Mr. Speaker, I rise today in support of my private member's bill, Bill C-240, the supporting Canadian charities act. The pandemic has inflicted tremendous losses on charities and their ability to provide much-needed services to Canadians. The situation is bleak. Canada's 170,000 registered charities have lost $10 billion during the pandemic at a time when the help provided by the charitable sector is needed more than ever. More than four in 10 charities are still facing declines in revenue. The average revenue decline is 44%, and more than half are dealing with revenue declines of more than 40%. Some 42% of charities are facing demands for their programs and services that currently exceed their capacity to deliver.
Arts and cultural organizations have been particularly hard hit, with an average revenue decline of 59%. Many charity workers are suffering from pandemic-related stress and mental health issues. Sadly, many of these amazing organizations may not survive.
Charities employ more than 2.4 million Canadians and account for 8.4% of this country's GDP. Under normal circumstances, each year charities raise $18.5 billion in donations and contribute $169 billion to our GDP. The charitable sector fills the gaps that cannot be fully met by government or by the market and is a key partner in the delivery of services including health care, education and social services. Sadly, nearly 40% of charities have laid off paid staff or reduced staff working hours, seriously impacting the ability of the sector to provide important services.
One study by Imagine Canada forecast a loss of private sector donations of between $4.2 billion and $6.3 billion, with estimates of between 117,000 and 195,000 job losses. When charities are unable to deliver services and programs, it means that individuals do not receive the support they need. That is the bottom line. This could be a person looking for a meal at Agape Table in Winnipeg, a child with a disability in need of special equipment or specialized therapy, someone who is homeless and looking for a place to sleep on a cold winter night, a single mother who cannot pay rent or feed her children, a senior not taking life-saving medications, or a person in so many other situations.
Demand for such services is expected to continue to increase in the coming months beyond the ability of charities to service that demand. Arts, cultural and recreational organizations have also reported revenue decreases of as much as 71%. For health organizations, the decline averages 48%.
Bill C-240 would deliver long-term, sustainable funding to the charitable sector. Although the government has played an important role in direct funding of charities, with a simple change to the Income Tax Act, hundreds of millions of dollars in new donations could be raised for charities every year.
Simply put, Bill C-240 would amend the Income Tax Act to waive the capital gains tax on the proceeds from the arm's-length sale of privately owned shares or real estate when those proceeds are donated directly to a charity. The last time the government made such a bold decision was in 2006, with the removal of the capital gains tax on gifts of publicly traded securities. This has resulted in additional charitable donations of over $1 billion ever since. Tax incentives also already exist to encourage the donation of ecologically sensitive lands. This bill is the next step.
The example I like to use is of a retiring dentist who is selling his or her practice after many years and may now choose to donate all or a portion of the sale proceeds to a charity. That dentist would receive a waiver of the capital gains tax so long as the donation was made within 30 days of the sale. The value of the shares is established by an actual arm's-length sale in the marketplace. By using that practice, we avoid the valuation ambiguity of an independent evaluation or appraisal. For years, charities across Canada have been recommending that the government unlock more private wealth for public good. The bill provides us all with the opportunity to help charities by stimulating increased charitable donations from the private sector.
This bill would highly incentivize charitable giving at a time when it is most needed. It essentially incentivizes the redistribution of wealth to those who need it most. I submit that there is no better time to do this than now. It is estimated that this one change will increase charitable donations by at least $200 million per year. These additional donations would cost the treasury the capital gains tax revenue of roughly 25¢ on the dollar, which is roughly $50 million to $60 million per year.
One-time-funding programs like the community services recovery fund and emergency community support fund are important, but represent only a fraction of the charitable sector's needs at this time. The opportunity is now to deliver immediate relief to help Canadians without significant additional costs to a treasury that is already running historic deficits. Existing jobs would be saved. New, permanent jobs would be created, and urgently needed benefits would be delivered.
This is not a partisan debate. We all want to help charities. Charities from across the country have endorsed this bill. This broad support includes local organizations, such as the Grace Hospital Foundation in my own riding in Winnipeg, and extends to some of the largest national charitable organizations. This includes the Special Olympics, Imagine Canada, the Heart and Stroke Foundation, Diabetes Canada and many others.
All stakeholders in the charitable sector are supportive of this measure, as are the hundreds of thousands of small business owners who would like to give back to their communities. A full list of the supportive groups and why they support this bill is available on my website.
Removing the capital gains tax on gifts of private company shares and real estate is much more tax effective than direct government spending for charities because the cost is not borne by taxpayers alone. Rather, it is shared by the taxpayers and donors. Not one penny of the donated proceeds would benefit the donor, but would provide major benefit to recipient charities and those they serve. This initiative actually removes a barrier to charitable giving while immediately reducing the donor's wealth for the betterment of their communities.
The real beneficiaries are the people who are served by not-for-profit organizations, including hospitals, social service agencies, universities, and arts, culture and religious organizations. This measure was also recommendation 34 in the report of the Special Senate Committee on the Charitable Sector issued in June of 2019, which states, “That the Government of Canada...implement and evaluate a pilot project on the impact on the charitable sector of exempting donations of private shares from capital gains tax.”
I want to put on record that laws, as they relate to the charitable sector, are in serious need of modernization. The Senate report also made recommendations for the creation of a secretariat on the charitable sector. This home-in-government approach would provide a stronger framework for discussions and solutions between government and the sector on a wide range of issues.
In the 1997 budget, then finance minister Paul Martin cut the capital gains tax on gifts of publicly traded securities by 50% when donated to a charity. In 2006, then finance minister Jim Flaherty followed suit when he removed the remaining capital gains tax on such gifts. The Senate report quotes Ruth MacKenzie of the Canadian Association of Gift Planners noting, “that the elimination of capital gains tax on gifts of listed securities has been ‘enormously successful, resulting in billions of dollars in shares being donated to charities every year.’”
It is now time for the government to take the next logical step by exempting private shares and real estate. This idea was, in fact, included in the Conservative budget of 2015 by then finance minister Joe Oliver, but it never made it into law before the change in government.
I would be remiss in not giving a shout-out to a very special person many members are familiar with, Mr. Don Johnson who has advocated for this measure for decades. Mr. Johnson has said implementing this exemption would be the single most important and tax effective measure the government could introduce to significantly increase charitable donations every year going forward. Mr. Johnson was directly involved when Paul Martin reduced the tax and when Jim Flaherty reduced the tax, and now he has been advocating for this change all along as well.
Many members recently received a copy of his book, Lessons Learned on Bay Street. He sent a personalized copy to every single one of us. I am about halfway through it, and I can tell members it is an excellent and very interesting read. He is a fellow Manitoban and a recipient of the Order of Canada.
Mr. Johnson made his career on Bay Street and successfully advocated for the current application of this law on publicly traded securities, which resulted in billions of dollars for charities and non-profits. Today, I stand on his shoulders. He has been a tremendous resource for me, and I cannot thank him enough.
The bottom line is that when charities are hurting, real people are hurting. Let us do something about it. I ask every member to support this bill. Working together, we can get the charitable sector back on its feet and Canadians back on theirs.