Buy Canadian (media): “close the tax loophole” revisited

Inauguration Day: the Trump-Tech photo that just won’t quit

March 5, 2025

Canadian news outlets have chosen an opportune moment to revive a long standing proposal to update a federal tax law that incentivizes Canadian advertisers to patronize Canadian online media instead of US tech.

The decades-old section 19 of the Income Tax Act allows businesses to deduct corporate expenditures on advertising placed in Canadian print, radio and television media, but not their US media counterparts.

However the law has never been revised to include ads purchased on digital media, the result being that a Canadian advertiser can deduct the cost of an ad placed in the online nytimes.com but not the New York Times print edition. 

The idea of extending the Buy-Canada tax law to online media resurfaces in Ottawa from time to time.

Well if there was ever a time, we’re currently loading for a trade war.

While the Internet loophole in the Tax Act can be closed with the stroke of a Parliamentary pen, it will certainly move to the top of the Trump-Tech Oligarch hit list that already includes our digital services tax, the Online Streaming Act, the Online News Act and even the GST on Hollywood streaming subscriptions.

The tech bros including Meta’s Mark Zuckerberg and Google’s Sundar Pichai have cast their lot with Donald Trump, willing to become protagonists in a gambit for political sovereignty and not just a garden variety trade dispute. 

Assuming a tax law update can survive our current trade war  —-we may be living in a world of steep cross-border tariffs for some time —- this kind of Buy Canada tax law raises the question of “buy which Canadian product”?

There is one big digital advertising option ready to go: Canadian news and information websites as well as a host of sports and entertainment streaming sites operated by Canadian television companies. Those homegrown media outlets provide a broad reach to millions of Canadians with purchasing power on a national, regional and local level. 

But as a long term media policy, closing the 19.1 loophole would do much better if there were Canadian alternatives to Google and Meta’s products offering low cost and data-enriched ad-targeting.

We should keep in mind that the analog version of the advertising tax law that currently drives Canadian advertisers to our own radio, television and print newspaper media was particularly effective because it was based on different technological and practical realities. 

It’s never been practical for American print newspapers to compete with Canadian print dailies in a meaningful way, so the US has always let sleeping dogs lie and turned a blind eye to our tax incentives.

On radio and television, US Congress long ago mirrored Canadian tax laws to incentivize American advertisers to patronize US border stations instead of Canadian border stations. That was probably because Hollywood supported a strong Canadian television industry that re-sold US television programming after Canadian networks paid for territorial distribution rights north of the border. Canadian networks needed Canadian advertising revenue in order to afford US programming.

But the analog situation is not quite the same in Internet-based media distribution that does not need to obey any of the commercial, practical or technological realities described above.

US tech products are direct-to-Canadian-consumer. They are not retailed through Canadian media networks. There are no Canadian Googles or Metas that Americans want to keep out of their own market (except Shopify, which explains CEO Tobi Lutke opposing Canadian tariff retaliation).

Under the ordinary circumstances of trade peace, Parliamentarians and Heritage Canada officials have been cautious about embracing a new tax policy, weighing up the pros and cons.

But this is war. Or at least trade war. If Canadian politicians are looking for a muscular trade strategy in the face of Trump tariffs, closing the digital loophole on this tax incentive is available.

***

If you would like regular notifications of future posts from MediaPolicy.ca you can follow this site by signing up under the Follow button in the bottom right corner of the home page; 

or sign up for a free subscription to MediaPolicy.ca on Substack;

or follow @howardalaw on X or Howard Law on LinkedIn.

I can be reached by e-mail at howard.law@bell.net.