Mr. Speaker, I rise today to support and address Bill C-93, the legislation that establishes an appeal for a decision of the Canadian Cultural Property Export Review Board to the Tax Court of Canada.
The purpose of the bill is to amend the Cultural Property Export and Import Act with consequential amendments to the Income Tax Act and the Tax Court of Canada Act to establish an appeal of the determinations by the Canadian Cultural Property Export Review Board of the fair market value of certified cultural property.
In December 1991 the responsibility for determining the fair market value of cultural property donated to designated Canadian museums, art galleries, and libraries was transferred from Revenue Canada Taxation to the review board. The review board assumed this new responsibility at its meeting held in January 1992. No provision for appeal of review board decisions was included in the legislative amendments, despite the fact that the right of appeal had existed when this responsibility was with Revenue Canada.
Donors and custodial institutions expressed serious concerns about the lack of an appeal process. The Department of Canadian Heritage, in co-operation with the review board, then undertook a series of consultations within the community about the need for an appeal process. As a result of these consultations it was agreed that legislative amendments should be prepared to establish the right of appeal to the Tax Court of Canada.
The bill establishes two processes. The first gives the donor or recipient institution the right to request that the review board reconsider its initial determination of fair market value. If after receiving a redetermination from the board the donor is still not satisfied, he or she may take the second step of appealing the board's decision to the Tax Court of Canada.
It is appropriate that the bill is receiving third reading today, October 24, because today marks the 50th anniversary of the United Nations. It was 50 years ago today, within a few months of the end of World War II, that the United Nations formally came into being when its charter took effect. The United Nations has the difficult mandate of maintaining international peace and easing global suffering.
We are also approaching the end of the United Nations world decade for cultural development. Launched in 1988, this decade will conclude at the end of 1997. The purpose of the world decade for cultural development is to promote activities that enhance the cultural components of development and undertake research and pilot projects that focus on the relationship between culture and development.
Through agencies such as UNESCO, the United Nations Educational, Scientific and Cultural Organization, the UN also has responsibility for literacy, education and contributions to scientific and cultural development around the world.
Canada has played an active role in the work of both the United Nations and UNESCO and is recognized internationally for the work it has done to protect the cultural property of developing nations. During the 1960s Mexico and Peru in particular, but many other southern and central American countries as well, experienced heavy losses of cultural property through illicit trafficking. Their appeal to UNESCO for a method to stop this led in 1970 to the UNESCO convention on the means of prohibiting and preventing the illicit import, export and transfer of ownership of cultural property. This convention, while it deals with measures to prevent the import, export and illicit transfer of cultural objects, places the onus on each country to develop their own measures to protect and preserve their cultural heritage.
To join the international movement to protect cultural property Canada passed the Cultural Property Export and Import Act in September 1977. The purpose of the act is twofold: first, to ensure the preservation in Canada of significant examples of the nation's cultural, historic and scientific heritage; and, second, to protect in Canada the legitimate interests of foreign states concerned with the preservation of their cultural property.
These objectives are accomplished by the following features of the act: first, the establishment of an export control list of defined categories of cultural property, which restricts their export without
a permit; second, the establishment of the Canadian Cultural Property Export Review Board to review applications for export permits and applications for the certification of cultural property for income tax purposes; third, the establishment of income tax incentives for gifts or sales of cultural property to designated Canadian institutions; and, fourth, procedures for the recovery and return of foreign cultural property that has been illegally exported from its country of origin.
In 1978 Canada became a signatory to the 1970 UNESCO convention on the means of prohibiting and preventing the illicit export and transfer of ownership of cultural property. The convention, which contains measures to prevent the illicit import, export and transfer or ownership of cultural objects, places the onus on each signatory country to develop its own legislation to protect and preserve its cultural heritage and to establish measures to facilitate the return of illegally exported cultural property to its country of origin.
The Cultural Property Export and Import Act contains provisions whereby it is a criminal offence to import into Canada cultural property that has been illegally exported from a country that is a signatory to an international cultural property agreement.
Protection of another country's heritage is not sufficient if we do not protect our own. Canada therefore put into place export controls to regulate the export of cultural property from Canada. It is imperative that we discuss here today the control system. It should be noted that any object that is more than 50 years old and made by a person who is no longer living is subject to export control. For such objects, a cultural property export permit must be obtained before they can leave the country.
The Canadian cultural property export control list provides a detailed description of the classes of objects that are subject to control. It divides cultural property into seven categories or groups of objects. The first is objects recovered from the soil or waters of Canada. The second class is ethnographic arts. The third is military objects. The fourth is decorative art. The fifth is fine art. Sixth is scientific and technological objects. The seventh is books, documents, photographs and sound recordings.
To apply for a cultural property export permit, the exporter submits an application to a permit issuing officer who determines if the object is included in the controlled list. If it is not, the permit is issued forthwith. If it is included in the list, the permit issuing officer refers the permit application to the appropriate expert examiner.
The expert examiner must then determine if the object meets the criteria of outstanding significance and national importance found in section 11 of the act which reads as follows: "The object is of outstanding significance by reason of its close association with Canadian history or national life, its aesthetic qualities or its value in the study of the arts and sciences; and whether that object is of such a degree of national importance that its loss to Canada would significantly diminish the national heritage".
It should be noted that if the expert examiner advises that the permit not be issued, the permit officer advises the applicant accordingly. The applicant either retains the object in Canada or appeals the expert examiner's decision to the Canadian Cultural Property Export Review Board.
The review board then hears the appeal and either overrules the expert examiner or affirms his recommendation. If the review board overrules the expert examiner, the permit is granted immediately. If the board agrees with him, a delay period of between two and six months is established.
There is an incentive system. The act establishes the Canadian Cultural Property Export Review Board which consists of nine members plus a chairman. It is composed of two representatives of the public at large, including the chairman, and four members each from the curatorial and dealer collector communities. As such, the board is an independent body of individuals with a recognized knowledge and interest in Canadian heritage.
The work that occupies most of the board's time is not export control. The certification for income tax purposes of cultural property donated to Canadian institutions is of primary concern.
At the time of passage of the Cultural Property Export and Import Act, the Income Tax Act was amended to provide an exemption from the payment of capital gains tax for gifts or sales of certified cultural property. In addition, the value of objects or collections that have been determined to be of outstanding significance and national importance is eligible as a tax credit up to 100 per cent of net income instead of up to 20 per cent of net income that may be claimed as an exemption for charitable donations.
Prior to these amendments, capital gains tax was payable for gifts in kind. Only federal and provincial government institutions could offer tax credits up to 100 per cent of net income.
From 1977 to 1990 the review board had only an informal advisory role in the determination of the fair market value of gifts of cultural property. In 1990 the responsibility for determining the fair market value of certified cultural property was transferred from Revenue Canada Taxation to the review board. This was confirmed by legislative amendments to both the Cultural Property Export and Import Act and the Income Tax Act in 1991.
No provision was made for appealing determinations of the review board. The right of appeal contained in the Income Tax Act was then lost. The need for an appeal process was identified and acknowledged in 1993. By establishing the right of appeal, potential donors will be assured that if they are dissatisfied with the
review board determination, they will have recourse to the Tax Court of Canada.
With the agreement of the Tax Court of Canada, the appeal to the tax court has been made retroactive to January 1992. That provides all donors who have made a gift since the right to appeal was lost and who wish to pursue an appeal with both the opportunity and the legal right to do so.
Determinations of fair market value are now being made by the members of the review board, people with professional expertise in the various domains of cultural property who are also active participants in the various marketplaces where it is sold. These same people already experience an expertise in a quasi-judicial capacity, that of hearing appeals when export permits have been denied. It is only appropriate and sensible therefore that they assume the additional responsibility as they are experts in the subject matter with experience as an appeal board.
An open and transparent process both at the time the review board determines and if necessary redetermines the fair market value of cultural property is essential. The right to pursue the matter in the courts if no other resolution can be found is consistent with both the Canadian legal system and the concept of natural justice.
As we celebrate the 50th anniversary of the United Nations, let us remember that Bill C-93 is very much in the spirit of everything the United Nations stands for. The Cultural Property Export and Import Act has its philosophical roots in the activities of the United Nations because it both protects Canada's heritage and allows Canada to become a signatory to the 1970 convention.
Bill C-93 is about fairness and natural justice, two principles that are fundamental to the United Nations. On this the 50th anniversary of the United Nations, it is only appropriate that all members of this House support this bill.