OTTAWA—Canada’s news industry is on the precipice, battered by a digital revolution and plummeting ad sales, warns a new report that urges taxes for websites such as Facebook and Google, reforms to the CBC’s mandate and a new fund backed by taxpayer dollars as remedies to ease the crisis in journalism.

The report, titled “The Shattered Mirror: News, Democracy and Trust in the Digital Age,” offers a grim assessment of the rapidly changing landscape in Canadian media that has cost journalists their jobs and communities their newspapers.

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Written by veteran journalist Edward Greenspon and published by the Public Policy Forum, the 103-page report outlines the precipitous fall in revenues for traditional media and accompanying cuts to newsrooms across the country.

These trends risk the dismantling of traditional news outlets, which would imperil the health of Canadian democracy, Greenspon said in presenting the report Thursday.

“This is harming the shared base of knowledge and understanding that produces a common political entity,” he said.

“History shows that poor information leads to poor political choices, and we have to be wary of that.”

The report’s main recommendations focus on changes to tax legislation. Currently, advertisements bought on foreign-owned websites like Google, Facebook and the New York Times are tax deductible. The report recommends changing that section so that foreign-owned sites that don’t meet certain conditions — a majority of payroll going to Canadian employees, and at least 5 per cent of Canadian revenue spent on editorial operations — will have a 10 per cent levy on their advertisement purchases.

It would also introduce HST and GST for digital news subscriptions and advertising on digital media that don’t meet the recommended Canadian content rules, and rebate the HST/GST on those that do.

Revenue from these taxes, which the report estimates could reach $400 million per year, would finance a new, arm’s-length organization called the Future of Journalism and Democracy Fund that would support digital innovation, civic journalism, local news media and indigenous reporting.

The fund would start with $100 million in federal cash as seed money.

“We designed something to keep government as much as possible away from this (fund),” said Greenspon, explaining why he isn’t pushing for tax credits for Canadian news outlets.

Other recommendations include changes to the CBC, including an end to online advertising for the public broadcaster and making CBC-produced content available for free to other news organizations

It also recommends a new mandate for The Canadian Press, the country’s national news service, to make further investments in local reporting across the country.

Without changes, the report offers an almost terminal prognosis of the media industry, declaring that the “march to the precipice appears to be picking up speed.”

Greenspon told reporters the recommendations are meant to improve democracy and the information needed for civic engagement, rather than bailing out any one business model.

He said the situation is “urgent” and expressed hope that the report will kick-start a policy debate so that remedies could be laid out in the 2018 federal budget.

John Honderich, chair of Torstar, called the report “bold, imaginative and full of good ideas.”

While questions remain about how some of the report’s recommendations would work, Honderich said an “accumulation” of measures would provide “some relief.”

“It does not take a large amount to help significantly in terms of news gathering,” he said in an interview.

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Torstar publishes the Toronto Star, the country’s largest daily circulation newspaper, along with the Metro chain of newspapers distributed nationwide, and the Metroland chain of newspapers serving more than 100 communities.

Honderich said he was heartened by the report’s findings that Canadians continue to value the work of traditional media outlets. “I think the false news syndrome that we’ve come to see has accentuated the need for quality journalism,” he said.

Paul Godfrey, president and chief executive officer of Postmedia, said the report puts a valuable spotlight on the industry’s struggles in recent years.

“I agree with their concerns with civic awareness and civic news. Nobody’s going to do that unless newspapers — large dailies and community newspapers alike — carry the ball,” Godfrey told the Star.

Google and Facebook have come to dominate the information narrative on the Internet, even though they lack a “passion” for news and “actively” avoid the responsibilities of a publisher, the report said.

But as these Internet giants dominate information dispensed on the web, traditional media outlets, battered by double-digit declines in their ad revenues, struggle to survive. Revenue flows to the distributors of information, rather than the producers.

In a statement Thursday, Google defended its role in the media system and warned that the tax changes proposed could harm small businesses, which enjoy savings on advertisements bought through their online network.

“We share a common mission and believe an open press and healthy news industry plays a critical role in our democracy,” said Aaron Brindle, Google Canada’s head of public affairs, in a written statement.

Facebook also issued a statement to the Star on Thursday, saying the company has unspecified plans to work more closely with news organizations. The social network will also “be working with publishers and educators on how we can equip people with the knowledge they need to be informed readers in the digital age,” said an emailed statement attributed to Kevin Chan, head of public policy for Facebook Canada.

A spokesperson for Heritage Minister Mélanie Joly, who ordered the study, said the government would be reviewing the recommendations but cautioned that it was “too early to speculate on possible policy outcomes.

“Our government understands the importance of a vibrant, local and reliable news media ecosystem, as it is a pillar of democracy,” Pierre-Olivier Herbert said in a statement.

In stark terms the report charts the decline of traditional media in Canada in recent decades. In the 1950s, more newspapers were sold each day than there were households. Today, fewer than one in five households pays for a paper.

In almost a decade, ad revenues for community and daily newspapers in Canada dropped to $2.3 billion from $3.8 billion.

That lost revenue has forced cutbacks. Since 2010, 225 weekly and 27 daily newspapers in Canada have shut their doors or merged with other papers. The Public Policy Forum estimates that one third of journalism jobs have been lost in the past six years.

Just this week, Postmedia announced further job reductions, with layoffs at the Ottawa Citizen and The Gazette in Montreal, according to the media union CWA Canada.

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