Evidence of meeting #40 for Finance in the 41st Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was charities.
A recording is available from Parliament.
NDP
Alain Giguère NDP Marc-Aurèle-Fortin, QC
Mr. Chair, it is a pleasure to welcome people who work for all of their fellow citizens. It is very nice.
There is talk of creating a donor culture. At present, the tax credit rate varies depending on weather the gift is more or less than $200. Insofar as the people who give less than $200 are very often less well off and $200 represents a large amount, a real sacrifice for them, would it not be preferable to apply a single rate to all donors?
President and Chief Executive Officer, Imagine Canada
At present, the rates are 15% and 29%. So it would probably be necessary to propose a rate of 29%. The system is complex. It could be simpler. What you are suggesting would not solve all the problems, but it's an idea to which we would not be the least bit opposed.
You were talking about small donors. But people often forget—or simply do not know—that donations made to charitable organizations in the area of health, be it cancer, heart or multiple sclerosis, amount on average to $30, $35 or $40. These organizations are supported by thousands of Canadians who all make small gifts. This is not so for the entire sector, but it is certainly the case in the area of health. It is very interesting. For these small donors, the tax rate is 15%, but perhaps consideration should be given to a rate of 29%, provided that 29% does not become 25%, obviously.
NDP
Alain Giguère NDP Marc-Aurèle-Fortin, QC
We understand.
You also mentioned control of donations and the fact that you were going to prepare a list of all donors so that people know exactly who their donations are for and whether they are trustworthy people. I, myself, had to deal with a serious problem in Laval. It was an ecological gift. Ever since the situation turned sour, all similar transactions have been frozen. No one wants to make a donation anymore. People hope for overvaluations that do not make any sense.
My question is directed more specifically to Ms. Cooper.
I noted that you wanted to propose some remedial measures, and I would like to know which ones. It is to prevent similar events from happening again.
Director, Canadian Land Trust Alliance
I can't comment on the particular facts of a member's situation. If it were an ecological gift, the mechanisms exist already in the Income Tax Act.
First, the land is certified by a government authority as ecologically sensitive. In Quebec it happens to be the provincial government that makes the determination that it is ecologically sensitive. Bureaucrats and biologists take a look, and it's significant environmentally sensitive land. The valuation is prepared by independent valuators chosen by the parties, and it goes to a committee within Environment Canada that assesses the valuation. These are two protection mechanisms that exist already.
NDP
Alain Giguère NDP Marc-Aurèle-Fortin, QC
The problem is that in the case you mention everything was done properly. It remains that a public servant behaved illegally. As far as I am concerned, I want to know what remedial action applies when someone makes a gift valued at an unreasonable amount and they get a huge tax credit in return.
Director, Canadian Land Trust Alliance
The mechanisms exist in the Income Tax Act. First, if the value was certified, it was certified. If somebody is not happy with the certified value, there is an appeal mechanism within the context of the Income Tax Act. So the remedy is there in itself. Also, CRA has ample audit procedures to take a look at the transaction. If it feels there was some form of fraud, if there was some misrepresentation, it's within the CRA's normal enforcement mechanisms to do an audit and reassess.
NDP
Alain Giguère NDP Marc-Aurèle-Fortin, QC
Thank you very much, Mr. Chair.
As a shrinking donor base has been noted and 46% of donations go to religious organizations, we wouldn't want to see funding campaigns costing more and more.
NDP
Alain Giguère NDP Marc-Aurèle-Fortin, QC
I would like to know how you are going to go about preventing the cost of campaigns from rising.
President and Chief Executive Officer, Imagine Canada
Imagine Canada feels that it is up to donors to decide who they want to give their donations to, within the regulatory framework in which they operate. We are not going to assume a correctional role as to the destination of these donations. It is really up to Canadians to make this sort of decision.
February 7th, 2012 / 4:45 p.m.
Conservative
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
Thank you, Mr. Chair.
And thank you for attending today.
I have a couple of questions. First of all, I noted, Mr. Johnson, that your submission to the committee estimated that the cost to the proposal would be somewhere around $50 million to $65 million and result in an annual increase in charity given in the form of private company shares and real estate of between $170 million and $225 million.
I'm not really clear on the methodology you used to get to those figures, and I understand that you have some support for that, specifically the FCM and the independent business association of Canada, but I'm not clear on the methodology. I thought maybe you could explain that to me a little bit better.
Member of Advisory Board, BMO Capital Markets, As an Individual
First of all, the estimate of how much charitable giving would increase in the form of private company shares and real estate was based upon the U.S. experience. In the United States currently, gifts of appreciated capital property are exempt, which includes listed securities, private company shares, and real estate. Based upon the U.S. experience, roughly 20% of the total gifts of appreciated capital property come in the form of private company shares and real estate. The estimate of that range, which is around $200 million, comes from the fact that gifts of listed securities have been $1 billion a year. So the ballpark number is $200 million from these two asset classes.
Now, the tax revenue cost is based on a detailed analysis of the Department of Finance's annual tax expenditure report. That annual report provides the charitable donation tax credit for gifts of listed securities and the foregone capital gains tax. It covers the portion of those donations that comes from individuals and the portion that comes from corporations. A lot of individuals who have significant assets in the form of stock own them in a private holding company. They don't get a charitable donation tax credit for the holding company; they simply get a tax deduction from the taxable income.
I probably don't have authority to use his name, but he was a prominent individual who spent 30 years in the Department of Finance.
Member of Advisory Board, BMO Capital Markets, As an Individual
He's now a senior adviser to a law firm.
Member of Advisory Board, BMO Capital Markets, As an Individual
He provided assistance in analyzing the tax expenditure report.
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
I did see that, and I don't disagree with your assumptions in relation to that in particular. I'm just wondering, wouldn't the $1 billion U.S. experience equate to about $100 million in the Canadian experience, or is there some other anomaly that would suggest otherwise?
Member of Advisory Board, BMO Capital Markets, As an Individual
The $1 billion is what has been given to charities in Canada—
Member of Advisory Board, BMO Capital Markets, As an Individual
—since 2006.
