Mr. Speaker, I too am pleased to have the opportunity to speak in support of Bill C-93, an act to amend the Cultural Property Export and Import Act, the Income Tax Act and the Tax Court of Canada Act.
I also thank my French teacher, Madame Paré, for allowing me to interrupt my class to come to the House to speak on this important bill. To Madame Paré I say:
I thank you for being patient with me.
On Friday, October 20, the Ottawa Citizen carried a story with the headline: ``Museums, historic sites become hot ticket''. The story notes that museums and historic sites across Canada have been attracting more visitors and even a little more money.
A Statistics Canada study also discovered that 12,000 full time and almost 20,000 part time employees worked in heritage institutions in 1992 and 1993. In addition to these paid employees, over 54,000 people volunteered their time to work in these same heritage institutions. These people are all working for one purpose and that is to ensure that Canada's heritage is preserved and that it is preserved in public institutions where it will be available for the enjoyment of all Canadians.
Few collecting institutions today have any funds to purchase objects for their collections. As a result, they must rely on donations. The tax incentives available for donations to custodial institutions that have demonstrated they meet professional standards is one way in which the Government of Canada is able to
provide assistance to ensure that their collections continue to reflect Canada's heritage.
Donations to registered charities are eligible for tax credits, although the total value of gifts to charity in any one year cannot exceed 20 per cent of net income. Donations of cultural property that have been found to be, in the words of the act, of outstanding significance and national importance are eligible for a tax credit up to 100 per cent of net income and are exempt from the payment of capital gains tax.
That does not mean they receive a tax refund equivalent to the fair market value of their donation. Non-refundable federal tax credits are based on 17 per cent of the first $200 of value of the donation and 29 per cent of any amount above that. When the exemption from capital gains tax is added to this, the best possible tax treatment a donor may receive is a refund equivalent to 50 per cent of the fair market value of the object or collection they are donating.
A donation to a museum means that a donor is donating both significant cultural property and 50 per cent of the fair market value to the institution. It would be more profitable to sell an object in the open market than to donate it to a cultural institution. Tax credits are a fiscal measure that provide an enticement and an acknowledgement of the importance of the donation, but they are not meant to represent financial compensation.
I will give a very brief example. I know that many Canadians who are watching the debate really want to know whether or not this is some sort of a scheme for rich Canadians, as the Reform Party would like to characterize it.
If a taxpayer had an object of art with a fair market value appraised at $1,000 and that object of art cost only $100 when it was acquired many years ago and the taxpayer sold that object of art to a museum for the $1,000 fair market value, it would generate a $900 capital gain, half of which is taxable. On that capital gain, even at the highest marginal rate, $225 in income tax would be paid. That means the net proceeds to the donor would only be $775.
If we compare that to the tax treatment that is being afforded to the donor under Bill C-93, the donation of the $1,000 artefact would generate a tax credit of 17 per cent on the first $200, or $34, and 29 per cent on the remaining $800, or $232. In total, the cash value of the refund to the taxpayer would only be $266. That should be compared to the $775 they would have received had they sold the object outright.
In brief, what it really means is that the libraries, archives, museums and other cultural and heritage institutions of Canada are able to acquire for substantially less very important artefacts and cultural and heritage items for Canada. It is much more than they would be able to afford by paying the fair market value in cash.
Approximately 1,100 applications for certification for tax credits are received annually with a total fair market value of approximately $60 million Canadian. Because this is a tax credit it results in foregone revenue of approximately $25 million to $30 million annually. However, when compared to other tax incentive programs this is a very small amount of foregone revenue and has an impact far beyond the dollar value of the cultural property that is being preserved.
Much of the cultural property being donated because of these tax incentives would otherwise be lost to Canada, as it would be exported and sold on the international market. By keeping these objects in Canada and in public collections they become part of Canada's heritage.
Approximately 300 institutions in every province and territory of Canada have their collections enriched each year because of the existence of these tax credits. The Cultural Property Export and Import Act therefore plays an important role in the development of heritage collections in Canada. It encourages donations of significant pieces of our patrimony to the people of Canada through public collections and these donations are forever for our enjoyment and for the enjoyment of our future generations.
The legislation was meant to promote private donations as a means of indirect government support when acquisition funds could not be sustained. Many Canadians are unaware of the important role played by private collectors in the preservation of our national heritage. Objects formerly from private collections now enrich our public museums, just as the great museums of the world have been supported by private individuals for centuries.
In Canada we have our own unique examples: the donation of Sir William Van Horne to the Musée des beaux-arts de Montréal; the Zacks bequest to the Art Gallery of Ontario in Toronto; the collection of Lord Beaverbrook, now proudly displayed in the Beaverbrook Art Gallery in Fredericton; Dr. Norman MacKenzie's collection, which forms the basis of the collection of the MacKenzie Art Gallery in Regina; the magnificent and diverse collection of the Harvey family, which is now in the Glenbow Museum in Calgary; and the generosity of the Koerner family to the Museum of Anthropology in the University of British Columbia.
These museums now house the collections of their benefactors and founders. Some even owe their existence to these private individuals who had a passion for collecting a strong sense of Canada's history. Because of their generosity and their decision to enrich our heritage these works are now preserved and will be
appreciated by future generations of Canadians as they appear in exhibitions and are made available for research purposes.
Government has a legitimate role to play in these transactions and must facilitate the movement of cultural objects from the private to the public sector by taking reasonable steps that will encourage philanthropy.
Without the tax incentives offered by the Cultural Property Export and Import Act, collectors would cease to make donations to museums, archives and libraries and would instead sell their collections to the international market.
There is a perception that it is only wealthy Canadians who have objects or collections to donate to our museums, archives and libraries and that only the wealthy benefit from the tax credits for donations of cultural property. This is simply not true. It is not true because of the reasons outlined by the hon. member for Erie, the hon. member for Central Nova, the hon. member for Winnipeg St. James and the hon. member for Broadview-Greenwood, all who so eloquently spoke on behalf of this bill and on behalf of Canada's cultural heritage.
As a result, museums in Canada, from the smallest local historical association museum in rural Canada to the major collecting institutions in Vancouver, Toronto and Montreal are the product of a collective belief. The Cultural Property Export and Import Act and the tax incentives it offers for donations nurtures that belief and contributes to a shared vision of Canada.
In 1991 the Income Tax Act and the Cultural Property Export and Import Act were amended so that the responsibility for determining the fair market value of certified cultural property was transferred from Revenue Canada Taxation to the Canadian Cultural Property Export Review Board. Through an oversight the right of appeal that had existed in the Income Tax Act was not transferred at that time. As a result this right was inadvertently lost. Bill C-93 will reinstate the right of appeal that existed until 1991. That is what the bill does. It reinstates the right of appeal that existed before 1991.
It does not extend the existing tax benefits for donations of cultural property nor does it make any fundamental changes in tax policy. The appeal of determinations by the Canadian Cultural Property Export Review Board proposed in Bill C-93 will permit any donor of cultural property who disagrees with a review board determination the opportunity to pursue this first with the board and, if necessary, with the Tax Court of Canada.
The amendments proposed in the bill should also be viewed as a guarantee of the donor's right through natural justice to an appeal to the judicial system that it is warranted. The decision to transfer the responsibility for determining fair market value to the review board was made in haste and without consultation with the people it affected the most, the recipient institutions and donors.
The government learned from the mistake of previous government and has consulted widely with the donors, museums professionals, dealers and members of the review board. During this consultative process we learned that many collectors were discouraged from making donations because they did not wish to become involved in a process they had perceived to be unfair.
The museum community is very pleased with the approach that has been taken with this bill and is convinced an appeal is necessary to ensure that donors will continue to support their institutions by making donations of cultural property.
The bill establishes two appeal processes, one that involves a reconsideration of all the relevant information by the review board and another that involves a formal, legal appeal to the tax court. The bill goes even further to ensure fairness with the agreement of the Tax Court of Canada. The appeal to the tax court is made retroactive to January 1992. Every donor who has made a gift since the right of appeal was lost and who wishes to pursue an appeal will have both the opportunity and legal right to do so.
The amendments proposed in Bill C-93 are extremely important because they offer a remedy to a situation that need not exist and should not exist. The right of appeal is a fundamental right and the bill proposes to re-establish a right that was lost through an oversight. These are technical amendments but are critical to the continued preservation of Canada's heritage.
That concludes my formal remarks on the bill. I am very happy to stand in support of Bill C-93. I reiterate the rationale for the bill which is the reason I am here speaking to the House. The debate that has been going on, particularly by the opposition, the third party, has tended to paint those who donate cultural and heritage artefacts to our institutions as people who are doing something wrong, people who are rich, people who are taking advantage of a situation.
In the example I outlined to the House it is very clear that in terms of cash in their pockets, those who have made that wonderful gesture to contribute part of Canada's heritage to libraries, to archives and to museums are doing it for much more than cash in their pockets and for substantially less than they would otherwise receive should they have sold those artefacts for fair market value.
I compliment the parliamentary secretary and the member for Mississauga East for her excellent work on getting the bill through the House. I know of nobody that is more fiercely loyal and supportive of the Canadian cultural and heritage institutions. She has demonstrated that with her work in the House and by her extensive travel across the country promoting Canada.
