CCA Bulletin 23/07

Ottawa, June 21, 2007

The Minister of Finance Replies to the CCA Advantage Canada Brief

Just the Facts

Late last year, the Minister of Finance released a long-range economic plan for Canada under the title of Advantage Canada. At the same time he called upon interested individuals or organizations to respond to the document. The CCA accepted this invitation and submitted a brief which put forward many of the same recommendations included in our 2007-08 pre-budget submission to the Standing Committee on Finance.

On May 24, 2007 the Minister of Finance, the Hon. James Flaherty, responded to the CCA in a surprisingly detailed letter. The letter begins with an inventory of tax measures that the government has implemented to support the work of the arts and culture sector. These include:

• a tax credit for Canadian film and video productions, including the cost of script writing;
• immediate deductibility for artists of the cost of created inventory;
• in certain circumstances, deduction over time of the cost of Canadian art purchased by businesses;
• flexibility for valuation of charitable gifts from the inventory of artist or their estate;
• special deductions for artists and employed musicians;
• non-taxation of capital gains on cultural property transferred to museums;
• federal status of the artist legislation;
• employment expense deductibility for employed artists.

This is a non-exhaustive inventory of measures taken by the government and does not mention increases to budget of the Canada Council, the renewal to 2010 of the Tomorrow Starts Today program and other legislative measures such as revisions to the Copyright Act, including the long-awaited next phase of updating this important legislation.

The Minister goes on to reject recommendations such as the exemption of copyright and residual income from federal taxation, income averaging and access to Employment Insurance and asserts the right of the Canada Revenue to base their ruling on employment status on a case by case basis rather than accepting the presumption of self-employment for performing artists.

Obviously, the CCA takes some satisfaction from the measures that subsequent federal governments have adopted to address the economic viability of the arts and culture sector. However, it is clear that these gains were the result of a sustained and tenacious effort by the sector, especially the National Arts Service Organizations.

Tell Me More

Mr. Flaherty’s letter is a clear indication that the road forward on issues such as exempting copyright and residual income from federal taxation, income averaging, and access to “soft benefits” associated with the Employment Insurance Program (all of which are long-standing recommendations from the arts and culture sector) is fraught with challenges.

The government has not fully come to terms with the evolution of the Canadian economy and the labour force. Many provisions sought by the CCA would benefit not only artists, creators and arts professionals but all self-employed Canadians. The self-employed portion of the Canadian labour market is growing at an impressive rate and the government is obviously concerned by any domino effect on public finances recognizing our long-standing needs may imply.

By basing access to social programs such as the “soft benefits” of the Employment Insurance Program on a labour force predicated on the industrial model of employer/employee, the government is missing an opportunity to modernize its approach to a post-industrial economy.

It is also clear that the arts and culture sector must find new ways of communicating its recommendations to government. Issues such as income averaging have been a staple in CCA and other NASO submissions for decades. Year after year, Finance Minister after Finance Minister, government after government, the answer is always the same: the government has provided a vehicle which has the same effect as income averaging – the Registered Retirement Saving Plan.

The logic of this statement seems to be that in high income years, artists, creators, arts professionals and self-employed Canadians can stuff their RRSPs with surplus revenue and withdraw it during the lean years. The drawback to this approach is that most self-employed Canadians do not have access to private pension benefits, and RRSPs are a critical source of income during retirement. By expending RRSPs before retirement, self-employed Canadians risk the prospect of further financial uncertainty when they will need the income the most.

As the CCA prepares for the pre-budget consultations for the 2008-09 fiscal year, the need to craft new arguments that have traction with the government is pressing. We have seen that a sustained effort does yield positive results over time. The collective efforts of the sector are once more required as we look to the future and how the arts and culture sector can further contribute to innovation in the public policy process. That is why the CCA has invited all arts organizations in the country to join in the coming months in a reflection on how best to present our cause.

What Can I Do?

Share your ideas with the CCA, we always appreciate constructive, innovative and practical suggestions. Please take a minute before summer holidays and drop us a line – the CCA relies on the imagination and dedication of the cultural sector to inspire public policy development.