THE ARTS

Taxing culture

Canadian artists voice fears about the GST

PAMELA YOUNG January 14 1991
THE ARTS

Taxing culture

Canadian artists voice fears about the GST

PAMELA YOUNG January 14 1991

Taxing culture

THE ARTS

Canadian artists voice fears about the GST

The past several years have been particularly difficult financially for artists and arts organizations, and Regina’s Globe Theatre has suffered more than most. Between 1987 and 1989, the city’s only professional playhouse had to raise its ticket prices by more than 40 per cent to meet increasing costs. The theatre also found itself in a state of flux when Kenneth Kramer, who had founded the Globe in 1966, resigned as artistic director in 1990. Meanwhile, a severe drought devastated the Prairie economy. The effects on theatregoers were dramatic: over three seasons, the Globe’s subscription rate dropped to 2,100 from 4,000. The theatre has made a partial recovery, with its subscription base currently at 2,700. But with the country now in a recession, and with the new federal Goods and Services Tax in effect as of Jan. 1, the Globe’s administrators say that they remain apprehensive. Added theatre general manager Victor Jerrett-Enns: “It would be really tough to see our upswing stall because of the GST, and I guess that’s my fear.” Economically fragile as a rule, Canada’s cultural organizations have been particularly vulnerable in recent years due to rising costs and reduced funding. Recently, the faltering economy has eroded their strength even more. Now, artists and spokesmen for cultural institutions say that they are especially concerned about the potential effects of the GST. As well as adding seven per cent to the price of theatre tickets, books and works of art, the tax will in many cases increase administrative costs. Said Blair Mascall, president and chief executive officer of the Toronto-based Council for Business and the Arts in Canada: “In a climate which is already in recession, the Canadian consumer is going to be acutely aware of the additional seven per cent. People will be resistant to spending money on non-essentials, and I think that will hurt the arts in a major way.” Last week, sellers and consumers had their first experiences with the new tax. Benjamin McNally, manager of the Nicholas Hoare bookstore in downtown Toronto, was trying to make sense of a computerized accounting statement providing information on, among other things, the store’s total sales for one day and the amount of GST collected from customers. Pointing to what was apparently a major discrepancy in the GST figures, McNally said, “This is an incredible administrative nightmare for most businesses.”

For their part, the purchasers of such items as books and theatre tickets were divided in their assessment of the tax’s impact on their

own arts consumption. At the Book Company in Calgary, customer Leona Becker, a legal records clerk, said that the GST will not affect her book-buying habits. “If I want the books,” she said, “I have to pay it—it certainly won’t

stop me from buying books.” But another shopper, surveying-crew assistant Fred Smith, disagreed. “I will not buy nearly as many books as I have,” he said. “The seven per cent is too steep. It adds almost $2 to a $25 book.” Meanwhile last week, Celina Copping, a Toronto homemaker with two children, purchased seats for a National Ballet performance of The Nutcracker. But she said that her family would be buying fewer theatre tickets with the GST in effect. Said Copping: “Rather than have the whole family go to something, it will more

likely be Mom and the two kids or Dad and the two kids.”

The GST replaces a hidden 13V2-per-cent tax on goods known as the manufacturers sales tax. Some cultural organizations had to pay MST on some supplies—theatre companies paid the tax on materials for set construction, but not on costumes. But those MST-taxable items represented only a small part of their costs. The Canadian publishing industry had to pay MST only on a very few items, including letterhead and media kits, but it will now have to pay out and collect large amounts of GST.

Many people working in the arts community say that consumer price resistance is the most worrisome potential side effect of the GST. Michael Fletcher, owner of Toronto-based Music Magazine and an accountant who has given seminars on the arts and .the GST, says that the business of the arts is very price-sensitive. “If you increase your price by seven per cent,” he said, “you might lose a lot more than seven per cent of your audience.” But government spokesmen defended applying the new tax to as broad a base as possible. Said Benoît Trudel, special assistant to Finance Minister Michael Wilson: “When you start treating certain industries differently, you create inequi-

ties in the economy. You

would have to raise the overall rate to make up for the loss if you exempted certain parts of the economy.”

Still, the introduction of

the GST takes place at a criti-

cal time for artists and arts organizations. That is partly because government funding for the arts has not kept pace with the rapidly increasing number of demands from an expanding cultural sector. In the recently released annual report of the Canada

Council, the federal dispenser of arts grants, chairman Allan Gotlieb noted that “the percentage of artists turned away for no reason other than lack of funds has become alarming.” Meanwhile, competition among arts groups for corporate sponsorship has become fierce. Indeed, many organizations are finding it difficult to fine up corporate sponsors for their 1991-1992 seasons. “It’s next to impossible,” said Zdzislaw Bajón, general manager of Winnipeg’s Manitoba Theatre Centre. “People are telling you about layoffs. They’re not looking

for high-profile sponsorship because they’re worried about employees and unions accusing them of supporting something frivolous.”

At a time when balancing the books is becoming increasingly difficult for the arts community, the GST represents yet another problem. The publishing sector has lobbied against the new tax with particular vehemence. Industry experts estimate that the added administrative load posed by the GST will raise internal costs by as much as 3V2 per cent. However, because the GST is a so-called flow-through tax, its burden will not be borne by publishers. Like other businesses, a publishing house will have to monitor both the GST that it pays on supplies and services (called input tax) and the GST that it collects from customers—mainly bookstores and distributors in the case of publishers. It will cover the input tax by deducting that amount from the tax that it collects, sending what is left over to the government. Booksellers, in turn, will collect the GST from their customers.

In the end, it is only the bookstore’s customers who will not get a rebate. Said Arnold Gosewich, director of the Book Industry Task Force on the GST: “There is a strong expecta-

tion that book sales will suffer everywhere in the industry. Our livelihood is at risk.” Publishers say that they are also concerned about cash-flow problems that could arise during the process of collecting and remitting the GST. Ottawa-based book industry consultant Dan Mozersky, who described the GST as “a bureaucrat’s dream but a reader’s nightmare,” said that the government could net about $175 million from the entire publishing sector, including newspapers, magazines and books.

Prime Minister Brian Mulroney has said that

the government will review the tax and may make concessions if publishers really do suffer under the GST. One option would be to give publishers government rebates for their input tax without having to collect GST from distributors or retailers. That way, the tax would not be passed on to booksellers and the general public. In November, the Quebec government reversed a decision to introduce an eight-percent provincial sales tax on books on top of the GST, which would have raised the total surcharge to 15.56 per cent. The reversal came after a provincewide protest by writers, booksellers and publishers. Quebec officials have stated that the provincial sales tax exemption will be reviewed before the end of 1991.

Even without the GST, many performing-arts organizations have already experienced boxoffice slumps, largely because of the increasing number of entertainment options available and the recent slide into recession. Said Mascall of the Council for Business and the Arts: “The sales of subscription series in theatres and music organizations are way down this year.” At Halifax’s Symphony Nova Scotia, 19901991 ticket sales for the orchestra’s three-

year-old series of performances in suburban Cole Harbour and Dartmouth are up, but season’s ticket sales for its main series and its pops series are down she per cent and 20 per cent, respectively, from the 1989-1990 figures.

Michael LaLeune, general manager of the symphony, says that the orchestra’s management is anticipating some resistance to the GST. Apart from the added cost of the new tax for single tickets in the 1991 half of the current season, the symphony has limited its ticket price increases to just 2lh to four per cent, depending

on the series in question. That is less than the annual inflation rate, currently running at five per cent. Last season, the top single ticket price for a Symphony Nova Scotia concert was $22; this year, with the GST and the orchestra’s own increase, the top price will rise to $25.50. Said LaLeune: “I’m very nervous. If we can’t raise the price to cover inflation, our costs go up. The options start to disappear.” The GST will also place an added administrative burden on the cultural community. Mascall noted that “the coming year is going to be a real challenge for a lot of arts organizations who do not have wildly sophisticated accounting systems.” Bookkeeping is going to become more complicated for most individual artists as well. Anyone who earns less than $30,000 a year—and most artists fall into that category—can choose to be classified as what the government refers to as “small traders.”

They do not have to charge the GST on goods that they supply or services that they perform. But if they choose to do that, they will not be eligible for rebates on the tax they pay on their business-related purchases. As a result, most tax experts advise people who make less than $30,000 and have high business costs to register for the GST.

Throughout 1990, Toronto artist and musician Mendelson Joe demonstrated against the GST on Sunday afternoons outside the Art Gallery of Ontario in downtown Toronto. He wore a signboard reading “GST: Culture killer, the new censorship.” In an interview, he pointed out that most provinces already charge their own sales tax on works of art. In most parts of the country, the combination of the GST and the provincial sales tax will amount to a total surcharge of between 15 and 16 per cent on works of art. Said the artist: “You know who does the same thing? The Mafia. The GST is a protection tax.” Not all artists are as defiant, but like most Canadians they are facing the dawn of the GST era with uncertainty and growing concern.

PAMELA YOUNG

JOHN HOWSE

DIANE TURBIDE