Evidence of meeting #58 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was budget.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Ted Cook  Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance
Sean Keenan  Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance
Brian McCauley  Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency

5:05 p.m.

Conservative

The Chair Conservative James Rajotte

I appreciate that. Thank you.

Mr. Caron, you have the floor.

5:05 p.m.

NDP

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

Thank you, Mr. Chair.

I would like to come back to the question of charitable organizations. We have not talked much about them, but I think we will be talking about them in future. I have a specific question. Both before and after the bill, a charitable organization will be able to devote a maximum of 10% of its time or resources to non-partisan political activities. Is that correct? That proportion will not be changing.

How is that limit calculated? How are you going to look at an organization and determine whether it spent more than 10% or less than 10% of its time or resources on political activities?

5:05 p.m.

Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency

Brian McCauley

We'll do it the way we do it now. There are guides up on our website. There's a methodology that begins with looking at the documentation—the books and records—and talking to the organization. There are criteria that, as I say, charities self-assess.

Part of the process for these measures will include sitting down with umbrella organizations and charities to talk about whether we need to post additional guidance and additional information. We don't see that changing either, although again, there are some funds here to educate and do more outreach so that there's more self-awareness in the sector.

5:10 p.m.

NDP

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

One of the changes in Bill C-38 is that a donor organization, like a foundation, could have something considered to be a political activity attributed to it if the organization that received the money uses those funds for a political activity. Have I understood that correctly?

5:10 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

Currently, under the Income Tax Act, when a registered charity makes a gift to another qualified donee, it is deemed to have been made for its own charitable purposes. What the bill does is leave the existing rules, which I think you've alluded to with respect to political activities, in place. A charity must expend all its resources exclusively for charitable purposes and must engage exclusively in charitable activities. Where a charity devotes substantially all of its resources, which we kind of think of as a 90% test, towards its charitable purposes or charitable activities, it can devote the remainder to political activities, as long as those political activities are ancillary and incidental to the charity's purpose and are non-partisan in nature.

This measure leaves that basic framework in place. But it provides, essentially, kind of a look-through rule. Before, if an amount was given to another qualified donee, it would automatically be considered to have been used for a charitable purpose. Now we'll make a determination as to whether it can reasonably be considered that the purpose of the gift to the other qualified donee was to allow them to engage in political activities.

5:10 p.m.

NDP

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

There is one thing that concerns me. A donor organization could, in complete good faith, give a sum of money to a charitable organization that then, for some reason, exceeded the 10% limit, when that was not the intention of the donor organization. From what I read, and according to the bill that has been proposed to us, the donor organization would share the responsibility, even if it had no intention whatsoever to contribute to political activities. Is that correct?

5:10 p.m.

Senior Legislative Chief, Tax Legislation Division, Tax Policy Branch, Department of Finance

Ted Cook

The CRA may have some questions.

In terms of the way we've crafted the legislation, it talks about the purpose of a gift. It was specifically drafted in a way that was meant to look objectively at the circumstances related to the making of the gift in the first place. It was not to impose sort of a tracking obligation.

You know, you, in good faith, have made a gift to another qualified donee, and they've gone out and have done something with respect to political activities. The notion was not to impose a specific obligation to track through. We look at the purpose. That's a concept used in the Income Tax Act. It talks about the objective being not what the final result is, necessarily, and what's reasonably considered. You would look at all the objective circumstances.

5:10 p.m.

Conservative

The Chair Conservative James Rajotte

Okay. Merci.

Mr. Jean, you have a very short round of about two to three minutes.

5:10 p.m.

Conservative

Brian Jean Conservative Fort McMurray—Athabasca, AB

Thank you very much, Mr. Chair.

That was a good question about the mineral exploration tax credit. I was going to ask that. That's excellent.

I'm curious about the Governor General's salary. Very quickly, because I have a limited amount of time, is this consistent with what other jurisdictions are doing, such as Australia and New Zealand? In essence, you are taking a tax-free salary and are grossing it up to take that into account and are making the salary, in essence, to my mind, competitive for a job of this nature. Is that fair to say?

5:10 p.m.

Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance

Sean Keenan

When New Zealand and Australia changed their law such that the salary of their Governors General became taxable, they essentially just increased the level to offset the fact that it was grossed up. They have different traditions in terms of how they set the salary of the Governor General. In terms of when those decisions were made, it was quite clear in the literature we reviewed that the decision was to just gross it up so that the net after-tax benefit was the same.

5:10 p.m.

Conservative

Brian Jean Conservative Fort McMurray—Athabasca, AB

Is it still applicable, in relation to the pension itself, that it's one-third of the salary annexed to the office of the Governor General on March 1, 1967? Is that how it's calculated?

5:10 p.m.

Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance

Sean Keenan

I believe those are the words in section 6 of the act. That section is not changing.

5:10 p.m.

Conservative

Brian Jean Conservative Fort McMurray—Athabasca, AB

The pension itself would be fairly minimal, if I can imagine the salary in 1967 and one-third of that.

5:10 p.m.

Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance

Sean Keenan

There's a second part to that.

5:10 p.m.

Conservative

Brian Jean Conservative Fort McMurray—Athabasca, AB

Yes, I saw where it says, “such amount, in addition to...the Supplementary Retirement Benefits Act”. I just thought it would be supplementary.

5:10 p.m.

Director, Personal Income Tax Division, Tax Policy Branch, Department of Finance

Sean Keenan

It's my understanding that the purpose of paragraph 6(1)(b) is to essentially take that amount in 1967 and grow it so its real value over time is protected.

5:15 p.m.

Conservative

Brian Jean Conservative Fort McMurray—Athabasca, AB

I only have time for one other question.

I'm wondering about filing. My understanding is that filing electronic returns is much more cost-effective and saves the Government of Canada and taxpayers a tremendous amount of money, compared to filing the traditional way, where you write them out, which I still do.

5:15 p.m.

Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency

Brian McCauley

It's about one-quarter of the cost for the government to administer.

5:15 p.m.

Conservative

Brian Jean Conservative Fort McMurray—Athabasca, AB

So there are substantive savings.

5:15 p.m.

Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency

Brian McCauley

It saves millions.

5:15 p.m.

Conservative

Brian Jean Conservative Fort McMurray—Athabasca, AB

What would it be over a year, on that basis?

5:15 p.m.

Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency

Brian McCauley

We're hoping with this measure that about three million tax filers will eventually move to electronic filing. It's hard to give a precise number, but it's certainly in the millions.

5:15 p.m.

Conservative

Brian Jean Conservative Fort McMurray—Athabasca, AB

Thank you, sir.

Thank you, Mr. Chair.

5:15 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much, Mr. Jean.

We will stop at this point. Mr. Jean has a couple of minutes left, and then it will be Mr. Marston. We'll continue from there at our next session.

I have to suspend. We will go in camera to consider the subcommittee report.

I want to thank our officials for being with us. I know we will see you very soon. Thank you all.

[Proceedings continue in camera]