Finance Committee on Feb. 9th, 2012

[Malcolm Burrows]

Very much so. These were proposals I was involved with. We need safeguards. There are existing safeguards in the system that date from 1997, which say that when there is a donation of essentially private company shares and the donor is not at arm's length from the charity, there can be no receipt until those shares are sold. It's a mechanism that's worked very well. It's provided clarity. Right now, when you donate those shares there are still capital gains payable. But there's clear valuation and it's an existing measure within the act.

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

You believe those safeguards would be in place as well as keeping it simple enough to—

[The Chair, Conservative, James Rajotte]

You have one minute.

[Malcolm Burrows]

I do, and we may need additional safeguards of added valuation because there would be more of these donations if we eliminated capital gains.

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

I heard this morning in the natural resources committee about disclosure for the CRA versus the U.S. counterpart, for non-profit organizations. The U.S. has far better transparency than Canada does in relation to non-profit organizations. I'll explain. In particular, they have to publish their ten highest-paid staff, including their names—in the U.S.—and the ten highest-paid contractors, including their names. That is not in Canada at all. In fact, we have the ten highest-paid individuals but no names at all.

What would you recommend in Canada to bring about transparency and accountability for these non-profit organizations?

[The Chair, Conservative, James Rajotte]

Just give a brief response, please.

[Malcolm Burrows]

Just to make the distinction between non-profit versus registered charities, you're talking about registered charities, are you?

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

I'm talking about both, actually.

[Malcolm Burrows]

With non-profits we probably lack clarity. With registered charities there's a high level of clarity and a high level of public disclosure.

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

That's not published, right?

[Malcolm Burrows]

It is published. It's on the CRA website. CRA is actually increasing and listing it, so it's on a little score chart that will be released later this year.

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

Mr. Chair, a point of order. I hope I didn't have to have my time deducted as a result of an intervention.

[The Chair, Conservative, James Rajotte]

No, not at all.

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

Mr. Aptowitzer wanted to make a comment as well.

[The Chair, Conservative, James Rajotte]

Okay. We're well over time here. Could we make it in a further round?

[Adam Aptowitzer]

Yes, it could wait.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Côté, s'il vous plaît.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you Mr. Chairman.

Ms. Alepin, it is with great pleasure that I read your brief and listened to you speak. I have long been concerned about the impacts various measures being taken are having on our democratic system. Tax issues have also been of great interest to me for some time now. In fact, I previously spoke with Ms. Carole Presseault, who is a CGA and has lobbied fiercely for the simplification of our income tax statements.

Your brief targets the potentially negative influence big money can have on the democratic process. I found it most interesting. On that subject, you suggest specifically that compulsory disbursement quotas should go from 3.5% to 8% so that taxpayers' donations may be recovered more quickly. Quite recently, an evangelical website which had violated electoral law was discussed in the news. This could be considered a Trojan horse of sorts and one can suppose that the evangelical organization is benefiting from charitable donations.

So could you please explain to us how increasing that quota could potentially reduce a possible attack on democracy? The absolute power to spend is of course a power. So I'm wondering if the fact of increasing the level of disbursements would not end up creating a contradiction with this principle or if on the contrary, the fact of spending accumulated capital more quickly would allow us to fight against this threat to democracy.

[Brigitte Alepin]

We could talk about that for a long time. When we look at our democratic systems we can see that they are working. This is true and we can say so. If we look at the process from beginning to end, we can see that one thing leads to another and that all is well. A problem arises when wealth is so enormous—whether it be held by a private foundation or by an individual—that its holders have more power than elected officials over public issues, in financial terms. With respect to the capital gains exemption for private companies donating shares for example, the private companies' shares are often being transferred to private foundations. Public charitable organizations are rarely involved in such cases.

You should really listen closely to what I am suggesting here and ensure that you do not put into place a system for private foundations. You probably know that a private foundation is an organization controlled by a person or group of related persons, rather than being under public control. One must therefore be careful. If one creates a tax system under which money found in a private foundation mostly comes from taxpayer funds and if that private foundation is controlled by an unelected individual, we are playing with democracy. We are taking risks with public authority. Fortunately, the great founders of private foundations seem to be decent people.

In closing let me give you an example. In the U.S., where the charitable foundations system is similar to the one set up in Canada, $600 billion will end up in the hands of 40 people because of the Giving Pledge initiative. This is a global initiative to deal with poverty and health issues. Six hundred billion dollars is an amount substantially higher than the World Health Organization's budget or that of the Quebec Department of Education. When it comes to private foundation systems, we must be cautious and avoid having a private foundation grant absolute power to one unelected person to deal with public issues and taxpayers' money.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

Given this situation, do you think that our tax system should be far less generous and that that could help us put a stop to this established trend?

[Brigitte Alepin]

The solution to the problem is to avoid offending donors. It is not a good idea to fool around with tax credits for charitable giving. I have studied many different countries' systems. And in all my books, I have a chapter on private foundations. By increasing, on an annual basis, charitable spending obligations, foundations lose their financial power.

[The Chair, Conservative, James Rajotte]

Merci, Monsieur Côté.

We'll go to Mr. Braid, please.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

I should note that it was your motion that started this process in the first place.

Thank you for being here.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you for mentioning that, and I'm very pleased to be part of this critically important study.

Thank you to all of the witnesses for being here today and for a range of excellent and very helpful presentations.

I have some specific questions for specific individuals.

Mr. Aptowitzer, I appreciated the way you framed your presentation into categories of incentives and disincentives. I was intrigued with one of your suggestions, and that was to potentially extend the deadline by which Canadians can make their charitable donations. You said until the end of February. That, probably not by coincidence, is the same deadline for RRSP contributions. There's probably some method to your madness there, I would suspect.

Could you elaborate a little bit on why you think extending that deadline would be helpful? Have you done any modelling in terms of what impacts may be in terms of giving?