Canada’s private broadcasters are taking the CRTC to court – alleging that they have been illegally taxed by the federal regulator to the tune of more than $300 million over the past three years. The lawsuit, filed Dec. 2 in Ottawa by the Canadian Association of Broadcasters, representing some 600 members, claims that the commission has overstepped its authority by charging so-called ‘Part Two License Fees.’

The fees represent an ‘unlawful’ and ‘unconstitutional’ tax according to papers filed with the Federal Court of Canada.

Under the Broadcasting Act, the feds are allowed to charge fees to broadcasters so that they can cover certain operating costs; in the case of Part Two fees, the cost of managing the broadcast spectrum and of certain regional operations.

But CAB has long argued that Part Two fees far exceed the actual cost of those operations. According to the suit, managing the spectrum has consistently cost $10 million to $12 million per year since 1998, while broadcasters have paid from $69 million to $99 million annually since ’98.

‘Licensees pay Part Two License Fees based solely on a percentage of their gross revenue… not by any objective or measurable criteria related to [their] alleged purpose,’ according to the claim. CAB adds that the excess cash goes into the general federal coffers, where it is not earmarked for any specific purpose.

The broadcasters want the fees for 2001, 2002 and 2003 returned and Section 11 of the Broadcasting Act, which spells out the fee regulations, ruled unconstitutional, given that CRTC is not authorized to impose taxes.

CAB is not contesting Part One fees, which recover other commission costs.

The CRTC would not comment on the lawsuit, but defended Part Two fees in its 2003 annual report, arguing they are consistent with federal cost recovery policies, and that they guarantee a ‘fair return’ to Canadians for commercial use of the public airwaves.

The commission does, however, seem to have quietly shot back at its constituents, noting this month in its annual financial report that profits among private TV stations doubled last year, rising from $95.6 million in 2002 to $189.8 million in 2003, while spending on drama inched up just 20% (see story, below). ACTRA jumped on the numbers and on broadcasters, decrying the ‘national shame’ of their ‘profit-driven thirst.’

CAB has been lobbying against the fees for some time, firing off a letter to the Treasury Board in early 2002 and pleading its case to then-cabinet ministers Allan Rock and Sheila Copps last spring. CAB president and CEO Glenn O’Farrell told Playback he thought he had the support of both ministers after that meeting, and the matter was then sent for review by the Joint Committee for the Scrutiny of Regulations.

The committee also seemed to side with CAB, tabling a report in October that found ‘license fees collected by the CRTC are well in excess of costs incurred.’ The five-page document noted that the fees ‘might prove vulnerable to legal challenge.’

The committee gave the federal government 30 days to respond, after which the problem seems to have become lost in the Ottawa labyrinth. The fees were sent for review at the Department of Finance, which passed, arguing that they fell outside its jurisdiction because they weren’t official taxes. According to a Finance spokesman, it was suggested that the legality of the fees should be decided by the Department of Justice. The question eventually resurfaced at the Department of Canadian Heritage, which is due to issue a response sometime this month.

-www.cab-acr.ca