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.

[The Deputy Speaker, NDP, Joe Comartin]

The House will now proceed to the taking of the deferred recorded division on the motion at second reading of Bill C-427, under private members' business.

The House resumed from November 1 consideration of the motion that Bill C-427, An Act to amend the Income Tax Act (income averaging for artists), be read the second time and referred to a committee.

Canadian Heritage

[Tyrone Benskin, NDP, 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?

Reflecting the Realities of Canadian Artists Act

[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.

[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.

[Alex Atamanenko, NDP, 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, Liberal, 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.

The House resumed from September 26 consideration of the motion that Bill C-427, An Act to amend the Income Tax Act (income averaging for artists), be read the second time and referred to a committee.

[Peggy Nash, NDP, 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?

[Barry Blake, National Councillor, Actor, Alliance of Canadian Cinema, Television and Radio Artists]

Thank you, Mr. Chair.

Good afternoon, everyone. My name is Barry Blake. I'm a professional Canadian actor, and I'm also a national councillor with ACTRA, the Alliance of Canadian Cinema, Television and Radio Artists.

I'm speaking today on behalf of our 22,000 members across the country, professional performers whose work entertains, educates, and informs audiences in Canada and around the world.

Canada's cultural industries represent over $85 billion, which translates to 7.4% of our GDP. They generate over 1.1 million jobs. In 2010-2011, screen production alone created 128,000 jobs and generated $2.6 billion in exports. That's significant.

Make no mistake: Canadian content creation is a very serious business. Content is at the heart of the digital economy. Canadian content creation is also synonymous with Canadian job creation. Building a mature, digital infrastructure requires smart investments that reinforce our cultural economic drivers.

To do that, we are proposing a three-point plan in terms of a sustainable digital economy strategy.

First, public investments are needed in content creation. I want to congratulate the government on maintaining the budgetary commitment to the Canada Media Fund in budget 2011.

I must say, it's a great start. It means we share our own Canadian stories at the same time as we create jobs. It's win-win.

With our changing industry, we need to make sure the proper tools are in place to seize all new opportunities. In addition to your support for the CMF, we urge you to commit to renewed and stable long-term funding for Telefilm Canada, the CBC, and the National Film Board.

Telefilm Canada's feature film fund is crucial to making sure that Canadian films get made. Each dollar invested in a Telefilm production triggers two dollars in additional financing for digital media projects, and three dollars for feature film projects. With the last budget's cuts to Telefilm's parliamentary appropriation, its mandate to foster the development of Canada's audiovisual industry and track its export value around the world is in jeopardy.

We recommend restoring Telefilm's full parliamentary appropriation and giving Canadian creators the support they need to excel on a competitive international stage.

Insofar as the CBC/Radio-Canada is concerned, a recent study by Deloitte determined that for every dollar the federal government invests in CBC/Radio-Canada, the corporation puts back more than three dollars into the Canadian economy. These are investments, not really costs.

We ask you not only to restore the previous parliamentary allocation but also to increase that allocation by seven dollars per capita, from $33 to $40 for every Canadian. That would bring it in line with the funding of public broadcasters in other industrialized nations.

The National Film Board is recognized around the world as one of our great cultural workshops. For over 70 years, it's created groundbreaking documentaries, animation, and digital media productions. It has pioneered many technical innovations. Unfortunately, the 2012 budget saw $6.68 million cut from the NFB's parliamentary allocation over three years. We urge you to reverse the cuts and put the brakes on future budget reductions.

Our second point would be increasing private investment. Our cultural industries don't want to rely on government funding alone. We need to build on incentives to increase private investment in content creation. We urge you to look at tax credits, expanding the Canadian film and video production tax credit, and allowing production services tax credits to count against the entire budget, not just labour costs. We're also looking at labour-based tax credits for digital and interactive media at the federal level.

Our final point is on income averaging for artists. Simply put, performers and artists are small businesses with very spikey or lumpy income, as we call it. The model we face is an employee-centred model, not really one that meets the needs of independent businesses.

We urge you to support the current bill before the house, Bill C-427, reflecting the realities of Canadian artists. This is one way to redress the inequity that performers face, and it would be lovely if it was supported by all parties.

Thank you very much.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Mr. Speaker, I rise tonight to speak in support of Bill C-427.

Before I comment directly on the bill, I want to commend my colleague from Montreal for his work on this issue. He is a two term national vice-president of ACTRA, an accomplished actor, singer, songwriter, composer, director and writer. I really cannot think of a better person in the House to work on this issue.

I had a nice surprise yesterday that that really speaks to why I strongly support Bill C-427. Between the ages of 15 and 25 I played music professionally and often considered making music my career. Yesterday a former Raspberry Jam band mate, Randy Kee, posted some old VHS footage on YouTube, which brought back memories of the time when playing music was probably the most important thing in my life.

In addition to allowing me to take a trip down memory lane, the video made me think not only about the artists with whom I worked but also the artists I currently admire and those in my community who really work hard but sometimes struggle to get by. The bands I am thinking of are 3 Inches of Blood, Faira, Wintersleep, Japandroids, Hey Ocean, Mother Mother, and perhaps Maria in the Shower. They might be groups that members entertain themselves with during the evenings. These bands are important to our community. They speak to different parts of the community. The entertainment that I mentioned goes right across the spectrum and is important to support.

We need to support our artists not just in words but financially. We need to take as much pride in our artists as other countries, and we need to back up our words with legislation like Bill C-427.

At its core, Bill C-427 concerns income averaging for artists. It would allow artists to average income for the purpose of federal taxation over a period of two to five years, producing significant tax savings on a flexible scale. Importantly, the bill proposes to exempt from taxation the first $10,000 in income derived from royalties, residuals and other special payments.

My colleague has outlined this in much more detail but I just want to give three reasons why I think the bill needs to be passed.

The first concerns the direct benefit to artists, like those I just mentioned. The bill would create greater overall tax fairness for this specialized group of taxpayers who are significantly disadvantaged under the current federal tax code. This concrete support acknowledges financial difficulties faced by developing and emerging Canadian artists and would put measures in place to counter the lack of access to certain government programs such as EI and CPP.

If we are able to make the private member's bill law, it would really show that the Canadian government is putting its money where its mouth is.

The second reason the bill should be passed is really a symbolic one, that we need to recognize the integral role that artists play in our society and how they boost our cultural identity.

The third reason is economic. We can see the House of Commons starting to focus and really zero in completely on the economy as we face economic difficulties abroad and really struggle in dealing with these in Canada. In that regard, we have heard some figures from the other side of the House that really underestimate the contributions artists make to our Canadian economy.

According to the Conference Board of Canada, the overall economic footprint of Canada's cultural sector is around $85 billion a year. We heard a number quoted a few minutes ago of $40 billion, but the Conference Board of Canada, which is not an extremely left-leaning organization, has estimated it at $85 billion. When we look at the impact on the overall Canadian economy, it is about 7.4% of Canada's GDP. When we look at this in terms of other industries, it really has a fairly massive impact.

We always talk about our trade deficit and how we import more than we export, but what could be more exportable than cultural products. These days people upload things to iTunes and sell them wherever they like. It is a very transportable good, film or music and as we move more toward a knowledge economy, this is something we need to encourage. Our neighbours to the south have done this in tremendous ways and we need to catch up.

Despite the potential contribution as well as actual contribution of the $85 billion, Statistics Canada indicates the average annual income of an independent Canadian artist is only about $37,500. This is significantly less than tradespeople, contractors and virtually every other variety of independent employee in the Canadian economy.

I was a musician until I was about 25 and used to joke about sleeping on couches, or having lots of people living in a house or driving in stinky vans. I guess that is the fledgling part of the industry. It might be fun when people are 25, but it is not fun when they are 45. These types of measures would encourage more people to stay in the arts and make it more of a viable career, which would only be good for Canada.

In the past, the government has portrayed of life of artists as a series of galas or soirees, but for most Canadian artists it is survival on the very edge of the poverty line. The measures being proposed today would go some way to alleviate that.

The measures contained in the bill are affordable as well. The government would forgo less than $25 million in tax revenue per year, but the benefits would be enjoyed by over 55,000 Canadians. Therefore, it really is the best kind of measure, where we are not spending a large pile in comparison to the rest of the budget, but spreading it out over a large number of people and boosting them up a little, which makes a big difference. It seems to be a very effective measure.

These benefits lead me to think about countries that really care about their artistic talent and ways that smaller countries can punch way above their weight. The country I think of often is Ireland, which has a small population but a worldwide reputation for everything from poetry to songs. The Irish have forever had one of the most generous taxation schemes, which has paid off in spades. While this legislation is different than the Irish measures, it is the spirit that is important, recognizing the cultural and economic contributions of artists and how we can support that most effectively.

Numerous jurisdictions at home and abroad use income-averaging measures to recognize the special circumstances of certain groups of taxpayers in cyclical or seasonal industries whose livelihoods do not follow the steady, predictable formula of a salaried job. Income-averaging models specifically targeting artists exist in dozens of European Union economies, including France, Britain, Germany, the Netherlands and a number of our other key trading partners.

In Canada, as has been mentioned but is worth restating, income-averaging models have been employed at various times to support east coast fishers, investment in resource exploration projects and other high-risk fields of work. It is often associated with physical labour, but it is good to stretch the mind a little to think about how this could benefit those who are not engaged in that kind of work, although lifting band equipment can fall into that category maybe.

In 2004 the Government of Quebec enacted Canada's only permanent income-averaging system, once again leading the way in terms of supporting artists.

This is widely supported right across Canada. Not only do we have an excellent spokesperson presenting the bill this evening, but ACTRA and other organizations are enthusiastically supporting this concept. The House should support the bill and I was happy to speak to it this evening.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Speaker, I thank the hon. member for bringing forward this proposal. It is helpful for us to debate changes to the Canadian tax system because the reality is that we have not had a meaningful study or evaluation of our personal tax system in Canada since 1971 with the Carter commission. The reality is if we were to try to find one word that would sum up what has changed in Canada since 1971 in terms of the Canadian and global economies, that word would be “everything”. Therefore, we do need a meaningful study, review and reform of the Canadian personal tax system.

Unfortunately, we are having these kinds of one-off discussions around the tax system due to the lack of leadership on the government side to take this important issue seriously and have a meaningful debate and discussion about changes that would build a fairer tax system and, potentially, a more globally-competitive one at the same time.

The parliamentary secretary said that the tax system should be based on fairness. He also said that we should not be picking winners and losers. I cannot help but go back to those comments and reflect on recent Conservative government policy in some ways, because he is saying that the taxes should be based on fairness and that we should not be picking winners and losers.

Recent boutique tax credits introduced by the Conservative government, whether for volunteer firefighters or family caregivers or, going back a bit further, the disability tax credit, discriminate against the lowest income Canadians because they are non-refundable tax credits. As such they do not benefit low-income Canadians. That is not consistent with the idea of a tax system based on fairness. I also do not think it is consistent with the idea that we would not pick winners and losers. The reality is that the Conservatives are picking winners and losers and the losers are low-income Canadians, which is absolutely inconsistent with the principles the member just articulated.

If we simply made those tax credits refundable we would include low-income Canadians in the category of Canadians and Canadian families who would benefit from them. I would ask the parliamentary secretary and the government to reflect on that. If fairness is the principle, if not picking winners and lowers is the principle, then we ought to at least make those tax credits fully refundable to start.

Now I want to speak specifically to Bill C-427 and the idea of income averaging for artists, because it is important to realize that all of our cultural artists, such as musicians, painters, sculptors and authors, face huge challenges and tremendously cyclical income curves over the period of their careers. They will work for years and not make any money, and then one year will have a really good year and be in a top marginal tax bracket. That is why I think we should move this to committee and have it studied. It is important to realize that this is an important issue for our cultural community, that the current system, as it stands, is not fair and that changing it to reflect the incredible variance in incomes of cultural creators makes a lot of sense.

Where I would agree in some ways agree with the Conservative parliamentary secretary is that we ought to consider income averaging in other areas. However, his idea is that if we are not doing it for everyone right now then we cannot do it for anyone. I think that is wrong. Income averaging in the cultural community can actually create a model that can ultimately be applied more broadly.

I will give an example. A few years ago I met with a constituent who I think had a grade 7 education. He was a physical labourer who had been injured in the workforce. After that injury, he went to workers compensation in Nova Scotia to apply for compensation.

He fought for his compensation for four years and ultimately was compensated. I think at the time he got over $100,000, which at that time put him in the top marginal tax bracket. As such, he was taxed at the highest marginal tax rate, after having had basically no income for four or five years. In that case I would argue that having been deprived of his income or capacity to work for those years because of a workplace injury and then having received a lump sum cheque to compensate for that lost income, he ought to have been able to qualify for income averaging.

I am using that example not as a reason why we should oppose the bill but why we should both support the bill and consider income averaging more broadly. That is where I agree with the Parliamentary Secretary to the Minister of Heritage. There are other groups within society that could benefit from this.

That brings me back to the original point. Why are we not having a more thorough discussion on the need to reform our Canadian tax system and taking a look at issues of fairness? For example, yesterday in the House we debated the issue of income inequality and equality of opportunity. There are direct impediments in our tax system to equality and upward mobility. Moreover, there do exist areas where members of the Conservative Party, the New Democratic Party, the Liberal Party and the Bloc would agree. These are some areas where if common sense were applied to the Canadian tax system, it would yield a simpler system. We could actually have a simpler tax system.

I understand the argument that this bill would create a more complicated tax system, but it is difficult to understand the Conservatives' point that they are opposed to any complications in the Canadian tax system when they continually introduce boutique tax credits, which actually further complicate the Canadian tax system. I studied taxation in university, and I remember it was an open book exam. I remember the size of the textbook. The Canadian tax code was pretty voluminous way back then. I shudder at the thought of what the Conservatives have done to that puppy since 2006.

The reality is that income averaging for artists makes sense. That is why in 2008, in our Liberal platform, we actually called for this. We said:

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. This will ensure that the tax system will better reflect the peaks and valleys of the artistic work cycle. This is an important tool for helping this country's writers, artists and musicians continue to excel.

Of course, Quebec has led the way on this. I have been acquainted with and introduced to the Quebec culture by having married a Quebecker. Prior to that, as an anglophone born and raised in Nova Scotia, I was not aware of groups like Les Trois Accords, or films like C.R.A.Z.Y., or La Grande Séduction, or programs like Tout le monde en parle, as an example. What I am very much impressed with and what I think all Canadians can learn from is what Quebec has done to support, foster and strengthen culture. I say this because when two million Quebeckers watch Tout le monde en parle on a Sunday night, it is a lesson to the rest of us as to what happens when we actually get behind a cultural entity. The reality is that there is a network of stars that far too many anglophone Canadians have not had the opportunity to enjoy and be immersed in. Having married into a Quebec family, I have had that great luxury and privilege.

We can learn from what Quebec has done in this area. I thank my colleague from the province of Quebec for having brought this forward. He is someone with great experience in this area. I hope that the Conservatives actually demonstrate some flexibility in recognizing that we can learn from this and move forward. This can be a start toward a fairer tax system and perhaps income averaging that can apply outside of cultural areas in the future.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Mr. Speaker, I am trying to get a handle on what Bill C-427 would actually cost Canadians. We did not talk about that, but that is where I come from in a lot of ways. To bring in this legislation there would be a cost to taxpayers across Canada. Could the hon. member give me an idea of what the cost of the program would be over the year? We have done an estimation that the minimum would be $25 million a year.

Has the member thought about where the money might come from, or what programs would be cut? Could he give us a hint as to how he would raise the money?

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

moved that Bill C-427, An Act to amend the Income Tax Act (income averaging for artists), be read the second time and referred to a committee.

Mr. Speaker, I would like to congratulate you on your new position. Having sought your counsel a number of times, I cannot think of anyone better to follow in the previous Deputy Speaker's footsteps.

I am more than pleased to stand in the House today as an artist and member of the House to speak to this bill. It is neither a new idea nor a particularly brilliant idea in and of itself, but it is an important idea.

Bill C-427, my private member's bill, is to introduce income tax averaging for artists. It is something that has been sought by the artistic community for over 15 years and is very important to the community.

I named the bill to recognize the value of artists and their realities because that is what the bill does. It takes into consideration the fluctuations and spikes in an artist's income at any given time and puts a value to that through the Income Tax Act.

I have divided Bill C-427 into two parts. The first part is the actual income tax averaging where an independent artist can take an income spike in any given year and average it over the previous two to five years.

This is important because the life of an artist is very unique. They trundle along at $20,000 to $40,000 a year for a period of time and then, through hard work and learning their craft, they may spike one year. In the case of actors, they may land a television series or a particularly plum role in a movie and their income can spike from $30,000 to $250,000. For the artist, it is a great thing and a recognition of their abilities, but tax-wise it creates a huge hit that they will have to carry for the next few years.

For example, when I was working on a series in South Africa, I was out of the country for approximately a year. When I came back, no one knew where I was. The series did not get picked up. I spent the following year rebuilding my career and not making as much as I was before the series.

The bill would make allowances for performers, visual artists or painters who spend years working on a sculpture or a series of paintings to sell in a given year. Hopefully the artists will be successful, but in some cases they go back down to zero because while they are working they are not generating income.

Bill C-427 would allow independent artists to average the proceeds from their work over the previous four years. Basically, they would be reassessed on their tax filings for the previous four years.

I need to point out that this bill is directed at what I call the journeymen artists. They are the artists who work every day hoping to make it big and sell well, which is the vast majority of artists in Canada. If they are blessed enough, they have that opportunity within a given year but it is not a consistent thing by any means. Bill C-427 is not aimed at the artists who have “hit it”, as one might say, such as those artists who have a series going on for a number of years or whose work is consistently auctioned off at high amounts. The bill is not aimed at those people but rather at everyday working artists.

The second part of my bill is a tax exemption on the first $10,000 of residual income. Residual income is any income that comes from royalties or residuals as in the film industry. Most people are familiar with the U.S. version of the residual system, which is that anytime a project plays or a show airs, the artists are paid for it. In Canada, it is a different system. In Canada, Canadian film and television actors are paid a percentage of their overall fee up front and the producers and/or distributors get to use that work for a period of two to four years before any back-end or residual payments are made. For the two to four year period nothing is coming in. After that, residuals start coming in.

I have received cheques for $1.45 that cost me more to process than the actual cheque itself. However, that can range from $2 to $200. The importance of this money is that it is essentially found money. It is money that one cannot budget for because one has no idea how a project is going to sell afterward. In many cases, this residual income, which comes in throughout the year, is the difference between making ends meet at the end of the year financially and not. I am looking for a $10,000 cap on money that comes in through that residual system to be tax free so it can be used by Canadian artists.

The economics of this are really quite simple. I had the bill costed. With both parts it is a total of approximately $25 million, and that is rounded up. However, it is not a $25 million loss to the coffers of government. It is $25 million that goes back into the pockets of working artists who can then reinvest in themselves as small businesses. Make no mistake about it, actors, performers and artists are small businesses. They can reinvest in the economy through consumerism. That money comes back to the coffers through sales tax or just through investments. It is not a $25 million loss that we are looking at.

One of the questions that came to me as I was discussing this with my colleagues was the aspect of fairness. There are other industries that are cyclical in nature, such as insurance brokers or real estate agents or farmers. The question is how do we do this for one sector of Canadians and not for the others. What I say is that labour in the world and in Canada has changed.

Once upon a time we could pocket everyone into a few different categories. They were labourers, management, professionals or something of this nature. Now things have become really specialized. Looking at the medical profession, we can no longer go to a GP. In fact, fewer people are going into general practice as doctors. They are specializing. We go to a heart specialist. We go to an ear, nose and throat person.

The labour landscape in North America or in the world, especially in Canada, is being specialized just as much. In the IT world, we have any number of different specialties that have their own unique problems. We need to begin to look at the labour market in that way.

For over 15 years now, artists have been looking for a recognition of that difference. The vast majority of independent artists do not have access to EI benefits or to pension plans. The cultural community had to create its own entities to take care of artists' futures. ACTRA has the Actra Fraternal Benefit Society, which is open to everyone in the industry. That way, artists can put money toward RRSPs through the benefit society. They can put money toward extended health care through the benefit society.

The issue of credibility at banks is something that artists have had to face for many years and still have to face. A colleague of mine had two series under his belt and wanted to buy a house. To get a mortgage he had to get his father to co-sign. That led to the founding of CASCU, the Creative Arts Savings and Credit Union, which was founded by ACTRA Toronto and is now available to the artistic community with a better understanding of the lifestyle of people in the arts.

These are things that the community has done for itself and it is incredibly important that we begin to recognize the value of artists to our economy: $85 billion from $8 billion being put in. That is a very high return. We would like to see fairness in recognizing those aspects, that lack of accessibility to programs that other people have access to, and balance that out. Within the tax system itself there are easements that are given to people for various reasons and all of those reasons are warranted, be it child tax credits or investment credits. There are a number of different things such as the volunteer firefighters tax credit, which is a worthy tax credit but it is not available to people who are not volunteer firefighters.

To the question of fairness, income tax averaging is a way of finding that balance for a unique sector of the Canadian landscape, the artists, and creating a world for them where they are seen as legitimate contributors to the Canadian economy, to the Canadian identity and to the business landscape. As I said, artists are not recognized as small businesses and we need to get past that sense of artists being long-haired hippies sitting under a tree writing songs and saying, “Yo, hey, this is great”. They are legitimate business people. They are legitimate contributors to the economy.

I will speak for every independent artist in this country when I say that all artists want to do is to be able to live a life from the fruits of their labour. They want to be able to raise a family. They want to be able to buy a car and put gas in it, although it is really expensive these days. They want to be able to buy a house, invest in their future. This income tax averaging act, in recognition of artists' realities, would be a step forward to help them do that.

On that note, I look forward to questions, comments and opinions.

[The Chair, Conservative, Harold Albrecht]

Okay. So ordered.

Next is bill C-427.