Canadian Heritage Committee on April 4th, 2022

[Costa Dimitrakopoulos]

For certain deductions that go to artists, the CRA would know that. In terms of all artists and whether they're tagged or not, I do not know. I will have to get back to you on that.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

That would be very helpful, because we've seen this in other areas, where the CRA systems have been deficient. It would be helpful for us to know that.

You were very helpful in your response to the question from Mr. Housefather about the series of exemptions or credits that apply to artists, with everything from instruments and equipment to makeup and photos. Do you have, and can you provide to the committee, the total value of those for the tax year 2020, or the most recent tax year when you have those figures available?

[Costa Dimitrakopoulos]

I do not have those figures available, but I will do my best to get them for you, if they're available.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Okay. That would be helpful as well, for the same reason that the other questions are helpful for our report: to really get a sense of how the tax system works now.

This is a more sensitive subject that I'm going to bring up, which is compliance activities. As you're probably aware, the NDP has been very critical of the lack of compliance activities with the ultrarich in this country. The Parliamentary Budget Officer valuates the annual loss—because of that refusal by the ultrarich to comply—to be $25 billion a year in tax dollars that go to overseas tax havens, for example.

You talked specifically about compliance activities for artists. I would like to know more about how the CRA ensures compliance by artists, even though, quite frankly, many have been critical of the agency's refusal to push the ultrarich in this country to comply with the similar tax system.

Can you give us a sense of what that means in terms of compliance? What is the number of audits that are conducted on artists? What penalties applied to artists over the last few years or over the last tax year?

[Costa Dimitrakopoulos]

I do not have the data in terms of the number of audits and the value of the audits. What I can say is that, as the administrator, we try to carry out our compliance activities in order to help ensure that everyone, including artists, respects the law as intended by Parliament.

What we have tried to do, as an administrator, is help artists. For instance, over the past two years during tax filing season, we have a liaison officer service that offers free virtual support and guidance either by video conference, phone or webinar to small businesses and self-employed individuals, including artists, to help them understand their tax obligations and help them to avoid common errors that would end up costing them both time and money.

Over the past couple of years during tax filing season, liaison officers have provided seminars to members of the Canadian Artists' Representation. The information was tailored towards artists and writers and included information regarding deductible expenses, how to correctly report income as self-employed individuals as well as information on COVID-19 benefit programs, CRA's online services and key information about tax filing.

[The Vice-Chair, Conservative, John Nater]

I do have to stop you there, Mr. Dimitrakopoulos. We are running short on time, but maybe there might be a little bit of time left. If the committee is okay, we'll do a lightning round here of three minutes, three minutes, two minutes and two minutes, and 10 minutes for Mr. Champoux.

[Some hon. members]

Oh, oh!

[The Vice-Chair, Conservative, John Nater]

We'll start with Mr. Waugh for three minutes or less.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Thank you, Chair.

I have a question for the CRA, because our office is inundated every tax season. On the interpretation, some, when you talk to CRA representatives, have a different interpretation from others. I know you're doing the webinars and so on, but is that a problem when you talk about the specialized area that we have right now in artists? We have Mr. Beaulieu on, and he seems to be very well-versed in the artist sector, but I can tell you there would be more who would not understand the artist sector, and then, deduction-wise, it's all based on interpretation.

Costa, I would like you to address that, if you don't mind, for the committee.

[Costa Dimitrakopoulos]

Over the past few years, other than the liaison officer service, we've also tried to consolidate information concerning artists and writers. We put out what we call an income tax folio for artists and writers that consolidates information about their tax obligations, the various deductions that are available and the various rules that affect artists and writers. We try to update that folio when there are changes in the legislation or when there are new positions taken.

We hope that, by doing that, people can find a repository of information in one place that represents CRA's views on artists and writers and the taxation of artists and writers.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Mr. Beaulieu, as an individual, a CPA, you must see people fall through the cracks. You seem to me very professional in this aspect of the CRA. I would say 95% of others in this country would not share your interest, and I can see that many artists would not get their full credit in this country because of it.

Could you address that, Philippe?

[Philippe Beaulieu]

Thank you for the question.

The arts are not something most accountants are familiar with. Our clients are ordinarily made up of large and small businesses, whose needs are completely different from the needs of professional artists.

Professional artists' incomes are unique. As Mr. Dimitrakopoulos from the CRA said, there is a folio that explains the various deductions that may apply to artists. That is a very important document. In fact, I refer CRA agents to it when they call me with questions about my clients' accounts. There is actually a fairly significant lack of knowledge about artists' situations and the tax deductions they are entitled to.

I have the opportunity to provide training at various artists' centres throughout Quebec to help artists be more familiar with the deductions that apply very specifically to their field.

So there is actually a fairly significant lack of knowledge. Certainly, putting a little brochure...

[The Vice-Chair, Conservative, John Nater]

Thank you, Mr. Beaulieu. Forgive me for interrupting you, but we are going to start a new round of questions.

Mr. Louis, you have the floor for three minutes.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses. I appreciate you being here, and I appreciate your expertise.

Mr. Dimitrakopoulos, maybe I will start with you. We have heard today, and we have heard before, that it's common for artists to spend years working on projects and then only get paid once a work is released. We were talking about this today. Because artists and performers see fluctuations in their activities from year to year, they are eligible for carry forward allowable expenses, which allow artists to deduct travel and promotional expenses to lower tax liability.

I would like to know if more can be done. It still poses a greater tax burden on individuals whose income is irregular and fluctuates from year to year over that of people who have a steadier income.

Can you tell this committee if that idea of income averaging has been something that you have researched?

[Costa Dimitrakopoulos]

I'm aware of the question of income averaging, but I would respectfully submit that the question being asked is outside the scope of the mandate of the CRA. We deal with the implementation of the Income Tax Act as is. The Department of Finance would be in the best position to respond to your question, as the Department of Finance is responsible for developing and evaluating federal tax policy and amending the Income Tax Act.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Okay, no problem there.

Maybe I could ask it this way. Are there any other sectors in our economy in Canada that do use income averaging?

[Costa Dimitrakopoulos]

I'm not aware of a particular other segment that does income averaging.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

I wasn't aware myself. I just wanted to clear that up.

Maybe I could then ask Monsieur Beaulieu. There are different types of income averaging. I have looked into block averaging, general income averaging, general forwarding averaging.

Which one is Quebec looking into? As an expert on taxes for artists, do you have a preference?

[Philippe Beaulieu]

There would have to be the possibility of averaging exceptional income over a maximum of seven years, at the artists' discretion. The artists have to be able to choose the averaging period they want within the seven-year period.

Certainly, accountants will advise artists to spread the income over the most possible tax years, to provide them with a stable income base for several years. That guarantees them that they will be paid a certain income in the form of an annuity for each of those years.

That measure would be tremendous if it were applied in the rest of Canada too. It would mean that artists Canada-wide would avoid having peaks and valleys in their income. Arts projects vary widely from one year to the next, depending on the artists' production. This annuity would provide them with a degree of income stability.

[The Vice-Chair, Conservative, John Nater]

Thank you.

Mr. Champoux, you have the floor for two minutes.

[Martin Champoux, Bloc, Drummond, QC]

Thank you, Mr. Chair.

Today, we are completing this study on the federal government's Status of the Artist Act.

For decades, artists and the cultural community have been pressuring to improve the status of artists.

In 1971, the federal government released the Disney report, the first complete picture of the economic problems experienced by Canadian artists. Nothing came of it.

In the early 1980s, the Federal Cultural Policy Review Committee, the Applebaum-Hébert Committee, was created. The committee was to examine the status of the artist, but also do a complete review of Canada's cultural institutions and policies. In the report they submitted in 1982, the commissioners noted that in spite of the pressure from the arts community and the extraordinary contribution made by artists to Canadian life, artists' living conditions were virtually unchanged.

Another task force was created a little later, and in 1986 it released the results of its work in the Siren-Gélinas Report. We're talking about Paul Siren and Gratien Gélinas. Mr. Gélinas is a legend in Quebec. The report proposed a number of amendments to the Income Tax Act and proposed to offer better financial security for artists, including by the income averaging that Mr. Beaulieu has talked about today.

In 1989, the Standing Committee on Communications and Culture created the Subcommittee on the Status of the Artist and directed it to review the numerous earlier reports on issues relating to the status of the artist. In 1990, the report was tabled. The federal government then committed to enacting legislation on the status of the artist. A host of recommendations were made that the government committed to acting on. Finally, in 1992, the Status of the Artist Act, a law that is too toothless to eat a bowl of soup, was born.

To sum up, our committee is concluding this study today, and, quite frankly, I'm a bit concerned to see that we are still going to be making recommendations to the government that may not see the light of day or that will be applied piecemeal and have no teeth.

I will conclude by quoting the 1982 Applebaum-Hébert report: “the income of many, if not most, of these artists classifies them as highly-specialized, working poor.”

If we do nothing, that's how things will stay. Our artists deserve better.

Thank you.

[The Vice-Chair, Conservative, John Nater]

Thank you, Mr. Champoux.

Mr. Julian, you have the floor for about two minutes.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you, Mr. Chair.

We undertook this study precisely in order to improve the situation of artists in Canada. Over the course of our meetings, we saw that our artists were not getting enough help to change their situation. Other countries are much more advanced than Canada in this regard.

Mr. Chair, it is very true that after this study, after having numerous witnesses tell us how difficult it is to be an artist in Canada today and many institutions admit as well the difficulty of the artist's life, given that this is so extremely important for our cultural future in our country, the government needs to take this seriously and start to make the changes that other countries have made to actually provide for a solid basis for our artists in this country. I'm certainly hoping that we will see that difference, that shift, in how the government looks at supporting our artists. It is absolutely fundamental.

I'm now going to take a few seconds to ask Mr. Beaulieu some questions.

We have heard a lot of things from the Canada Revenue Agency about the support given to artists. Do you think the framework in place at the CRA is sufficient to support our arts community?

[Philippe Beaulieu]

Thank you for the question.

The CRA could, with the Department of Finance, introduce new measures to provide more support for Canadian artists, such as an income-averaging annuity for arts income and a tax deduction for copyright income. Those measures, which Revenue Québec offers artists, are actually important for them and improve their financial situation on an annual basis.

[The Vice-Chair, Conservative, John Nater]

Thank you, Mr. Beaulieu and Mr. Dimitrakopoulos.

We appreciated your comments and thoughts today on this important study.

If there's nothing further for the good of committee, we will adjourn.

The meeting is adjourned.