MW’s solution to safeguard public interest investigative journalism

How can we safeguard the future of investigative journalism in Australia? MW’s submission to the Senate Inquiry into the Future of Public Interest Journalism floats a couple of ideas (with the added bonus of neutralising #fakenews) and requiring just a minor tweaking of our tax laws. MW’s ed-in-chief, Sandi Keane, reports.

AS MICHAEL WEST said in his Opening Statement to the Senate Inquiry into the Future of Public Interest Journalism:

“There is as yet, however, no reliable business model to fund journalism and my personal experience is testament to this.”

The massive slump in advertising revenues has hit investigative journalism hardest. Delving into tax rorts, bank scandals and exposing corporate and political chicanery can take weeks rather than hours. While the meter’s ticking over, there’s the added threat of corporate wrongdoers cancelling advertising as well as lurking legal risks.

But there are solutions.

One is we adopt the American model of truly independent, investigative journalism made financially possible via the granting of charitable and tax-deductibility status. Funded entirely through contributions from listeners, viewers, philanthropic organisations and foundations, not-for-profit media’s point of difference with mainstream media is that they are truly independent.

Another option is to impose a levy on Facebook and Google. Better still, do both. Let’s face it, it was Westie’s investigation which led to the government wresting back nearly $1 billion in tax.

As Senate committee member Senator Nick Xenophon rather cheekily joked to Michael West when he was on the stand last month:

“If only you got one-tenth of one per cent of that, Mr West!”

We should levy Facebook and Google to fund journalism – here’s how

So what do you, the readers, think? We’d love to get your ideas and comments on the thread. Our submission is published in full below. Please take the time to read it. You can check the other 37 submissions here.

Submission to the Senate Select Committee on the Future of Public Interest Journalism

From: Sandi Keane, Editor-in-chief, Michael West — michaelwest.com.au

About this site:

The website is dedicated to the public interest. Our focus is investigations into big business, particularly multinational tax avoidance, corporate power and the banking and energy sectors.

____________________________________________________

This submission focuses primarily on the following points in the Terms of Reference

(a) the current state of public interest journalism in Australia and around the world, including the role of government in ensuring a viable, independent and diverse service.

(c) the impact on public interest journalism of search engines and social media internet service providers circulating fake news, and an examination of counter measures directed at online advertisers, ‘click-bait’ generators and other parties who benefit from disinformation;

(e) examination of ‘fake news’, propaganda, and public disinformation, including sources and motivation of fake news in Australia, overseas, and the international response; and

(f) any related matters.

*

HOW IMPORTANT is a strong, independent media to democracy in Australia? Public interest investigative journalism sheds light on important truths, which governments and powerful vested interests wish to hide. Media coverage of important issues of public interest has already been damaged by the departure of thousands of experienced journalists from the mainstream media over the past ten years.

1. The current media crisis

Investigative journalism is under threat from both the decline of traditional media and the rise of new media.

Newspaper industry revenues are still declining at more than five per cent a year and this decimation of tradition media is likely to continue as internet advertising yields failed to live up to their earlier promise. As Paul Murphy, chief executive of the Media Entertainment and Arts Alliance, reported to the Senate Inquiry, more than 2,000 jobs have been lost since 2011.

The upshot is that important issues are not receiving the coverage they deserve, and what coverage they are receiving is often compromised by the media’s increasing reliance on diminishing revenues from large advertisers.

New media has taken up some of the slack in exposing matters of public interest but coverage is disparate, often unreliable and regularly subject to manipulation.

While supply is challenged, there is significant demand for quality independent journalism. Since starting michaelwest.com.au a year ago, we have experienced strong audiences and public support for investigations into the likes of multinational tax avoidance.

There is as yet, however, no reliable business model to fund journalism and Michael West’s personal experience is testament to this having survived to date only with support from non tax-deductible donations from supporters and from a Fairfax Media redundancy payout.

The advertising profits which once funded mainstream media are now largely taken by Google and Facebook. Not only do these companies pay very little tax in Australia but they take very little responsibility for the information which they disseminate.

The declining revenue base of traditional media has already severely undermined robust public interest journalism as it is expensive to fund, particularly investigative journalists whose output is constrained by the need to spend days and weeks on a story rather than minutes and hours. Delving into tax rorts and bank scandals, and exposing corporate and political chicanery, requires resources and commitment.

What is desperately needed is an alternative source of revenue.

2. Potential new source of revenue based on the US model

In the United States, following the Global Financial Crisis, we witnessed an explosion of not-for-profit (NFP) media sites spring up such as the quadruple Pulitzer-prize winning Pro Publica and multiple award-winning multi-media site, Democracy Now!. It is now estimated that there are some 150 NFP media sites.

Funded entirely through contributions from listeners, viewers, philanthropic organisations and foundations, their point of difference with mainstream media is that they are truly independent. A few take advertising but most are advertising-free due to the universal concerns about conflicts of interest.

3. Qualifying as tax-deductible NFP under IRS

US NFPs operate under Section 501©(3) of the U.S. Internal Revenue Code, describing themselves as “educational”. The term “educational,” per Treasury Regulations Section 1.501(c)(3), relates to:

(a) The instruction or training of the individual for the purpose of improving or developing his capabilities; or

(b) The instruction of the public on subjects useful to the individual and beneficial to the community.

So an organization is not educational if its principal function is the mere presentation of unsupported opinion or advocacy.

Sites like The Digital Media Law Project have been set up to help new digital media navigate the legal minefield to obtain not-for-profit status.

4. Why the American model is a win for everyone

The American public recognizes that investigative, independent journalism is integral to democracy as mainstream media’s dependence on advertising is fraught with conflicts. ProPublica’s Pulitzer Prize-winning investigations have been syndicated across the mainstream media and run at no cost on major mastheads like The Washington Post and The New York Times. Collaborations between not-for-profit media and the mainstream are also common. So rather than competing, the addition of not-for-profit media to the media landscape has been a win for media and particularly for the public at large in this age of fake news.

Similar legislation in Australia would open a large source of funding for independent media ventures at a time when traditional funding is at crisis levels, thanks mostly to Google and Facebook’s stranglehold on the media advertising market.

One example of the benefits of investigative journalism is the work of Michael West, which led to the Senate Inquiry into Corporate Tax Avoidance in 2015 and subsequent reforms. This year the Australian Tax Office expects to raise $2 billion more in tax from multinational companies than it had earlier anticipated. Half of this revenue is due to the government’s reforms, arising from the Inquiry, and the other half from “behavioural” changes in the way multinationals approach the issue of paying tax, perhaps much of this due to concerns of reputation.

5. Levy Google and Facebook

Some have suggested a levy on Google and Facebook to fund Australian journalism. This idea has been proposed by Dr Ben Eltham in his article ‘We should levy Facebook and Google to fund journalism – here’s how’:

“We don’t need to reinvent the wheel. We could levy Google and Facebook say, 25 per cent of their domestic advertising revenue and redirect this to fund Australian journalism and other content.”

With proper funding, professional journalists who have been made redundant by mainstream media could continue their vital truth-seeking and fact-finding role by working for independent start-ups such as michaelwest.com.au.

6. Level playing field needed in Australia

At the moment, few media organisations in Australia have charitable, let alone DGR status. The Conversation Trust is a registered charity with DGR status (qualifying under the “Public Universities” category). This makes The Conversation possibly the only media site with DGR status in Australia and one of only a handful registered as a charity.

The only others which come to mind are the Melbourne edition of the Epoch Times, the Churchill & District News, (both of which take advertising) and a couple of WA newspapers Community Spirit Newspaper and Newman Community Newspaper. None of these have DGR status. So mechanisms for achieving tax-deductibility from the Australian Tax Office for NFP media are required.

Meanwhile, lobby groups acting for powerful corporate interests have never been more numerous or better funded. Organisations such as the Institute of Public Affairs and The Australia Institute have both charitable and DGR status. Neither are truly independent, especially the IPA which is Australia’s leading advocacy body for climate denial. The IPA refuses to be transparent about its donors but it is well known that many such as Exxon, Shell, Caltex and BHP are from the oil and gas industry.

According to Professor Clive Hamilton in an article on the ABC website in 2012, entitled ‘The Shadowy World of IPA Finances’:

“In order for the IPA to become a DGR it had to apply to the Secretary of what is now the Federal Department of Innovation, Industry, Science and Research giving various undertakings.

Most importantly, it had to undertake to use all tax-deductible donations exclusively for scientific research, more particularly “scientific research which is, or may prove to be, of value to Australia”. In this context, the authorities have ruled that “scientific research” includes social scientific research….

It must also ensure that all disbursements … are evaluated and approved by “a suitably qualified research committee” of at least five members, the majority of whom are appropriately qualified in the field of research that is to be undertaken or have appropriate experience in reviewing research, and who should be nominated on the basis of their “proven ability to direct a research program”. As far as I can tell, the IPA has not made public the membership of its research committee.

The rules state explicitly that tax-deductible funds may not be used for “the organisation of conferences, congresses and symposia and the publication of information (other than the results of the IPA’s own research work, undertaken through this program).”

Yet the IPA was able to claim tax deductibility for donations to fund its manual, Climate Change: The Facts 2014, written by a group of climate deniers rather than scientists. Like previous books, it attacks climate science, carbon pricing and renewable energy targets.

The issue here is not free speech. The IPA, like any other organisation, is entitled to express its opinions. Rather, the issue is a level playing field where public interest journalism is, at the very least, afforded a level playing field with advocacy bodies when it comes to public funding.

7. Suggested model for Australian NFP media

In addressing the current media crisis, we request that, in the Senate’s deliberations on the future of public interest journalism, it considers a model based on the highly successful American one. In the US, start-ups are encouraged. By limiting support to organisations with a high annual turnover would exclude and discourage new media and thus, greater diversity. Criteria for qualification should include that the organisation:

• engages primarily in investigations in the public interest;
• avoids advocacy which benefits private interests;
• avoids unsupported opinion;
• provides a community benefit (i.e. education);
• adheres to strict ethical guidelines;
• is fully transparent about its donors; and
• not be a foreign controlled corporation or a company with a turnover of more than $50 million

8. Recommendations (as per Michael West’s Statement to the Committee)

1. Defamation law reform

In Australia journalists can be sued whether a story is true or not. The costs of paying lawyers and defending lawsuits are prohibitive. Law firms are shutting down bloggers. Even the threat of litigation is often enough to deter journalists from writing the truth. It leads to self-censorship.

In the US, it is far harder to sue journalists. The bar is higher and requires evidence of malice on the part of the journalist rather than claims of reputation damage.

2. Charitable and tax-deductibility status

The Inland Revenue Service in the US presently provides tax deductibility for not-for-profit media organisations. If lobby groups can attract tax deductions via Deductible Gift Recipient status (DGR), it is fair that independent media enterprises – which have no political affiliations but act in the public interest – also merit DGR status. Criteria for qualification as listed under point 7 above.

3. Google and Facebook

These two multinational companies now soak up the bulk of the advertising dollars which used to fund the mainstream media, yet they pay very little tax. Google even avails itself of R&D tax breaks. The Australian Tax Office is now clawing back revenue from these companies which has been previously funnelled offshore, yet more needs to be done to capture revenue and perhaps reallocate revenue into public interest media.

4. Government and corporate transparency measures

Freedom of Information laws need to be improved to make it easier for citizens to hold public institutions accountable. Political donations disclosures should be made when the donation is made. Political parties should file detailed General Purpose financial statements so the public can see how politics is funded. It is vital to public confidence in government and, therefore, the effectiveness of government, that there is visibility about the influence of corporations and wealthy private individuals on pubic policy.

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You can follow Sandi on Twitter @Jarrapin.

Editor’s Note:

NEWSFLASH (23/6/17)

A Canadian parliamentary inquiry has just recommended: 

Based on the many suggestions received on this issue, the Committee also believes there is a need to remove the obstacles that prevent philanthropic organizations from investing in journalism in Canada.

The Committee believes that this subject is worth studying in order to rejuvenate Canada’s media industry, increase the diversity of voices, particularly at the local level and provide an additional source of funding for existing not-for-profit media.

RECOMMENDATION 19

The Committee recommends that the Government of Canada change the definition of a registered charity in the Income Tax Act to include not-for-profit media or foundation.