Bill C-427 (Historical)

Reflecting the Realities of Canadian Artists Act

An Act to amend the Income Tax Act (income averaging for artists)

The purpose of this enactment is to amend the Income Tax Act to permit Canadian artists to benefit from income averaging for the purposes of federal taxation over a maximum period of five years.

Reflecting the Realities of Canadian Artists Act

[Chungsen Leung, Conservative, 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.

[The Deputy Speaker, NDP, Joe Comartin]

The hon. member for Argenteuil—Papineau—Mirabel has about seven minutes.

[Mylène Freeman, NDP, 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.

[The Deputy Speaker, NDP, Joe Comartin]

The hon. member for Jeanne-Le Ber has five minutes to respond.

[Tyrone Benskin, NDP, Jeanne-Le Ber, QC]

Mr. Speaker, would that I had more time to address the time-shifting, trans-dimensional contributions of my colleagues from across the way. I will bring this back to this dimension and this reality.

The bill would respond to the needs of artists. It has very little to do with support for the arts and institutions. The institutions that get the get tax credits and support that the Conservatives have talked about are fine. This is about the artists. A lot of the contributions to these organizations do not necessarily trickle down to the artists. The bill looks at the work that artists do, the remuneration they get and looks at a way of helping in spike years to ease some of the massive tax burdens that artists have because of it.

I will address one issue in particular. The fact of how we would pay for this is a question that kept coming from the other side. We would pay for this by the same means as are all tax easements contained in the tax code. It would be done through choices, through making a good choice for artists. This bill would offer an investment into the economy. It would allow artists to put more money into their pockets so they could contribute to the economy and to themselves as small businesses and as people. This is not about whether a film can be made. It is about what happens after that film is made.

The other thing I will touch upon is the question of what we say to other sectors that look at this bill and ask, “What about us?” What we say to them is that this is the beginning. It is the beginning of a conversation we need to have in how we collect taxes. We can no longer look at the tax regime as being how much money people make and how much they should be taxed. We have to look at it in addition to how that money is made.

Farmers have particular needs, as do insurance workers, car salesmen and artists. This is not be about selecting a few individuals and special treatment toward those individuals. It looks at the realities of this group of individuals and this a portal, if I may continue the same analogy, to looking at how we tax our citizens.

When the Income Tax Act came into being in the 1940s as a means of funding the war effort, the labour force looked different. There were labourers, factory workers or office workers. It was very simple. Now it is as diverse as the medical industry, as I have said before. We go to the GP now not to get fixed as much as to get a little slip to go to see a specialist in one area or another. The workforce is that same way. We need to start to look at ways to derive income tax from our citizens in ways that reflect how they make their money and not simply how much money they make.

To again address a comment that was made on the other side, this bill has been costed. It has been costed by the Parliamentary Budget Office. The income tax averaging aspect of this bill would come in at around $7 million, rounded up to $10 million. That money goes back into the pockets of our citizens, which eventually goes back into the coffers through economic and consumer activity and through investment activity. I cannot think of a better way to help artists in our country by giving them that power to be full and active members of the economic and cultural community that is Canada.

[The Deputy Speaker, NDP, Joe Comartin]

It being 6:30 p.m., the time provided for debate has expired.

The vote is on the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

No.

[The Deputy Speaker, NDP, Joe Comartin]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Deputy Speaker, NDP, Joe Comartin]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Deputy Speaker, NDP, Joe Comartin]

In my opinion the nays have it.

And five or more members having risen:

Pursuant to Standing Order 93, the recorded division stands deferred until Wednesday, November 7, immediately before the time provided for private members’ business.