting circles around the world is not around audience share, which is more a matter of tracking eyeballs for advertisers, but around the availability of important programming. When you get something important, like a Quebec referendum, you will find the trust that exists in the journalistic operations of CBC radio and television is much higher than that available to private sector organizations. That, in turn, is reflected in the polls that I could provide you, if you're interested.

Mr. Roy Cullen: Okay. Thank you.

Mr. Morrison, at the risk of raising your anger level, I'd like to ask you the following question. Sometimes governing and management is about making choices with scarce resources. Maybe you've been asked this before, but I haven't asked you, and I haven't heard your answer. Are you equally friendly to CBC radio and television, or would you make a distinction?

Mr. Ian Morrison: On the English language side, 80% of Canadians watch the English television network for at least half an hour a week, and 33% of Canadians listen to CBC radio one or two hours per week. So the radio service is more of a minority concern that has a quite devoted following.

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People who know the television industry understand that, in general, people watch programs rather than channels. There are exceptions, but generally that's the case. So the brand loyalty to CBC television is less strongly felt by a much larger percentage of the population. In our judgment, both of these instruments are important in what I described as nation building and the objectives of the Broadcasting Act.

I can't assemble any anger whatsoever in responding to you, but I would just conclude by saying that when we do analyse what people think and we ask them which is more important—this is the Compas organization, our polling firm—in defending and protecting Canadian culture in the audio-visual system, CBC television or CBC radio, by a two to one margin Canadians choose CBC television.

Mr. Roy Cullen: Thank you.

Mr. Bill Graham: What about the French language side?

Mr. Ian Morrison: On the French language side, it's just the opposite in terms of loyalty. The strength of the SRC television system is very established amongst francophones, and the radio system a little bit less so. However, the audience for French language CBC radio is also in a dimension about the same as that for English radio.

Mr. Bill Graham: Thank you.

The Chair: Thank you, Mr. Graham and Mr. Morrison.

Mr. Brison.

Mr. Scott Brison: Thank you, Mr. Chair.

Thank you for your interventions. It has been an interesting morning. We've heard everything from issues of homelessness to Haydn, and so we've gone from too few homes to too much Haydn in one morning. But it has been a fascinating opportunity for us to learn directly some of the priorities of Canadians.

One of the things that has occurred over the last several years has been a reduction of the government's role, for instance, in the provision of services, some of which were seen as fairly essential services, whether it was the federal government's role in low-income housing or the provincial government's and federal government's role decreasing in a number of areas.

Commensurate to that decline in the role of the government, there has been an increase in the role of the volunteer sector. I guess that's why your proposal relative to the capital gains tax issue, in terms of contributions, makes so much sense at this time. I understand there's an approximate cost of about $50 million, potentially, with the elimination of capital gains on these gifts. Is that approximately the cost you're assessing?

Mr. Donald Johnson: Yes. An estimate was made three years ago when we made the submission for a complete exemption. The best estimate—and these are very rough figures—was that it would cost, for a complete exemption, between $20 million and $70 million a year in the initial years. So we cut that in half and said the incremental cost of going the rest of the way would be between $10 million and $35 million a year, which is substantially less than 1% of the $5 billion surplus.

Mr. H.N.R. Jackman: A $50-million loss to the government translates into many more times that to the charities, and that's the significant thing.

Don mentioned the case of Stanford. A fellow gave $125 million; he saved himself $25 million in tax. Probably the Department of National Revenue will say, well, look, we gave $25 million to that guy. But the truth is, if it weren't for the exemptions, he never would have given the money and the government never would have gotten the money. Just keep that in mind.

Thank you.

Mr. Scott Brison: Thank you.

It's important as government sees some opportunities or is setting priorities for reinvestment, for instance, even on the social side, that the volunteer sector be recognized as a potential vehicle for that reinvestment, for a couple of reasons. One is, in some cases the volunteer sector may be better at identifying needs and also may be able to address those needs more efficiently, without what can be often the impedimenta of the bureaucracy of government. So we are firmly in support of your proposal.

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I have one question further. I recognize it doesn't connect directly with your presentation, but it's on the issue of capital gains in general. We have about twice the capital gains rates in Canada as exist in the U.S., and that is having a very negative impact, for instance, on the high-tech sector, where increasingly stock options are being used as compensatory assets and vehicles.

Would you support a dramatic decrease in capital gains taxes in general, a reduction in the inclusion rate either to half its current rate or to 66%, for instance? What type of decrease would you support? The information from the U.S. and from other jurisdictions where there has been a reduction in capital gains tax shows it has not cost the treasury a lot. In fact it's been a minimal cost, because it unlocks so much capital and increases the level of economic activity.

Mr. Donald Johnson: The general area of capital gains tax is not part of our submission. However, I as an individual would strongly endorse a significant reduction in the capital gains tax. My understanding is that the capital gains tax in the United States for long-term gains over a year is 20%. So in Canada, with a zero cost base, it would be about 37.5%. I would strongly support that as a real way to help create an environment in Canada that supports entrepreneurism, new business, and hence employment.

I know an income tax cut of $100 a year for every working Canadian would cost over $1 billion a year in forgone taxes. I'm sure a dramatic reduction in the capital gains tax would be much less loss in tax revenues but would have a significant impact on creating an environment for companies to start up here and grow and create jobs. So personally I would strongly support cutting the capital gains tax in half for all gains so that we're competitive with the U.S.

Mr. Ian Morrison: Mr. Brison, you could reduce the cost of the whole issue in terms of forgone revenue by just exempting Mr. Jackman from the provision.

Mr. Scott Brison: Thank you, Mr. Morrison.

The issue of funding for the arts is always contentious in a period of restraint. A case needs to be made for the importance of the arts, even from an educational perspective. I understand, Mr. Johnson, that as a matter of fact the investment banking community is looking very favourably at those with undergraduate degrees in arts as opposed to undergraduate degrees in business, etc. But people don't pursue undergraduate educations in the arts unless they're exposed to art and to the arts.

Any civilized society has always supported and nurtured the arts. It's important that while we move in the direction of using tax policy as a vehicle for supporting art through contributions, we do not lose sight of the importance of general funding through government.

Part of it also is a censorship issue. If we eliminate too radically support for the arts or general funding for the arts, we can get into situations where we see populism being used as a vehicle to reduce the rights of the minority and in fact reduce the quality of the arts. That is an issue—

Mr. H.N.R. Jackman: You can get that with government too. The government is very subject to .... Look at The Valour and the Horror thing on the CBC. In fact the CBC had to apologize.

What we really need is a multiplicity of donors, not just one. I have nothing against the Canada Council, but we are trying to shift more of the government funding of the arts to matching private sectors so that we get a double-whammy, so that we get more.

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Mr. Scott Brison: Yes, the leveraging is there, but we also don't want to see the types of activities we've seen in New York City with Giuliani and the Brooklyn Museum of Art. I think we can have both.

Mr. Morrison, relative to funding for CBC, are you amenable to a new funding formula that involves, for instance, allowing private contributions and a system whereby the type of tax policy changes that Mr. Johnson and Mr. Jackman are advocating could benefit the CBC, through private contributors contributing directly to public broadcasting in Canada, as exists in the U.S. with the national Public Broadcasting System?

Mr. Ian Morrison: No change is required in public policy to make that happen. A gift to the crown would apply to the CBC, and the CBC could easily qualify for something equivalent to charitable status. They have not chosen, as a matter of policy, to do so.

Mr. Scott Brison: Why?

Mr. Ian Morrison: Well, I don't speak for them. They don't even like me on some occasions. I just would say it is the type of question, if I could come back to the recommendation we put before you, that somebody objective and informed ought to be looking at, and we think the agency is the CRTC.

Mr. Scott Brison: And maybe the Canadian Tax Foundation?

Mr. Ian Morrison: Oh, sure, and the Friends of Canadian Broadcasting.

Mr. Scott Brison: Okay.

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source:   http://www.parl.gc.ca/InfoComDoc/36/2/FINA/Meetings/Evidence/finaev09-e.htm