Tax Repeal

The Tory government last week repealed Canada's tax on the gross advertising revenue in Canadian editions of foreign magazines, pointing out that the tax was 1) wrong in principle and 2) a failure in its intent to aid Canadian publications. The tax had aroused alarm among Canadian newspapers, which feared an infringement on press freedom; it drew worried protests from Washington, and it undercut Canada's traditional stand for the principle of free international exchange of goods and information.

When the 20% tax was imposed by the Liberal government in January 1957, Liberal Finance Minister Walter Harris admitted that his aim was to force the foreign magazines to raise their rates or go out of business, in either case diverting advertising to Canadian-owned magazines. The main targets, TIME and Reader's Digest, increased their ad rates to offset half of the tax--and last year collected a slightly higher percentage of the total Canadian magazine advertising revenue than before. TIME paid the tax (about $500,000 in 1957) under protest; Reader's Digest elected to fight it in court--and even after repeal decided to carry the case to a decision. When the tax was removed, both magazines announced immediate ad rate reductions equal to the part of the tax that had been passed on to advertisers.

Both Prime Minister John Diefenbaker and Finance Minister Donald Fleming had denounced the tax when they were Opposition M.P.s. Last week, while Diefenbaker listened, Fleming restated his reasons for opposing it: "We warned repeatedly that this tax would prove to be both unjust and ineffective. Experience has confirmed our views. I do not underestimate the difficulties which Canadian magazines are facing. If the government is to give any special support, it should be in a manner that infringes neither the freedom of the press nor the reading preferences of the public."

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