Evidence of meeting #57 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was charity.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Mark Blumberg  Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca
Michael Cloutier  President and Chief Executive Officer, Canadian Diabetes Association
Kate Bahen  Managing Director, Charity Intelligence Canada
Shawn Pegg  Director, Policy and Research, Food Banks Canada
Mary Dodd  Vice-President, Finance and Operations, Women's College Hospital Foundation
Allyson Hewitt  Director, Social Entrepreneurship, Social Innovation Generation

5 p.m.

Conservative

The Chair Conservative James Rajotte

Monsieur Caron, two minutes.

5 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

Madame Bahen, you talked about one of the tax scams being some kind of a pyramid scheme.

In the United States and in Canada, there has been some concern for several years about foundations that, in large measure, are tax shelters, specifically for the shares of family businesses. Those shares are not traded, rather the foundations act as tax shelters for significant amounts of money. Clearly, a part of that money is devoted to charitable activities, but the main objective is to shelter the money from taxes.

Do you think that it is as much of a problem in Canada as it is in the United States? If so, how can we correct the situation?

5 p.m.

Managing Director, Charity Intelligence Canada

Kate Bahen

For private foundations where an individual, let's say Bill Gates, decides to put aside his money, he receives a tax receipt today, and the foundation is now set up...is that a tax incentive that I'm worried about? No, it is not. We've seen tax schemes run in both public foundations and in operating charities, so we see no distinction. The scoundrels get in and they are sophisticated, and they're not really worried about the legalese of it.

One of the things I would consider, if you are concerned about the money being put away today and the tax receipt issued today, is I would look at increasing the payout ratio. Currently, the payout ratio I believe is 3.5%. Canada has one of the lowest payout ratios in the developed world. That means that less money has to come out of that foundation into an operating charity each year. The U.S. is at 5%; other countries are looking at that tax issue and are looking to raise the payout ratio. It would mean that the money would be released faster.

5 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

Mr. Blumberg.

5 p.m.

Conservative

The Chair Conservative James Rajotte

Just very briefly.

5 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

I would agree with that. I think we should increase the payout to 5% or 6% from the 3.5% and encourage foundations to spend money, rather than keep it in perpetuity and things like that.

5 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you. Merci.

I'm going to take the next round as the chair.

I wanted to follow up, Mr. Blumberg, with you on some comments. You talked about a charity, for instance, in Canada and the U.S., and the number of records they have to file. Ms. Bahen said that we should have a sliding scale for larger and smaller charities, and that seems to make sense to me. It seems a sensible point. Do you agree with that, Mr. Blumberg?

5 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

I have no problem with that. Right now, we do have a sliding scale, in a sense. Most charities have under $100,000 in revenue. For example, they fill in less information on the financial side than one that has over $100,000. But you could have another sliding scale where, say, charities over $1 million would fill in another two or three pages. I have no problem with that.

5 p.m.

Conservative

The Chair Conservative James Rajotte

I appreciate your comment about non-profits. I think it was a very interesting discussion you had with Mr. Adler. Would you apply the same rules, then, to non-profits that we apply to charities?

5 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

Anything is better than what we have right now. So even if you were to say we'll have disclosure of non-profits over $1 million only, that's a lot better than what we have right now, which is that there's no disclosure of any of these $80,000 to $100,000 organizations. I would point out that CRA has it on a database, so it just requires a change to section 241 to be able to release that sort of information.

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

I appreciate that very much.

I want to turn next to Ms. Hewitt. I'm very interested, and I'm very intrigued, in terms of social innovation. I think it's a fantastic path to go down. I think one of the concerns, though, is there's sort of a grey area between the non-profit sector and the charitable sector, and then the for-profit sector, and a concern that some people would be using charitable status, or sort of masking it as this type of enterprise but in fact being a for-profit enterprise.

How do other countries address that concern about that grey area?

5:05 p.m.

Director, Social Entrepreneurship, Social Innovation Generation

Allyson Hewitt

I think you have absolutely picked up on the fact that the lines are blurring all over the place. There are more for-profit entities that are actually set up to do social good and also to make money. It used to be that those were contradictory terms. But in fact we're seeing that youth in particular are saying they actually don't care about the corporate structure. What they want to do is achieve a social impact and make some money back, but not make no money—as my friend who worked in the non-profit sector before stated. They actually think they can make money and make a difference.

So there are some interesting precedents, but the lines are blurring. There are things like community interest companies in the U.K. There are L3Cs, or low-profit limited liability corporations, in the U.S. that are beginning to tackle this exact question. In fact, B.C. has just introduced a community enterprise company to look at this very issue.

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

Okay. I appreciate that very much.

My third and final point—any of the charities can answer this—is that when I make a donation to a charity, I have a tax receipt in my BlackBerry within about one minute. In terms of electronic communication, the charities in Canada are at the forefront of this. I'm not sure exactly how that happened, but it's an outstanding electronic service by all of the charities that I have dealt with.

Yet when I deal with our health care system across the country, it's like Fred Flintstone designed the recordkeeping system in this country. Can one of you answer how we can get that innovation that the charitable sector has frankly implemented applied to the health care sector? Ms. Dodd, if you want to address that question.

5:05 p.m.

Vice-President, Finance and Operations, Women's College Hospital Foundation

Mary Dodd

It's something the health care sector is definitely struggling with. The electronic record—where you go into your physician in North Bay and they can call up your results from what happened when you were in Toronto—is where we're going. We're not there yet. It takes dollars. The government is not going to be able to provide this sort of backing, so it's up to the foundations to do the fundraising.

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

I have a minute left. Does anyone want to comment in terms of how the charitable sector moved to adopt it in such a quick fashion? Frankly, the health care sector is still.... They still do the Roman numerals when I go into the hospital, and you do it three times over.

Mr. Cloutier.

5:05 p.m.

President and Chief Executive Officer, Canadian Diabetes Association

Michael Cloutier

Certainly I would agree. Electronic medical records are absolutely imperative to realizing the real value of our health care system. We have countless Canadians who are injured and I might say whose lives are lost because we don't effectively manage care electronically. Obviously, there were many reasons for that in the past. But the commitment of all levels of commitment to ensure that we change it, and change it quickly, would go a long way to protect the interest of every Canadian, and in particular our constituents, the 9 million Canadians with diabetes or pre-diabetes.

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you. I appreciate that.

We will go now to Mr. Brison, please.

5:05 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

Thank you very much, Mr. Chair.

I want to help my colleague Mr. Jean a little bit, because he was looking for some examples of potential interference in Canadian political debate of U.S. or foreign entities.

The Koch brothers—American oil billionaires and founders of the foundation Americans for Prosperity, sponsors of the Tea Party movement—actually gave $500,000 to the Fraser Institute between 2008 and 2010. Do you believe that's the kind of foreign interference in Canadian environmental debates that Mr. Jean is looking for examples of?

5:05 p.m.

Voices

Oh, oh!

5:05 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

It's very possible. The Koch brothers apparently also provided a lot of money to the Cato Institute. I think there's an IRS investigation at the moment into some of that stuff.

Yes, I think we should have a free flow of ideas. I don't mind money coming from outside the country, but I think we just have to be very open and realize transparently what's happening. I have a feeling that at the end of the day, in five years' time, we're going to find a lot more churches getting in trouble because of the political activities issues. Then we're going to find any environmental groups that have crossed the line.

I'm not sure why this can of worms was opened, but there will potentially be negative repercussions that will be across the board.

5:10 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

Thank you very much.

So you believe that in fact this is not something that really is an environmental organization issue? It's something that is a governance issue in general that we ought to be concerned about, but that environmental organizations ought not be targeted specifically?

5:10 p.m.

Lawyer and Partner, Blumberg Segal LLP, CanadianCharityLaw.ca

Mark Blumberg

I think we have generous rules allowing Canadian charities to do political activities. They should do it. It's actually important, for an efficiency and effectiveness reason, that they are involved with it. But yes, they need to have good governance procedures. They need to make sure they follow the rules and understand the rules.

The CRA will help through more public education—I'm hoping—over the next couple of years so that everyone does understand. Then maybe we will have more charities involved in political advocacy when they realize (a) it's allowed, and (b) it can be quite effective.

5:10 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

Thank you.

I have a question about the whole area of social entrepreneurship and social finance.

RBC recently established a $10 million RBC Impact Fund. How would that differ—such that members of the committee, including me, can understand better—from any other sort of foundation they might set up, a social impact fund? Will it have more milestones or perhaps some private sector type of discipline in the measurement of the results of the contributions? It would be helpful to have a little insight as to how that would differ from a more traditional foundation contribution.

5:10 p.m.

Director, Social Entrepreneurship, Social Innovation Generation

Allyson Hewitt

Thank you.

We're working very closely with RBC. They have announced the funds, but they are still working on the details. As I mentioned, we've also launched a Centre for Impact Investing.

One way I could make it clear is if we think about this 3.5% disbursement quota from foundations, one of the ways we can look at how to free up more capital is if the rest of the money is held up in traditional investments. But if you were a social enterprise, they could leverage some of that money and invest it in you. So it's not going to traditional investments; it's going to you and your either for-profit or not-for-profit enterprise as you try to generate revenue and generate social impact. It's a new way to free up this money.

Yes, RBC is thinking about how they apply business disciplines, social impact metrics, and other qualifiers to actually mobilize more capital that's in addition to fundraising and traditional charitable dollars.

5:10 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

In other countries that have social finance, has there been a significant growth in terms of the percentage of overall philanthropic activities that social finance occupies?