Finance Committee on Feb. 2nd, 2012

[Prof. Paul Reed]

The difference between the incidental givers, people who respond to a knock at the door and hand over a twenty-dollar bill, and the people who put $50, let's say, on the offering plate at their place of worship, is huge. The median annual donation for people who are incidental givers is somewhere barely above $100 a year. It's approaching $1,000 a year for the second.

The second kind all know about tax credits. The first kind, who are somewhere in the vicinity of two-thirds of donors but who account for a minuscule portion of all dollars donated—they don't know about it. So it becomes an issue of how to change the first into the second.

[Randy Hoback, Conservative, Prince Albert, SK]

Moving forward, in your research or in any of your studies, have you looked at a model in another region or another country where you've said, “Hey, they've got it, they've got it figured out”, where we could maybe look at it and say, “This is not a bad model to copy”?

[Prof. A. Abigail Payne]

I would encourage you to look at what the U.K. is doing. They have the Gift Aid system, where high-income earners can get a tax credit. But if you're not a high earner, if you give to charity, the charity will ask you, “Are you a U.K. taxpayer?” The equivalent to the tax credit is given back to the charity.

Some research has been done for HMRC by Sarah Smith and Kimberley Scharf on the differences in terms of individual behaviour with regard to how they perceive that type of indirect government support of charities versus a credit system.

[Prof. Adam Parachin]

Some of the submissions that I've read online pertaining to the exemption of capital gains tax from donations of capital property already exist in the U.S. That would certainly be an example of the difference it can make in terms of volume of donations and the kind of donor you're attracting. We're actually the holdout on that issue.

[Randy Hoback, Conservative, Prince Albert, SK]

Do you have any suggestions on how we'd work with the provinces and the municipalities when we start looking again at increasing donations, and the taxation...? As you know, there's federal tax and there's also provincial tax and then there are the municipal taxes.

Do you have any ideas on how they interact with those models? It may be a little more detailed, but....

[The Chair, Conservative, James Rajotte]

Is that to Mr. Parachin?

[Randy Hoback, Conservative, Prince Albert, SK]

To Mr. Parachin—and Ms. Payne, actually, I think.

[Prof. Adam Parachin]

In my specific proposal in terms of actually identifying what donations qualify, the provinces typically piggyback the federal system. In terms of gifts that are recognized federally, they're also recognized provincially. So that's one of the talking points.

The second is that Quebec historically has had a broader definition of “gift” applied, because Quebec law actually recognizes split transactions as qualifying as gifts under provincial law. So in the kind of example where a donor sells property for less than its fair market value, it's actually recognized as a gift under Quebec law.

The problem with the rest of the country is that it wasn't a gift at common law, and that's one of the issues that the law has sort of tried to reconcile. We have a bijural state. That's been one of the other talking points that the proposed split receipting rules were meant to remedy, but of course they're not enacted, and they may not even be in draft form before the House anymore.

[The Chair, Conservative, James Rajotte]

Can you make a very brief response, please, Ms. Payne?

[Prof. A. Abigail Payne]

There are differences in the tax credits, so effectively in the price of giving across the provinces. You could use both charity information returns, because you know the location of the charity, for tax-receipted giving, as well as individual tax returns, because you know the residence of the individuals, to explore the differences across the province.

Also, I believe in Alberta a few years ago they instituted a change where they increased a credit for donations to charities within Alberta. I believe that is correct.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Mai, please.

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

Thank you, Mr. Chair.

Thank you to all for being here.

To Ms. Laforest, you mentioned that with the reduced expenses in...well, programs helping the organizations, and the government getting out of its role of helping society and giving more of that role to the organizations. Can you perhaps expand on that and tell us since when, maybe, and what you've seen regarding that?

[Prof. Rachel Laforest]

Do you mean in terms of funding cuts?

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

I mean in terms of funding cuts and the fact that it's becoming more the responsibility of the charitable organizations to help out, in terms of delivering services.

[Prof. Rachel Laforest]

That started in the early nineties with the program review in the first restructuring of the federal government, and then there was a gradual shift in the system of grants and contributions. A blue-ribbon panel studied and assessed the fact that government funding is less functional. There are a lot of accountability rules, so it's not a useful mechanism for supporting organizations. That's part of the story.

It has also shifted since 2006 with the election of the Conservative government. There has been a shift away from funding groups that do political representation, that engage in that form of advocacy activity. That has created some strain, certainly on national organizations, but it has trickled down to provincial organizations as well.

Then, at the provincial level, it varies from one province to another. In Quebec, the voluntary sector, the community sector, is actually quite strong, because the provincial government continues to fund through grants and contributions but they also have special funds set aside for advocacy and political representation, and then it varies from one province to another. But there has been a shift since the early nineties.

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

And how can that be repaired? You mention that a lot of the service organizations are having problems and the ban has been increased. They're the ones having the most problems.

Can you expand on that?

[Prof. Rachel Laforest]

I'm not very positive that government funding is going to come back or that in the short term funding to community organizations is going to increase. Therefore, in that context of constrained resources, I think it's important to at least increase the capacity of voluntary organizations or charitable organizations to get individual donations, because those are an important source of revenue.

I also think it's important to place in context those two funding trends—the fact that funding revenue is declining but also that charitable donations or the civic core that is responsible for charitable donations is very fragile. In the short to medium term, if the number of people who donate declines, and if the population continues to age and therefore stops making those generous donations they've been making, and if religious practice continues to decline, all of that will create even more pressure on the voluntary organizations.

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

Thank you.

Ms. Lamb, you were saying we need to be more cognizant of varying levels of responsiveness for each donation sector to potential changes in tax incentives.

How can we help? If you want to focus on a specific sector—let's say donations that provide services—what would be your recommendation about tax incentives? How do you model that?

[Prof. Laura Lamb]

The results of this research, which show the varying levels of responsiveness to the same change in tax credit, would suggest that there could potentially be different tax credits for different sectors. Now, on the government level, it's getting kind of messy, but potentially there could be a specific tax credit for social services and health centres and a different tax credit for a religious sector. Of course, it brings to light all kinds of normative discussions about which sectors are more important than others, so it gets politically messy, but that's what the research implies—that sectors do respond differently to the tax credits, and that potentially that would be the way to go forward.

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

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mai.

Mr. Adler, go ahead, please.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Chair.

I'd like to thank all of the witnesses here and not here this afternoon for their participation.

I would like to begin with Dr. Payne. What is the total percentage of giving relative to GDP in Canada? Do you know that?

[Prof. A. Abigail Payne]

I do not know that.

[Mark Adler, Conservative, York Centre, ON]

Okay. Does anyone on the panel know that?

As a comparison, in terms of giving, maybe on a per capita basis, how does Canada rate in comparison with other G-8 countries?

Do you know?

[Prof. A. Abigail Payne]

No. Actually, that's a really interesting question. I'm working on a chapter for the Handbook of Public Economics with another professor, and we can't get that number.