Finance Committee on Jan. 31st, 2012

[Cathy Hawara]

We do maintain close relationships with certain countries, and I'm not aware of any of them having implemented something similar.

I don't know whether the Department of Finance has anything they want to add on that particular question.

[Sean Keenan]

In terms of whether other countries have adopted a stretch tax credit idea, we're not aware of any that have done so.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Bluntly, from my perspective, wouldn't there be some potential integrity issues relating to a year-to-year tax credit like this?

[Sean Keenan]

In analyzing any proposal for a tax policy change, we would look at the cost and the implications. Especially with the charitable donations incentive, one of the major considerations is whether you're going to be subsidizing existing donations or actually providing an incentive for new donations.

Recently there was an article in The Globe and Mail about the stretch tax credit, which essentially said it would encourage more donations but would also provide an incentive for people to act strategically to increase the tax credit they receive without necessarily increasing overall donation levels.

For instance, spouses could alternate between who claimed the credit. One spouse could give $500 one year, and then the other spouse could give the next year, so there are opportunities there for strategic giving. I think the example in The Globe and Mail said to give a little bit less in year one and a little bit more in year two. Whether that's going to lead to additional donations in the sector would have to be a consideration that we would have to take into account.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I did have a chance to look at the website that you referred me to relating to practice of disclosure. I have a couple of questions, and maybe suggestions.

Why not include the total number of employees in each bracket of the amount made? It seems fairly easy to do, because it's already being done, for the most part. You have the total number of employees, and then you have the top 10 in each sector. A particular organization that I give to has only 21 employees. I can imagine that even if they had thousands, it would still be fairly simple to put them into each bracket, to be blunt. That would certainly give you a good idea of what kind of organization it is, such as whether it's hands-on or executive or administrative, and it would help Canadians, I think, donate to those particular organizations that fit their needs.

Also, with respect to schedule 5, non-cash gifts, is that a per-year schedule of gifts? For instance, this organization that I looked at was $39 million. Is that per year or is it overall in the life of the organization? It wasn't specified on the website. I'd just refer you to that.

I also looked for third party expenditures and contractors. In one particular case that I looked at, professional and consulting fees amounted to half a million dollars. It was a small charity. I would suggest a breakdown of those types of organizations and contractors would be very helpful. I think it gives opportunities to organizations to enrich certain types of people in the organizations themselves through professional fees. As an ex-lawyer, I can assure you that people look at all sorts of ways to defraud others of money, and I think it would be greatly encouraged to do exactly that.

[The Chair, Conservative, James Rajotte]

Do you want to have a brief response, Ms. Hawara?

[Cathy Hawara]

I believe the answer to the question on non-cash gifts is that it is every year. It's reported for each fiscal year.

With respect to greater disclosure on compensation, we always look at the form and see what can be done. There are significant system costs associated with the form itself.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

A $5,000 amount or a certain limit would be advantageous, I think.

[The Chair, Conservative, James Rajotte]

Thank you. Thank you, Mr. Jean.

Mr. Mai is next, please.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

My question is for you, Ms. Hawara.

With charitable organizations that operate at community level, have there been more complaints about political activities in recent years? Have there been more complaints, by which I mean revoked registrations, for those kinds of organizations?

[Cathy Hawara]

According to the information at my disposal, there has been no increase in complaints. Have we revoked registrations of organizations for engaging in political activities to an unreasonable degree? Actually, in recent years, no registrations have been revoked for those reasons.

We have identified a number of problems; really, non-compliance comes in a wide range of forms. In each case, we chose the appropriate tool. But there have been no revocations in recent years.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you.

In chapter 7 of the Auditor General of Canada's 2010 report, it states that the Canada Revenue Agency does not have sufficiently detailed internal guidance to apply sanctions to fraudulent charitable organizations.

Has that been corrected? What steps have been taken along those lines?

[Cathy Hawara]

Yes, that was one of the recommendations that was made to us. So we have established a procedures manual. The report also indicated that, if an infraction is subject to a sanction or penalty and the decision is not to impose the sanction, the auditor should justify that decision. It is checked at head office.

There is also now a person responsible for sanctions in our central administration. So that person can liaise with the auditors and develop the expertise that allows to us to better apply the range of sanctions we have available.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

You said earlier that you lack the staff to come to grips with the gift problem in terms of receipts, for example.

Now that you have guidelines on the application stage—because the CRA has been criticized for not really having taken any steps, or not having succeeded in collecting fines associated with the sanctions—what specifically are the sums involved; what progress has been made in this area since then?

[Cathy Hawara]

I would like to make a clarification. I do not believe I mentioned a lack of staff. Now, there are some difficulties with receipts and with the fact that we have no automated system. But it is fair to say that we do have enough staff.

In the auditor general's report, she made the point that few sanctions had been issued in the period covered by the audit. She made some suggestions about our procedures, our manuals and our approach. We have almost finished implementing what she asked and we are committed to doing so. I do not have with me the number of penalties that have been imposed since, but we can certainly send that information to the committee, including the sums involved. I do not know them by heart. I would also like to point out that, if a charitable organization has been the subject of a sanction, the public has access to that information through our website.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

In terms of the steps you have taken to deal with the problem, could you tell me if you need any extra tools—I am specifically thinking about staff—to make sure that the situation regarding fraudulent activity is really corrected?

[Cathy Hawara]

I appreciate the question.

I don't think that we need more staff at the moment. First of all, we have to see whether those situations correspond to the provisions of the act in terms of our discretionary power to impose a penalty. We always have that discretionary power. So we are trying to see whether that actually provides a way for the organization to come once more into compliance with the act.

[The Chair, Conservative, James Rajotte]

Thank you. Merci.

Ms. McLeod, we have time for just a very brief round, unfortunately.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I think perhaps it's a quick question, and it will probably be for another panel, but have you had any experience internationally? Are there any countries that you are aware of that are involved in important and significant issues? I'll leave that question to anyone who might want to answer it. Does anyone have any insight into what other countries are doing?

[Blaine Langdon]

You'd probably want to take a look at some of the things coming out of the United Kingdom. They have a fairly large charity-related project they refer to as The Big Society. They're looking at social enterprise over there, and they're looking at social impact bonds. There's a lot of stuff going on over there.

Right now, Australia is another country you could look at in terms of some of the measures they're taking. In their last budget there was a commitment to look at non-profit organizations. They're also going to be looking at the establishment, I believe, of a charities commission down there.

Then there is the United States as well. They have a lot going on in terms of social enterprise and different types of community corporations and different business corporations. As well, they're looking at their tax system more generally, but they're also, as I understand, looking at donation incentives with the aim of seeing what they can scale back rather than making them more generous. It would be interesting to follow that as well.

[The Chair, Conservative, James Rajotte]

Thank you very much, Ms. McLeod.

On behalf of the committee, I want to thank all of our witnesses. Today's discussion was very interesting. Thank you so much for your responses.

If you have anything further to share, either a response to a question today or anything you wish the committee to consider, please submit it to the clerk, and we will ensure that all members get it.

Colleagues, just before you go, I want to propose a motion to cover primarily witness expenses for this study. I move that the proposed operational budget in the amount of $37,700 for the study on tax incentives for charitable donations be adopted by the finance committee.

D'accord? Okay?

(Motion agreed to)

Thank you all, colleagues.

Finally, I would like to thank Mr. Marston for his excellent work and for his kind words here today.

[Some hon. members]

Hear, hear!

[The Chair, Conservative, James Rajotte]

Thank you.

The meeting is adjourned.