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.