Evidence of meeting #39 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was charities.
A recording is available from Parliament.
5:15 p.m.
Prof. Paul Reed
I've looked at it. Corporate giving is a very pale...it's at a very modest level compared to giving by individuals and households. If I recall, it's somewhere around $2 billion compared with somewhere up above $8 billion to $10 billion for individuals and households.
5:15 p.m.
Conservative
Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC
Anyone else...?
Actually, hopefully we'll have time to hear from everyone.
5:15 p.m.
Prof. Adam Parachin
There are some Canada Revenue Agency technical interpretations offering the view that when a corporation issues stock of its shares to a charity or issues stock options to a charity, that's not a recognized donation. That might be one way to incentivize corporate giving: the actual giving of shares.
You might want to think about it in terms of looking at donors. You might not want to draw too stark a distinction between the privately held corporation and the sole shareholder of that corporation, because the person calling the shots is one and the same.
You can look at the rules dealing with the donation of private company shares to arrive at the same outcome. There are some submissions before the committee on removing the capital gains tax—some call it the capital gains penalty—on the donation of such shares.
I would offer you that perspective.
5:15 p.m.
Prof. A. Abigail Payne
I think the problem is twofold. One is that we have very difficult data to try to do any kind of analysis with. If you look at the charity tax returns, you'll see that the charity tax returns are not specifically asked how much money they received from corporations or businesses.
But from a corporation standpoint, corporations give money and corporations give food, but corporations also give sponsorships, and how they're treated under the tax code is going to differ. So trying to get a number on their involvement is going to be very difficult. I suspect their involvement is probably more than what was just stated as $2 billion, but what that number is, I don't know. I think it would be difficult for any of us to know.
5:15 p.m.
Conservative
The Chair Conservative James Rajotte
Ms. McLeod, I think you wanted Ms. Lamb to comment on that.
Ms. Lamb, would you like to comment on that?
5:15 p.m.
Prof. Laura Lamb
I really haven't done any research in that area, but by nature, corporations are making decisions in much different ways than households do. Corporations generally would probably require a larger incentive to increase their giving than individuals and households would.
5:15 p.m.
Conservative
Cathy McLeod Conservative Kamloops—Thompson—Cariboo, BC
I appreciate those comments.
When I mentioned to someone in the riding that we were doing this study, he certainly felt we were missing some magnificent opportunities by not finding some ways to provide incentives to corporations, so that was why I was explaining it that way.
The study really is focused on tax incentives. I do know there are probably some important things we can do that are not about tax incentives, and I don't think we should restrict ourselves to just tax incentives when we finish our report. But I wonder if we could get each person to say, in one sentence, what they think the single most important tax incentive change we should make would be.
5:15 p.m.
Conservative
5:15 p.m.
Prof. Adam Parachin
It would be the one I proposed.
5:15 p.m.
Prof. Paul Reed
To pick one of several, I would say in particular targeting contributions from capital.
5:15 p.m.
Prof. A. Abigail Payne
I think I would eliminate the two tiers and make it a single tier.
5:15 p.m.
Prof. Rachel Laforest
I don't have a specific recommendation, but I would pay attention to the shrinking civic core and the implications of that.
5:15 p.m.
Prof. Laura Lamb
I would support the idea of a single-level tax credit at a level higher than the current lower level.
5:15 p.m.
Conservative
The Chair Conservative James Rajotte
Okay, thank you, Ms. McLeod.
We'll go to Mr. Brison for a five-minute round.
5:15 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Good afternoon, and thank you very much for appearing today. I want to start by apologizing. I had a speech in the House on the old age security issue today. I would have been here earlier.
I really appreciate the onus and the insight that you've provided to the committee, which will no doubt help guide our deliberations.
I want to start with a quick question. We met with Department of Finance officials earlier this week, and they were discussing the issue of a term of tax expenditure, which they use to describe what they perceive to be a cost as a result of a tax change or a tax benefit that leads to charitable giving. They had attributed, I think in 2011, $36 million as a cost of the exemption of capital gains tax on gifts of publicly listed securities.
I'd appreciate your input on this, because their assumption is based on—and I'll give you an example—somebody giving $100,000 in gifts of publicly listed securities. If you were to calculate, depending on inclusion rate, depending on their tax bracket, say, a $20,000 capital gains tax that would have been paid had there not been the exemption of capital gains tax on gifts of publicly listed securities.... The Department of Finance looks at that and says that's a tax expenditure. That cost us money. It's like a line item in the budget. I was looking at that and thinking, well, that's assuming the contribution would have occurred in any case notwithstanding, and my feeling is that in a lot of cases it wouldn't happen. Capital gains tax kind of locks up capital, and the tendency is to hold on to it, and you may never divest yourself of it, or it might be something that's so far into the future that it's hard to put a cost on that.
So is it accurate to say that the $36 million figure that the Department of Finance applies as a tax expenditure for this is a bit of a specious or at least questionable figure in terms of actual cost to the government?
5:20 p.m.
Prof. Adam Parachin
There is a school of thought in tax theory that charitable donations aren't tax expenditures because they're not within the normative tax base. It's not a widely held view, but it is a view that does have some adherence, and that continues to this day.
On the specific question of the $36 million figure, I would readily agree that it's speculative, because it's based on a number of assumptions that arguably do not hold true. A realization of capital gains from a donation of capital property is very much unlike any other disposition of capital property for the very reasons you mentioned. So I assume that number derives from an assumption the donor would have sold the shares on the open market but for the donation. That may not have happened. They might have been held and sold at a time when there was a capital loss, which would radically impact that tax expenditure calculation.
5:20 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
For example, if a couple of years ago your donation was Research In Motion shares, that would have been a very different reality from what it is today. I'm not saying that to be facetious. I'm just saying there's a reality in this.
5:20 p.m.
Prof. A. Abigail Payne
Can I add something?