Grant Robertson – Globe and Mail
Canada's broadcasting industry has won a major victory against the federal government that will save the sector more than $100-million a year — and may force Ottawa to provide a lump-sum refund worth seven times that amount.
A federal judge ruled Thursday that Ottawa has been unlawfully taxing television and radio broadcasters, along with cable and satellite distributors, for the past eight years by charging fees for their licences.
In his decision, Mr. Justice Michel Shore ordered the government to stop charging the fees and said it may be incumbent on Ottawa “from a moral standpoint” to negotiate a full refund for the money that has already been collected.
Since the money was flowing directly into the federal government's coffers without a specific service provided to the industry, Ottawa was levying a tax without the proper laws in place, the judge said.
Glenn O'Farrell, president of the Canadian Association of Broadcasters, said the industry was pleased with the decision, as many companies had been paying the fees under protest since they were introduced.
“This was a huge consideration for the industry as a cost of doing business, which was basically imposed unlawfully and for which there was no justification,” Mr. O'Farrell said.
The charges, known as Type 2 fees, were introduced in 1997 and amounted to $107-million last year. Each television network, radio station, cable company and satellite distributor was required to pay 1.365 per cent of its revenue that came directly from broadcasting.
During that time, the Canadian Radio-television and Telecommunications Commission collected a total of $790-million for the government's general revenue pool, not including an estimated $112-million expected this year.
The CAB will appeal to the court for a refund of the rest of the money. It will also try to negotiate with Ottawa. But it may not get all the money back. The judge noted about $70-million in services were provided to the industry over the eight years for management of the broadcasting spectrum.
While the dollar figure is significant, analysts said it won't be a windfall for the companies.
“It's not going to be enough to juice valuations for anybody. But it's a nice little bonus for the industry,” CIBC analyst Bob Bek said.
He estimated the fees would have totaled about $9-million a year for a broadcaster such as Corus Entertainment, and would have been higher for bigger networks such as CTV and Global.
The Type 2 fees were introduced as a way to charge companies for the benefits they get from holding the licences.
The fees were imposed in addition to Type 1 fees the CRTC charges broadcasters and distributors for regulating the industry. Those fees will not change. Because the money was passed through to the federal government, the regulator said the decision will not hurt its funding. |