Finance Committee on Jan. 31st, 2012

[Cathy Hawara]

Mr. Chairperson, currently charities have to report on the various sources of their funding. They also have to report on what they do with all of their resources.

In terms of disclosing the names of individual donors, if I understood the question correctly, certainly there would be some issues with the current confidentiality provisions of the Income Tax Act. If you were looking to disclose the donations of Canadians, that would be confidential taxpayer information, so it would not be within our administrative discretion to simply amend the form to have that kind of information released.

[The Chair, Conservative, James Rajotte]

Okay. I'm on your website now. Where do I find the most information? I've surveyed the financial information section. It's actually fairly general. Where would I find the activities of a specific charity, such as the Canadian Cancer Society, which is a very reputable charity. Where would I find its activities listed here?

[Cathy Hawara]

There's only a brief description of the actual activities. The form is more geared toward, unfortunately, yes-or-no answers and some financial data. Currently we don't have a lot of narrative information about what the charities are undertaking.

[The Chair, Conservative, James Rajotte]

It's very basic information at this point.

[Cathy Hawara]

It would be, and it would depend on whether they completed the short form of the financial information or the more in-depth schedule. Further information would be found in the financial statements, which unfortunately are not available on the website.

[The Chair, Conservative, James Rajotte]

Okay. Thank you for clarifying that.

I would like to turn to Statistics Canada. I have a little over a minute left.

Page 3 deals with tax filers and charitable donors from 1990 to 2010. If I'm seeing it correctly, the number of charitable donors stays fairly constant at just over 5 million, but the number of tax filers goes from about 17 million or 18 million to 24 million. Do you have any insight as to why the number of donors has not increased, while the number of tax filers has?

[Sylvie Michaud]

I think we mentioned at the beginning of the meeting that charitable donations could be pooled for a married couple. Both of their charitable donations could actually be pooled on one tax file donation, but both spouses may have actually contributed.

[The Chair, Conservative, James Rajotte]

Does this explain why the number has not gone above 5 million, while the number of tax filers has increased? My sense is that some groups come before us and say that the number of people giving is not going up with the number of tax filers, so therefore we need things like the stretch tax credit to encourage people, especially middle- or lower-income people, maybe, or younger people, to give more. They say we need the stretch tax credit because of this information, so I want to make sure that I understand why this number is fairly constant.

[Sylvie Michaud]

This is the number of the people who reported a charitable donation on their tax form, but as Alison has mentioned, donations can be pooled, so it doesn't necessarily reflect the number of charitable donors. More information on charitable donors would come from the CSGVP, which has a bit more detail.

[The Chair, Conservative, James Rajotte]

Okay. Thank you. I appreciate that.

I'm going to go to Mr. Brison now, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you very much.

I want to go back to this whole issue of tax expenditure just for a moment, in terms of the figure of $34 million. If taxpayer A has shares worth $5 million, donates them, and as such doesn't pay any capital gains tax on that transaction, you might attribute, depending on the inclusion rate, a tax expenditure of $1 million to that transaction.

However, if taxpayer A doesn't make any donation and holds onto his shares, he doesn't pay any capital gains tax either. Therefore, your tax expenditure figure is contingent on the assumption that taxpayer A would have sold his shares in any case, when in fact the argument in favour of reducing--and in this case, eliminating--capital gains tax on gifts of publicly listed securities is contingent on the idea that this public policy decision actually catalyzed an activity that would not have occurred otherwise.

If we assume that taxpayer A would not have executed any transaction or donation, there's no tax expenditure. I think it's very important when you apply what is, in some ways, a government construct of a tax expenditure to this situation that we consider, depending on how we look at it, that there's no tax expenditure if in fact there had been no contribution, and if the reduction in and elimination of the capital gains tax on publicly listed securities had no impact on taxpayer A's decision. Do you understand the logic?

[Sean Keenan]

I do understand the point you're making. I think Mr. Julian had the question about what the value is of the tax benefit that is being provided as a result of this measure, which is what we're trying to show in the tax expenditure report. Yes, you could say that without that incentive, the person would not have donated those shares. I think that's a very valid point.

[Scott Brison, Liberal, Kings—Hants, NS]

Sure, that's the point. When you use the tax expenditure verbiage--and I know it's widely used within government, and I respect that--it does imply a cost that in some ways is subjective, depending on one's assumptions, and the motivation.

Speaking of subjectivity and the whole issue of political advocacy and how you judge that, I'll give some examples. One is a wildlife federation that hypothetically advocates against a gun registry, which is hypothetical these days. We register lobbyists now in Canada, but we don't register long guns. As another example, let us consider an environmental NGO that may express views contrary to government policy on the environment, or an international NGO that may campaign vigorously against government cuts to international development in certain countries. How do you compare those to, for instance, a church that may oppose or campaign against a government social policy?

This is very subjective, and I find it difficult. I'd really appreciate some of your insight in terms of how you define what is appropriate. How do you quantify or analyze granularly, in an objective way, something that seems inherently subjective in terms of what are appropriate levels of advocacy, and what type of advocacy crosses the line? That's one I'm really concerned about.

[The Chair, Conservative, James Rajotte]

There are about 45 seconds.

[Cathy Hawara]

I'll take that question, Mr. Chairperson.

We do have guidelines available that lay out our interpretation of what's allowable under the Income Tax Act.

Registered charities are allowed to participate in political activities. By political activities, we mean when there is a call to political action, so it could be urging the public to contact their MPs or an explicit communication by a charity that a particular piece of legislation or a decision should be changed. Those are political activities, in our view.

Charities are entitled to undertake those types of activities so long as it's non-partisan--which is essentially support for or opposition to a political party or a candidate to public office--so long as the activities are connected to the organization's purposes, and so long as those activities remain a small part of what the charity does, and that's where the 10% limit comes in. Looking at all of their resources, we would determine whether they are beyond that threshold.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Brison.

We'll go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Chair, I'm going to continue in that vein. The detective in me is telling me to ask who actually goes to investigate that. Earlier we were talking about complaints being so important, but do you do any proactive investigation of that type of behaviour?

[Cathy Hawara]

We do, actually, in the sense that we audit, as I mentioned, about 1% of charities a year. It's a little less than that. We do about 750 audits. In each and every one of those audits, one of the essential components is to look at whether the charity is engaging in political activities, and if they are, to make a determination as to whether they're partisan or whether they're excessive--that is, whether they're beyond the 10% threshold. In every audit, including the random audits we conduct every year, the organization does get looked at from the perspective of political activities. This is in addition to the complaints we might specifically receive.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good.

When I think of auditors, I think of numbers. When I think of policing this issue, I think of people who are actually going out and seeing what happens at these rallies to hear whether or not there is criticism of, or support for, a specific party or a person. Does that happen?

[Cathy Hawara]

The way the audit would unfold is that normally an auditor would attend a registered charity's offices and look at all of the books and records and ask a lot of questions, but the auditor wouldn't work by himself or herself. There is a team back at headquarters that is specialized in the activities of registered charities, including political activities, so they work together to do a lot of research about the various activities and pronouncements that charities might have made to be able to draw a picture both on the activity side and on the financial side.

[Shelly Glover, Conservative, Saint Boniface, MB]

But does anyone go on the ground to rallies?

[Cathy Hawara]

To rallies? No.

[Shelly Glover, Conservative, Saint Boniface, MB]

Do they ever look at newspaper articles for quotes and pull them as evidence that there has been a breach?

[Cathy Hawara]

We would look at a wide range of possible sources of information, including the media.

[Shelly Glover, Conservative, Saint Boniface, MB]

Okay. Sounds good.

Mr. Jean will get into the stretch tax credit for me; I wanted to get into the monetary penalties. One of the slides, I think the Finance slide, talked about a monetary penalty.

Ms. Hawara, I think you talked about some of the repercussions. What is the range of monetary penalties for any kind of breach?

As well, I believe it was you, Ms. Hawara, who talked about the salary ranges. I'd like those tabled. I would also like to know how many people fit in each of the ranges, if that's possible.

Thank you. We're back to your answer, Mr. Keenan.