The Digital Economy: Tax or break situation for digital publishers?

Canadian Finance Minister Bill Morneau has proposed a tax windfall for digital publishers, designed to offset the cost of publishing and make accessing news cheaper for digital subscribers.

Bill Morneau announced a tax incentive in his federal fiscal update worth almost $600 million to help news organisations offset labour costs.

Non-profit news organisations will now be allowed to issue tax receipts to sponsors and donors. The plan includes a refundable tax credit for both for-profit and nonprofit news organisations.

According to the National Post newspaper an independent panel drawn from the Canadian news and journalism community will determine eligibility for the tax credits. Subscribers to eligible news media are also to receive a temporary 15% non-refundable tax credit.

Not much can be said yet about the immediate impact of this almost $600 million in incentive intended to help publishers cope with digital disruption in the industry.

The jury is still out on how different this approach will be from one the EU Commission will end up proposing for its “Fair Taxation of the Digital Economy” reforms.

Tax regulators across the world are already itching to use what they refer to as “significant digital presence” as a green light to pounce on a lucrative digital economy.

Significant digital presence to the EU refers to any one among three criteria applying to digital services companies within a tax year:

  • More than EUR 7 000 000 in revenues

  • Have more than 100,000 users (followers, members, account holders, etc.,)

  • Over 3000 business contracts for digital services (subscriptions, streaming services, etc.,)

The Canadian incentive brings interesting implications publisher’s copyright.

To qualify for the tax cut, in the case of Canada, publishers have to release all work for free under a creative commons licence.

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