Mr. Speaker, I really appreciate the privilege today to speak on Bill C-28.
I would like to specifically address the issue of film credits and the way film credits under these amendments are going to be affected, in particular in the area of the cable production fund and other subsidies the government is presently doing to the industry.
The tremendous complexity of the Income Tax Act has been one of the Reform Party's concerns from square one. It is very thick and because of the counterbalancing references within the act, the administrators of the act in Revenue Canada will frequently change their minds after people have filed their returns. This can be a retroactive process. The process is so complex that many ordinary Canadian citizens have to patronize H&R Block or other tax preparers to the tune of between $50 and $150 just for the simplest income tax returns.
I mention that at the outset because if we can put people on the moon, we should be able to create a tax system that will not interfere with people's lives and that will not interfere with the way people make money. To this point in the history of Canada, neither the Liberals nor the Conservatives have been able to create that.
Frequently when people like me are in the process of speech preparation, we go to clippings. We extract small portions from newspaper clippings. Every now and then we run into an article that is so descriptive that it would be better to simply read it into the record. That is what I will do. This article by Tony Atherton was printed in the Ottawa Citizen this past week. It is entitled “Tax on federal fund could cramp style of TV producers”:
TV producers who rejoiced last month when the federal government renewed a $100 million a year programming fund now are worried that some of that money might be clawed back through a new tax measure.
A clause buried in the avalanche of housekeeping documents that accompanied the budget this month could leave producers scrambling to make up hundreds of thousands of dollars in program financing on the verge of a new production season.
It will be at least 10 days before the departments of revenue and finance can clarify whether TV shows which receive money from one arm of the government-sponsored Canada Television and Cable Production Fund (CTCPF) are subject to a new measure which would reduce the federal and provincial tax credits, says fund president Gary Toth.
“Speed is of the essence, and both revenue and finance are very sensitive to that,” Toth said. The CTCPF will begin accepting funding applications from producers in mid-April, and by then producers will need to know whether the change will affect their program budgets.
[The Liberal MP for Parkdale—High Park] says the potential effect of the new tax clause was identified by the TV industry shortly after the budget papers were tabled. The new initiative reduces tax credits available to taxpayers who receive not only direct government subsidies, but also indirect subsidies. The concern is that the money distributed by the production fund as a way of topping up a broadcaster's licence fee for a TV program could be viewed as an indirect subsidy.
If so, says Toth, producers could see their production tax credits erode by as much as four per cent of overall production budget. That would amount to a shortfall of several hundred thousand dollars on a major prime-time series.
“We want to make sure that was not the intention of that section,” says [the member for Parkdale—High Park], a member of the parliamentary heritage committee.
Before I complete reading sections from this article, I will say it is so typical of the way things happen with the Liberals. The heritage minister comes forward with the topping up of the cable production fund while the finance minister and his ministry are doing things that would potentially take money back from that cable production fund. It shows that the right hand does not know what the left hand is doing. More important, for ordinary Canadians, for the people in coffee shops who will have tax bills and complete their returns for April 30, this is yet another example of how unnecessarily complex the tax regulations in Canada are.
Returning to the issue of tax status, the uncertainty about tax status is one of the concerns that has been dogging the $200 million a year production fund since the heritage minister announced in February that the government would continue contributing its half of the pot through to the year 2001. The other half of the fund's resources would come from the cable industry and Telefilm Canada. New subjective guidelines for the fund aimed at encouraging more distinctively Canadian programming were introduced this month to the dismay of some producers.
This is where we get to the very substantive difference between the Reform Party and the Liberal Party. The Liberals will do their social engineering through their tax law. For example, they reduced the option of choice for parents as to who will stay home, if anyone will be staying home, to look after children.
The Liberals with their tax policy simply eliminate that choice. They force people to make decisions on the basis of taxes that are having effects on families that are outside the control of families. That is wrong. Taxation policy should not be aimed at social engineering. Clearly that is what the Liberals are doing.
In this case we are looking at what I call cultural engineering, the attempt of the heritage minister to manufacture Canadianism through whatever means she is doing and then running into direct conflict with the taxman, with Revenue Canada. The Liberals have a bad enough history in social engineering. I hate to see what they are doing in the area of cultural engineering.
This is what the changes may mean. The changes mean that only programs to which the industry refers as super Canadian shows, programs with little or no foreign investment, distinctively Canadian themes and creative personnel, can expect to get as much money from the fund as they did last year. Some programs deemed not sufficiently Canadian will not be able to apply for it at all, for instance a drama or children's program based on a game or toy that is ineligible for funding unless the toy or game was created and developed by a Canadian.
That stipulation has Vancouver's innovative computer animation company Mainframe Entertainment in a lather. Its Saturday morning cartoon Beasties , developed and produced in Canada but based on a toy developed by U.S. toy manufacturer Hasbro, was set to begin shooting a third $8 million 13-episode season this spring. New guidelines rendered the series ineligible for funding and about $2 billion short of its budget.
Producer Linda Schuyler, president of the Canadian Film and Television Producers Association, says that while the changes will hurt some producers this year, especially those in animation, they are reasonable. She says that their cartoon series associated with a brand name U.S. toy is arguably more likely to recoup its cost on international sales and should have less need for the fund. In terms of the general philosophy of the fund, she really stands behind it. If they have to make the fund's modest amount of money go a long way, to take a pro-Canadian stance is absolutely correct, she says.
This is exactly the kind of cultural micro engineering I am talking about. When we end up in clear conflict with the social and cultural micro engineering of the Canadian heritage minister, we run into direct conflict with what she is doing under the fund in attempting to micro manage the creative side of Canadian companies and artists, our Canadian creative community. She is attempting to micro manage and push them in particular directions only to find that there is a conflict under the provisions contained in Bill C-28.
There is no conflict between two parties. There is no conflict between the opposition and the government. This being Canada, when the government is a majority government and in power it has the right to propose legislation. With all the closure and stifling of debate in this place, it not only has the right to propose but it takes upon itself the right to dispose of legislation.
Here we have a government that has total control over its own affairs. Yet, how ridiculous, how ludicrous it is that we end up with the heritage minister and her proposal for her Canadian television production fund in direct conflict with the finance minister and his provisions. It is nonsensical.
One thing I have learned in the time I have been in Ottawa is that usually if I have a simple answer it is because I did not understand the question. In other words, often we do not realize the complexity of issues until we first get into them. Surely the heritage minister and the heritage ministry with its thousands of employees must have been able to understand or be aware of what was happening in the finance department.
What is really scandalous is that Canadian production companies are now put at the disadvantage at the very start of their production period of not knowing what their bottom line will be. Why? It is because the heritage minister does not talk to the finance minister, or at least their departments certainly do not talk to each other.
I come back to the key issue. We can talk about the very laughable situation of two departments getting all muddled up. We can talk about the fact that the companies that are dependent on this are now in a big quandary as to what they will do as they go into their production year. That is not laughable to them.
The core issue is why in the world we have the complexities of the delivery of programs that are put forward consistently by this government and governments before it. Why can they not apply their creative talent, their genius that creates all sorts of ways of grabbing more and more money out of our wallets, to simplifying the tax system so that everyone in Canada will have an opportunity to understand the tax form.
One tax form which I think was applicable to the Liberals was a very simple two line form. It said to list the amount of money earned this year and the next line was to send it to Ottawa. That is really the direction these people seem to be going in.
The proposed amendments add to the layering, the complexity and the confusion we all have in Canada over taxation. That in itself stifles us as creators of wealth and as earners of income. It stifles our ability to buy running shoes for our children. It stifles our ability to have enough money to pay our mortgage.
The overlaying of rules and regulations within the tax department to which this bill adds is one of the major causes of frustration for people involved in small business.
To give members an idea of the complexity of the tax system, I will talk about a situation I had in my constituency a few years ago. A number of my constituents who own ranches were in a position a few years ago with a downturn in cattle prices to be able to sell trees off their ranches that could be turned into lumber. The reason those two things happened to dovetail together was the rather boneheaded policies of the NDP in British Columbia relative to tree harvesting licences and all the rest of it. The mills were facing a real shortage of wood.
The ranch owners went to their accountants. Let us note that they did not all go to the same accountant. Some went to CAs and some went to CGAs; it was all over the map. Some of the public accountants contacted the Penticton taxation office and asked for advice. “How should the income from these trees be treated by these ranchers?” The answer was that it was a capital gain.
Perhaps, Mr. Speaker, with your being a businessman you would know the terminology better than I do. It was based on the fact that it was a capital gain as opposed to income from the ranch. That was the way they filed their taxes, independent of each other.
Many of my constituents are people in their sunset years. They are 70 and 80 year old people who are trying to hang on to their piece of property. They did not know at the time that Revenue Canada would come back and retroactively say that it had lost too much money and was going to reassess them not on capital income but on a form of income to their ranches. It made a difference in many cases of $15000, $30,000 and even $70,000 of taxes owing.
My constituents are honest, law-abiding, taxpaying Canadian citizens. Because of the overlaying of the complexity which currently exists within tax law, Revenue Canada retroactively taxed these people. In many cases they were faced with the harsh reality they just might be taxed off their land in spite of the fact that they complied with all of the rules of Revenue Canada at the time they paid their taxes.
This cannot stand. This must be changed. I am having meetings with the revenue minister over this issue because it is not fair, right or moral to tax people retroactively.
I cite in my capacity as heritage critic this example of the confusion that exists within our tax laws between the heritage department and the Minister of Finance which must be cleaned up immediately.