Bill C-427

Tyrone Benskin Jeanne-Le Ber, QC

Mr. Speaker, in 2007, the Conference Board of Canada calculated that the cultural sector represented 7.4% of GDP. Artists who contribute to the economy are penalized by the current tax system in years when they earn a decent income.

Will the Conservatives support tax flexibility for Canadian artists by voting for Bill C-427?

Mylène Freeman Argenteuil—Papineau—Mirabel, QC

Mr. Speaker, the bill introduced by the hon. member for Jeanne-Le Ber deals directly with justice and equality among all Canadians. The bill allows income averaging for artists and cultural entrepreneurs under federal income tax practices. It also makes some income that is derived from royalties or gratuities tax-free.

The Canadian tax system is crucial to our government, but it is hardly fair for artists. In addition, artists do not have much of a social safety net to rely on. The tax system puts them at a disadvantage because of the irregular hours usually associated with their work and because of punitively high taxation during years of high earnings. The years before and after a high-earning year should be taken into account, since they are often very modest. In terms of the social safety net, artists are often ineligible for certain government programs, such as employment insurance, Canada pension plan, and so on.

This bill addresses one of the challenges that comes with a career in the arts. At a reasonable cost, we could help nearly 100,000 Canadians make ends meet and guarantee that they are no longer put at an unfair disadvantage.

The performing arts are unparalleled for the flexibility required because artists are hired, but they can easily be fired. By definition, any creative work carries its share of risks and uncertainty that expose the artist to a precarious life, more so than the typical salaried worker. It is obvious that this work model is only sustainable if the government is prepared to provide an element of stability in the employer-employee relationship. That is what we would like to do.

Managing risk is a vital function that prevents prolonged and intermittent periods of unemployment from making employment in the world of arts and entertainment even more precarious. The principle of income averaging for artists, in general and in Bill C-427 in particular, has almost universal support from members of Canada's cultural community. They believe that this measure can mitigate the uncertainty of the artist's work. Unlike what the Conservatives seem to be saying, income averaging is quite common throughout the world and it is an effective means of spreading out the tax liability.

I will talk about an organization that is an economic driver in my riding and in the Montebello region: Outaouais Rock, which hosts the largest rock festival in Quebec. When Alex Martel, the business manager of Outaouais Rock, heard about Bill C-427, introduced by my colleague from Jeanne-Le Ber, he wrote to me to say that he wanted to offer his support, as well as the support of all those involved with Outaouais Rock, for this bill that would do a lot for artists.

Artists and people who work on stage or behind the scenes, like Mr. Martel, recognize that work is needed to adapt our tax system to artists' realities. This year, the economic spinoffs of Rockfest in Montebello were estimated at $4 million. The festival brings in a number of investments to our region and is good for all those who live there. It also acts as a tourism draw for the region.

Careers in the arts, as in many seasonal industries, are often characterized by large fluctuations in income and by irregular work hours. This situation has an unfortunate consequence: it harshly penalizes artists on their taxes when they receive a higher income.

Contrary to what the government seems to believe, careers in arts and culture make an enormous contribution to our economy. The least we can do in return is to take into account the distinct nature of work in the arts and give artists their just due so that they can continue to enrich our culture. Artists, artisans and those who work in the cultural industry generate huge economic spinoffs and positive economic externalities. They need us to adjust the tax system so that it takes into account their reality.

To quote Gabrielle Roy, “Could we ever know each other in the slightest without the arts?” There is no better way to describe the importance of the arts in our society. This reminds us of the importance of supporting these occupations that are essential in our society.

This bill is an excellent example of how much the NDP supports artists and the cultural industry. This sector leaves a huge economic footprint. It accounts for a large part of our GDP. It provides many jobs and generates good economic spinoffs.

My colleague's bill recognizes the importance of this industry and is an excellent way to allow artists who live for their art to also make a living from it.

Chungsen Leung Parliamentary Secretary for Multiculturalism

Mr. Speaker, thank you for the opportunity to speak to today's NDP costly proposal for special preferential tax treatment for a select few Canadians.

Let me preface this by saying I fully appreciate that our country attempted, during the period 1971-88, to do some sort of income averaging, but now I think there are many other tax administrative tools that are much more effective and efficient in providing that type of income security and income levelling out.

Before I continue with my remarks here today, I want to be clear that our Conservative government has always been a strong supporter of the arts and culture. Our government recognizes that arts and cultural activities enrich our lives immeasurably as individuals, communities and as a country. Not only are they an expression of the many faces and many stories of Canada, but because of that, they help strengthen and define our Canadian identity.

I am very pleased to have this opportunity to highlight some of the support that is available to Canadian authors, musicians and other artists under our Conservative government.

First, Canadian authors and publishers benefit from the Canada book fund. Its principal objective is to ensure access to a diverse range of Canadian-authored books in Canada and abroad. The program seeks to achieve this objective by fostering a viable Canadian book industry that publishes and markets Canadian-authored books.

For our filmmakers, key measures include the Canadian film or video production tax credit, which objective is to encourage Canadian programing and develop an active domestic production sector. This fully refundable tax credit is available at a rate of 25% of the qualified labour expenditure for an eligible production.

Musicians can benefit from the Canada music fund. Its objective is to enhance Canadians access to a diverse range of Canadian music choices; to increase the opportunities available for Canadian music artists and entrepreneurs; and to ensure that Canadian music artists and entrepreneurs have the skills, know-how and tools to succeed in a global and digital environment.

Members of the performing arts can take advantage of the Canada arts presentation fund, which gives Canadians direct access to a variety of quality artistic experiences, by providing financial assistance to arts presenters and the organizations that support them.

These artists can also benefit from the Canada arts training fund, which contributes to the development of Canadian creators and future cultural leaders of the Canadian arts sector by supporting the training of artists with high potential through institutions that offer training of the highest calibre.

It is clear that our government is helping artists to market their works and providing them with the tools they need to succeed on a local, national and international scale. Our Conservative government will continue to stand behind our artists and champion their causes and indeed, we are doing more. We provide numerous special incentives through the tax system to support the cultural industry in Canada. For instance, employed musicians may claim the cost of maintenance, rental, insurance and capital cost allowance on musical instruments against employment income earned as a musician.

Employed artists are also entitled to deduct expenses related to their artistic endeavours, up to the lesser of $1,000 or 20% of their income derived from employment in the arts. Artists who receive prizes for meritorious achievement in the arts, such as the iconic Governor General's awards in arts, do not have to pay taxes on these awards. As I noted earlier, film producers can receive a tax credit for Canadian film and video productions, including the cost of scriptwriters. Also, self-employed artists receive an immediate deduction for the cost of producing their work, even if the work is unsold and remains part of their creative inventory.

Clearly, our Conservative government wants to see a thriving cultural industry in this country, and we understand that the best way to achieve this is through a low tax plan. The positive initiatives I have highlighted are measures that benefit artists of today; however, we also are looking to help the artists of tomorrow. We understand the necessity to assist Canada's next generation of great artists, possibly the next Céline Dion or Justin Bieber. That is why we introduced the children's arts tax credit, available since 2011, to promote children's participation in artistic, cultural, recreational or developmental activities.

This credit is provided on up to $500 of eligible fees per child in respect of qualifying children's programs for those under the age of 16. This credit has been warmly welcomed across Canada, especially among moms and dads.

Here is what Christin Dewald, organizer of an arts summer camp in Calgary, said:

...it shows that our society understands the importance of creativity in the development of children. The children who attend our classes have the opportunity to use their whole brain. We see children develop new skills like problem solving and risk taking. As a result, these kids enjoy increased self-esteem.

Clearly, our government is supporting artists and helping to foster the arts here in Canada with smart and affordable policies. Unfortunately, today's NDP proposal is not such a similar policy. I would like to point out that income averaging, as outlined in today's NDP proposal, is an idea that was tried and failed in the 1970s and the 1980s.

As the Parliamentary Budget Office report on C-427 itself points out, expert opinions even then, “...suggested that the averaging provisions were exceedingly complex”.

Basically, when income averaging existed previously it proved to be a failure as tax policy, as it was used primarily by high-income taxpayers to avoid paying taxes. Not surprisingly, that is why over 20 years ago the then federal government eliminated income averaging.

Furthermore, bringing back income averaging today fails to recognize that there have been major reforms to the Canadian tax system since that time. When income averaging existed in the 1980s, Canada had 10 tax brackets. Today we have only four brackets, and the top federal marginal tax rate has decreased from 34% to 29%, not to mention that all federal surtaxes have been eliminated.

Again, all those tax reforms have made the need to bring in income averaging essentially redundant. However, do not simply take my word for it. Listen to the independent experts and the economists who have studied income averaging proposals.

For instance, here is what Kevin Milligan, a professor of economics of the University of British Columbia, had to say about income averaging and today's NDP proposal specifically:

[T]he NDP's tax policy proposals still need some more rehearsal time.... Many Canadians support the presence of a healthy cultural sector in our society. However, income averaging is an extremely clumsy apparatus for supporting the arts—to the extent it would even help at all. Let the debate on support for culture flourish, but let's keep income averaging out of it.

I could not agree more with that statement. We all support the arts and we all want to see the arts succeed in Canada, but we want and should want to do that with smart, affordable and effective policy. Unfortunately, income averaging is not such a policy.

Alex Atamanenko British Columbia Southern Interior, BC

Mr. Speaker, I am very pleased to speak in support of the bill.

I would like to thank my colleague, the member of Parliament for Jeanne-Le Ber, for his tireless efforts on behalf of Canada's artist community. I would also like to thank the previous speaker for his support of this bill and some of the important points he laid out.

Before I start, I should say that the member who introduced the bill has had a long and distinguished career as an independent artist. He learned first-hand how unforgiving our tax system can be for those engaged in creative enterprise.

The member has consulted extensively with the artistic community. He is determined, and I am hoping we can all support him in his efforts to enact this modest measure of promising, one could say, greater fairness to those in the artistic community.

Bill C-427 seeks to enact a form of income averaging for artists and cultural entrepreneurs under the federal tax code and to exempt from taxation a portion of their income derived from royalties and residuals.

It would allow artists, as carefully defined under the Status of the Artist Act, to average their income for the purposes of federal taxation over a period of two to five years, producing significant tax savings on a flexible scale.

It would exempt from taxation the first $10,000 in income derived from royalties, residuals and other special payments.

It would ensure greater overall tax fairness for a specialized group of taxpayers significantly disadvantaged under the existing federal tax code by the inconsistent hours of work associated with their careers and by punitively high levels of taxation in years of high earning. They are further disadvantaged by lack of access to certain government programs such as employment insurance.

The act would also stimulate a broader public debate about how government can act to appropriately recognize and valorize the cultural industry and artists who enrich our society, unify our country and represent an ever more crucial driver of economic growth, which I will talk about a little later.

Despite strong support for the arts and the existence of many highly developed and competitive cultural industries, Canada lags far behind a number of other developed countries in terms of fiscal policy actions designed specifically to support the work of artists and cultural entrepreneurs.

Due to irregular working hours and fluctuating incomes often associated with their work, artists are almost always disadvantaged both by outrageous tax rates in years where their income is high, and also by their inability to take advantage of certain federal programs, including employment insurance, the Canada pension plan and others.

Bill C-427 will give artists the small business support they need by allowing them to spread their income over a chosen period and make significant tax savings over two or five years. It will of course be possible for them to reinvest their savings in their business and for them to better provide for themselves and their families.

A number of governments, in Canada and abroad, have implemented income averaging mechanisms in order to acknowledge the particular status of certain groups of taxpayers, of cyclical or seasonal industries, whose incomes do not fit the stable and predictable formula of wage-paid work. There are income averaging models specifically for artists in dozens of European countries, including England, France, Germany, the Netherlands and other countries that are Canada's trading partners.

Here in Canada, income averaging models have been used on a number of occasions to provide support to our east coast fishers and to invest in resource exploration projects and in other high-risk employment sectors. In 2004, the Quebec government introduced the only permanent income averaging system in Canada.

Most people understand the importance of arts and culture for the dynamism, expressiveness and vitality that it offers Canadian society, but many do not realize the economic and positive impacts. In a landmark study in 2007, the Conservative-leaning Conference Board of Canada calculated the overall economic footprint of Canada's cultural sector to be greater than $84.6 billion or a staggering 7.4% of Canada's real GDP. By way of context, this means that cultural industries make a larger annual contribution to the Canadian economy than fisheries, mineral extraction and a variety of other crucial industries, accounting for over 1.1 million jobs.

Freelance artists in Canada overwhelmingly confront a situation of income precariousness. The Canadian socio-economic information management program administered by StatsCan indicates that, based on the North American Industry Classification System, the average annual income of an independent Canadian artist was only $37,476 in 2011, which is significantly less than that of tradespeople, contractors and virtually every other variety of independent employee in the Canadian economy. This is not a lifestyle of galas and soirées; it is survival, often on the very edge of the poverty line.

The measures included in Bill C-427 are completely affordable. The analysis conducted by the Department of Finance, further to the request we made to the Parliamentary Budget Officer to give a figure for the cost of the bill, determined that the total cost of the bill’s implementation would be less than $25 million in deferred income tax per year.

The impact of passing the bill will be both reasonable and widely shared. Using the best information available from Statistics Canada, the Parliamentary Budget Officer calculated that some 55,000 taxpayers would probably take advantage of the income averaging provisions in Bill C-427, with an average savings of about $130 per taxpayer. Similarly, the consequences relating to the royalties exemption provision in the bill would benefit some 41,600 Canadians involved in artistic pursuits, with an average savings of about $1,500 per taxpayer. This represents real money in the pockets of real taxpayers that will be used to stimulate Canada's economy and Canada's economic recovery.

In the few seconds I have left, I want to once again thank the hon. member for introducing this bill. As was mentioned earlier, it already enjoys the endorsement of ACTRA and other major national organizations representing Canadian artists. It is a way of stimulating our economy, putting more money into our communities, supporting the arts and at the same time supporting small business. Therefore, I urge all members to support this bill.

Scott Simms Bonavista—Gander—Grand Falls—Windsor, NL

Mr. Speaker, this is something that has been talked about for quite some time. Actually, it was in practice in a general sense back in the 1970s and 1980s. I believe that it was discontinued around 1987.

I want to congratulate the member for Jeanne-Le Ber for bringing this forward. It is a comprehensive bill. I said to him that when one amends the tax code this way and uses the formula to do it, there are probably only about five people who could truly understand how the formula works and those five people should probably be locked away. It is comprehensive, no doubt, but nonetheless it is something that is necessary. I congratulate the member because he did some fine work in the legislation.

Before getting into the discussion of the actual bill, there are several things in it. This is something for the arts industry in this country, for people who create, who disseminate material from their own imaginations. The dissemination process today is not what it used to be. It is far more instantaneous. We are not even getting into talking about copies anymore. Now it is all about clouds and instant access for the world.

It is difficult for artists nowadays to recoup their investment in their own work, whether through music, through art, productions, plays, movies and so on. This would allow, through the tax code, these people to actually make a living or at least get them to the point where they could make a better living and reap the benefits of what they do. That is because of the nature of what they do and how they are able to receive remuneration.

If we think about this for a moment, authors spend roughly three to five years writing a book. I am not an author but I assume three to five years is in the ballpark for a major novel. All of a sudden, they publish it and it is out there in the market. If they are lucky the book gets on the bestseller list for a period of two or three months and the income comes in dramatically, and most of it during that period. Then the book goes to paperback and then to digital, and slowly but surely, the amount of revenue received from it dwindles.

However, all that money that is received in income falls into one taxation period. If artists receive all revenues from their created work in one year, obviously they will be taxed at a higher level than if the income were spaced over three to five years. If this were treated like a normal job in the world of taxation, people would be taxed over the period that they worked on it, three to five years or maybe more.

There is an unfairness in this. There are other industries where that is the case. There used to be a situation where we could apply this principle to the general public, but we no longer do that. It was changed because the tax code was simplified in the late 1980s and the difference in rates between the top and bottom were not as great, so that concept was thrown out because it was said not to be as beneficial.

It is beneficial for certain industries to this day and this is one of those industries. It would allow artists to average their income over a two- to five-year period. We can debate and amend as to what that number would be, but certainly the principle is sound in the sense that artists could amortize income over a certain period of time that reflects the amount of work put into the body, as opposed to all the money they have received in a short period of time. That is simply the nature of the business.

Income averaging is a concept that dates back to agriculture and to the fisheries as well, where people get an incredible amount of money in a short period of time and try to average that out. Luckily, we have government programs to help them do that. Fisherman's EI is another example of that. It is not called income averaging, but that is essentially what they are doing. They get an average income over the course of the year instead over a short period of time.

Many of these projects, when it comes to the artistic world, reflect that nature. There may be a project that goes year over year. That is fine. The bill does not affect those people who are getting a steady income. However, what it does do is even out income for those who are on their own.

Let us face it, artists in our country are on their own, doing their own thing. Not only are they artists but they have to become financial analysts and tax people. It is difficult for them to follow all the rules, given that there are so many rules around what they do because they are pretty much on their own. It is expensive to hire a taxicab. What we see reflected in the bill is fairness in the tax system.

I may have neglected to mention it and members may have figured this out, but I will be voting yes to this particular bill, just in case I gave anyone the wrong impression.

The number of stakeholders who agree with this all over the artistic community is phenomenal. This is why we have been talking about this issue for quite some time. The stakeholders have talked about this ad nauseam. The individual who brought the bill here is an artist. I have seen him in movies. He is good at what he does.

Stakeholders who support the bill are: the Canadian Federation of Musicians, ACTRA, the Independent Media Arts Alliance and the Canadian Conference of the Arts. These are broad umbrella groups that give the bill a lot of support.

The angst from all this, as I am sure members will hear, is whether we can do it for this one group and not do it for the others. Someone once said to me that if we cannot do it for all, we should not do it for any. Does that really make a lot of sense? What about when Saskatchewan created medicare? Would the federal government at the time have said it could not do it because if it did it for one province it would have to do it for the rest? We did do it for the rest. It took one province to show leadership and do it.

By being a leader on this particular issue, the arts community could be the leader and open it up for others. Granted, it could be an expensive endeavour. We realize that. In a time of austerity we have to keep that in mind. However, it is certainly one of those things where we should allow these people to continue to make a living at what they do.

The other thing is to look at how many of our talented people go south of the border. Would income averaging allow these people to have a better life in our country and they would not have to go south of the border, particularly actors and performers? The numbers are out there. I think it would. Some people could argue that it would not. It is hard to tell. However, it certainly gives them a better footing in our country to be able to make a living, to pay their mortgages, to pay for their vehicles and to help raise their families. That, in essence, is what this is about. It is a social concern. It is something that provides this particular community with the tax fairness it needs.

Back in the last election campaign, the Liberal Party endorsed this. This is from the 2008 election. It states:

Support for Canada’s arts and culture must also extend to support for artists themselves. That is why a Liberal government will provide income averaging for artists drawing on the inspiration of Quebec’s income-averaging provisions.

There we go. We have a leader here, a province to look to for how this is done, similar to the way the Province of Quebec handled pensions and similar to the way Saskatchewan handled medicare. What Quebec represents is a vanguard to how this plan could be implemented.

As for costing, Finance Canada estimates the income averaging bill, Bill C-427, would cost the federal treasury approximately $10 million a year. That is not a lot in total spending for the government. It estimated that this measure would benefit approximately 55,000 individuals, with an average benefit of $130 or more.

We get the idea that it is not a tremendous measure. It is not a great anchor hoisted upon our federal treasury. However, it is something that would go a long way for the individual artist or artist groups who want to receive fairness from the tax system and to make a living in our country without having to go somewhere else.

I applaud my colleague for bringing this forward.

Peggy Nash Parkdale—High Park, ON

Other countries are making these investments, and if we don't, we're going to fall further behind.

I appreciated your comments about the engineers of tomorrow and bringing in first nations and women. I would argue there are many young people of diverse backgrounds across the country who would love to get into a career like engineering.

I do want to be able to ask more questions. I want to ask you, Mr. Blake, about your presentation. Full disclosure: I was one of the seconders of Bill C-427 on tax averaging. I strongly support it, but I would like to hear more from you about artists as job creators and as incubators of not just creativity but also of good businesses. I was very glad to see Sarah Polley's new film, and it says, “National Film Board presents”. To me, a commercial film that will get this kind of distribution is a good investment of our dollars. Can you talk a bit about job creation and the arts?