Body rules Canada shouldn't have taxed 'SI' to death

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TORONTO -- Canada has lost a key cultural battle to the U.S. after an international trade panel ruled Ottawa illegally taxed a Canadian version of Sports Illustrated out of existence. The Financial Post newspaper, based in Toronto, reports that the World Trade Organization said Canada's attempts to prohibit "split-run" magazines - those that are printed in Canada but contain mostly foreign content and attracting Canadian advertising dollars - violated international trading rules. The confidential report, which is to be made public in February, says Ottawa can't impose an 80% advertising tax or stop foreign magazines from publishing in Canada, producing "split-run' issues. Subsidized postal rates given on to Canadian magazines were also ruled illegal.

While Canada is expected to appeal the decision, sources say the WTO is unsympathetic to cultural restrictions on trade, even though Canada wrote special cultural restrictions into the North American Free Trade Agreement to protect Canadian media.

Sports Illustrated shut down its three-year-old Canadian edition after Ottawa imposed the 80% tax on advertising in split-run magazines in December 1995. Sports Illustrated, owned by Time Warner Inc., had been electronically beaming its magazine to a Toronto-area printer to get around existing Canadian custom restrictions that were created to stop foreign magazines carrying Canadian advertising to enter the country as if they were domestic magazines, since they carried very little, if any, Canadian content.

Copyright January 1997, Crain Communications Inc.

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