Magazine Tax

Canada, a nation that has long prided itself on its devotion to free trade and free enterprise, swung abruptly toward the opposite extreme last week. Without warning, the government proposed a sharp 20% tax on the advertising revenues of Canadian editions of foreign, i.e., U.S., magazines.* In his budget speech announcing the levy. Finance Minister Walter Harris made it clear that the tax was not intended to produce revenue, but was designed to cripple or halt the U.S.-owned publications, and thus force mere Canadians to advertise in and read Canadian magazines.

Government officials admitted privately that the magazine tax was a vote-catching political device. The Liberal government has lately been under heavy opposition attack for the freedom it has allowed U.S. investors in Canada. With a general election coming up next year. Liberal strategists figured that a loud public slap at U.S. magazines, putting themselves in the role of staunch defenders of Canadian culture against outside influences, would be an easy way to make the government look good without doing any heavy damage to Canada-U.S. trade. Not to be overlooked either was the good chance that the Canadian magazines benefiting from the restriction would tend to take a kindlier view of the Liberals in the election campaign.

Ringing Defense. In explaining the tax to Parliament Finance Minister Harris carefully skirted the bill's political background, instead billed it as a "very exceptional" measure to protect Canada's struggling magazines. Actually, the Canadian magazines are doing better than ever; their circulation is up 51% in the past decade, their gross advertising revenue up 165%. In a brief to the government only two weeks ago, Canada's Periodical Press Association forecast: "Much larger circulations for Canadian periodicals; more Canadian publishers and new publications in all fields; bigger individual issues."

But Harris defended his proposal in ringing terms: "Magazines by Canadians, for Canadians, telling about Canadians, are an essential thread in the fabric of our national life ... I wonder whether we could contemplate a time when we would not have a Canadian magazine."

Sharp Attack. Liberal, Tory and independent newspapers across the country attacked the measure as a threat to press freedom. The Liberal Winnipeg Free Press called it "a discriminatory tax ... on the movement of ideas." Toronto's Tory Telegram said it was a "vicious" tax that "should cause concern in every editor's office." The Liberal Victoria Times called it "a discriminatory and authoritarian measure," the Vancouver News-Herald saw it as "a stride toward censorship," and the London Free Press, taking note of a similar affair on the other side of the border (see below), pointed out that "the same government which protested to the U.S. against discriminatory action against a Canadian brewery in Maryland is now discriminating against reading material from abroad."

Vigorous though the criticism was, the government made no move to change the measure. As one immediate result, Parents' Magazine announced that it would abandon its Canadian edition if the proposed tax goes into effect on schedule next January.

-Principally affected: Reader's Digest, TIME, Parents' Magazine, Woman's Day, Better Living, Family Circle, several trade magazines, and Newsweek, which was considering a Canadian edition.

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