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House of Commons – Bill C-427 Reflecting the Realities of Canadian Artists Act, Tyrone Benskin, NDP

Introduction of Private Members Bill C-427 and Responses in the House of Commons

September 26th, 2012

Mr. Tyrone Benskin (Jeanne-Le Ber, NDP) 

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.

Questions and Opinions

Mr. Bev Shipley (Lambton—Kent—Middlesex, CPC): 

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?

Mr. Tyrone Benskin: 

Mr. Speaker, the hon. member is right. We had it costed by the finance department through the Parliamentary Budget Officer. The combined rounded up total was approximately $25 million.

Where would I find the money? Any budget that is put together by any government is based on a matter of choices. There is no concrete way that it needs to be done.

One has to consider the choices. For example, if we cut a thousand jobs, we may save money in one area, but we have to remember that there would be a thousand people who would have no income, and as such they would not be paying income tax. Those thousand people would not be purchasing because they would not have any buying power. No sales tax revenue would be generated. There would be nothing feeding the economy through consumerism. We may win a few dollars in one area and lose a few dollars in another. It is a matter of choices.

This would be a very modest cost. It would allow artists to become stronger participants in the economy and to reinvest in themselves as businesses and as families.

Mr. Paul Calandra (Parliamentary Secretary to the Minister of Canadian Heritage, CPC)

Let us look at income averaging. As a former insurance broker, I am glad he brought up insurance brokers. There are great times and there are bad times. Income averaging for insurance brokers probably would have been a good thing for me in my career. It also would have been a good thing for farmers and car salesmen. There are many industries in this country that would benefit from income averaging. The dilemma is that this bill would decide who the winners and losers are, which industries are more important than others.

Our tax system has been, and should continue to be, based on fairness. One of the things that a government cannot and should not do is try to pick winners and losers in the tax system. We are not going to do that. We are going to continue to focus on creating jobs and opportunities. We will continue to introduce taxes for all Canadians, not just for one sector and not another.

Professor Kevin Milligan looked closely at the proposal and concluded the following:

    [T]he NDP’s tax policy proposals still need some more rehearsal time…. [I]ncome 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.

 

He mentioned that because, as was mentioned by one of the speakers, income averaging was tried in the 1970s and 1980s and it was abandoned as something that was not only unfair, but it was unworkable, hard to administer and actually did not achieve the results it sought to achieve. For those reasons, we have abandoned income averaging in the past.

Our government is going to continue to support arts and culture. That sector is extraordinarily important for economic activity. It is also a very important source of Canadian pride. When we see the success of our artists and our museums, we are very proud.

Again I thank the hon. member for bringing this forward and giving us an opportunity to discuss it further. I too look forward to some of the debate going forward.

Mr. Dean Del Mastro (Parliamentary Secretary to the Prime Minister and to the Minister of Intergovernmental Affairs, CPC): 

The member mentioned a couple of things of which I have to take note. Specifically, he and his party have talked a number of times about refundable tax credits and transforming a whole range of current programs from their current system to refundable tax credits. There are numerous reasons why that is a bad idea, not the least of which is the enormous cost, of which the members have not proposed any means of paying for, which would ultimately lead to higher taxes for all Canadians if we were to do that. It would also threaten a number of the programs that people who do not qualify for non-refundable tax credits rely on, programs like the working income tax benefit program, child tax credits, GST and HST rebate cheques, housing support and OAS. So many programs that are funded out of general revenues by the government would be impacted by changing how these tax credits work, and the Liberal Party members have proposed no means of paying for these things.

While the members put it out as kind of a fuzzy, feel-good thing that they would like to give more free money to everybody, I think a lot of Canadians know there is no such thing as free money from government. It does not exist. In many cases it comes from one pocket and goes in the other, with the cost of government subtracted from it before it arrives in that pocket. Or it comes from a neighbour, parents or other family members or from businesses. Overall, it just becomes a weight on the national economy.

To speak to this bill directly, there are principles in the tax system that are very important. One of them is generally accepted accounting principles, or GAP, which I had an opportunity to speak to the member about a couple of days ago. One of the principles that the tax system is founded on is the matching principle, which basically states that income or expenses that are incurred in any given period are recognized in the period for which they are incurred. In other words, we do not take an expense from 2006 and put it against our income for 2012 and we do not take income from 2008 and put it into 2012. We match our income and our expenses to the period for which they apply and it is on that basis that our tax system is built. If we do not base it on generally accepted accounting principles and just cast them away, then our whole system of marginal tax rates, the progressive nature of our tax system and the very treasury itself and how much revenue it collects in any given year would be significantly impacted.

This is a costly bill. As I said when I spoke to the member, if we were to looking at doing this for artists, we would have to look at doing it for a number of professions, because I think an awful lot of folks in various occupations do have cyclical incomes.

My colleague, the Parliamentary Secretary to the Minister of Canadian Heritage, named a few industries. Certainly the one that came to mind immediately for me is realtors. I have talked to realtors about this. They would love to have the ability to move their income from good years to bad years and pay less tax. The problem with doing that is we would then have to put more weight on other Canadians whose income is not cyclical. We would have to charge them more taxes to supplement people whose incomes go up and down. That is not fair…

It is very important also to recognize that regardless of whether an individual is an artist, a realtor, an insurance broker or whatever in the Canadian economy, all Canadians contribute to our society. They contribute to our tax system. They contribute to making our country stronger. They all deserve a fair tax system based on a clear set of guiding principle. That is what has guided the tax system.

That is why essentially I would oppose the bill. I do not think the Minister of Canadian Heritage has taken a definitive position, but I would personally oppose it because I think it runs contrary to clear guiding principles on which our tax system is founded.