Finance Committee on Feb. 9th, 2012

[Adam Aptowitzer]

Thank you very much for asking that question.

I work with Arthur Drache. Arthur Drache was the gentleman who drafted many of the original proposals that are under examination today--the legislative provisions, that is. I asked him if there is any reason why the deadline is December 31. His answer was simply that no one ever thought about it.

I might turn the question back and say that I'm not sure I have modelling for the end of February, but I don't think any modelling exists for December 31 either. My thought in suggesting it really was that what we see from RRSP contributions is my friends over here, the witnesses, have taken a lot of time to educate donors on the tax aspects of contributing to your RRSPs. If we want people to understand the incentive program, which is critical if you're going to have an incentive, then we have to be better at educating them. Currently, if you have a deadline that coincides with the Christmas giving season, there's not a lot of emphasis on that education component.

The thought was more of a qualitative nature than a quantitative nature. I'm afraid I don't have any modelling, and I'm not sure that I'm in a position to have done it anyway, quite frankly. I find it's probably in a much better position.

[The Chair, Conservative, James Rajotte]

Mr. Braid, Mr. Alexander wanted to comment.

[Craig Alexander]

Very succinctly, I would heartily endorse extending the deadline for charitable giving. I think if you surveyed your own constituents and asked them what is the last day that they can make a donation for a tax receipt, I'll bet that the vast majority of them will not say December 31. I do presentations across this country, and when you do investment seminars, you very quickly learn that most Canadians aren't actually aware of the exact date of the deadline. Hence, they tend to start thinking about their tax returns in the new year, which happens to coincide also with the RRSP season. I think it would be an extremely good idea.

[The Chair, Conservative, James Rajotte]

Okay.

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

My next question is for Mr. Burrows. I wanted to follow a line of questioning from Mr. Brison actually on the important issue of social finance.

My impression was that you seem to certainly support that concept. In fact, I wrote down what you said. You also indicated that although you supported it you thought it might take many years to develop. My question for you then is how might the federal government encourage or spur the development of social finance, social investment mechanisms? How can we help to create a platform to move that long?

[Malcolm Burrows]

Part of it I think lies with the federal government, and the report that Mr. Brison referenced I believe makes seven recommendations, which are all, in and of themselves, excellent. One of the big questions, though, is if we are going to have true enterprise, do we have the entrepreneurs? Is there going to be that community action?

To some extent, we have some, but to some extent there is a gap between wanting to do it and looking to the government for the rules. There's not currently enough existing activity, which is to me a disheartening sign, that we're looking for.... And from a practical perspective, in many basic things there is nothing holding it back, and it's only suitable in certain situations.

Mr. Aptowitzer has actually written on this.

[Adam Aptowitzer]

If I might add briefly, one of the additional points in my presentation was raising the limit for the charitable donation amount, the extent to which you obtain credits, from 75% to 100%.

The purpose, really, behind that is that social enterprise—social enterprise as distinct from social finance—can be pursued through a corporate entity owned by a charity, but currently there would be tax leakage because there is only so much that a corporation can take advantage of. The thought really is there.

That's one thing the government could do to help encourage this and see how that goes before maybe extending it further to look at social bonds and other elements of social finance.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Thank you, Mr. Braid.

We can go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you to all our witnesses for coming today.

I would like to take a few seconds to say something to Mr. Braid.

Thank you very, very much for the motion you put forward. It's led to a tremendously interesting conversation here. We appreciate that you joined us at the committee today, Mr. Braid.

Now I would like to put a question to Ms. Alepin. I see that your assessments have been essentially carried out in the United States. Apart from the foundations and the data on the foundations that you have given us, do you think that Canada has better regulations to encourage charitable giving as compared to the United States? Is Canada better positioned than the U.S.?

[Brigitte Alepin]

I cannot really answer that question because I have not studied that area sufficiently. Since I have been in this field, I have concentrated my work on private foundations only. I can tell you a great many things about private foundations. There are many rules.

[Shelly Glover, Conservative, Saint Boniface, MB]

I understand. Thank you.

I am going to ask the other witnesses the same question.

She said she hasn't compared, and yet, Mr. Burrows, you said very clearly at the onset that we have the most generous system in the world. I'd like you to expand upon that, but at the same time I would like you to tell us the consequences in the foundations world if we were to go to 8%. Again, I want you to take a moment to really explain why it's important to look at the big picture, not just one thing within a system.

[Malcolm Burrows]

There are a number of elements. First, the safeguards in the Canadian system.... There are a lot of restrictions on what private foundations can own, self-dealing rules. Sometimes there's a view in the charitable sector that they actually go too far, that they're limiting philanthropic contribution.

One of the factors with the disbursement quota is it can't, in many cases, be arbitrarily increased because of a conflict of laws. You end up having trust law. For example, I mentioned the foundation dating from the 1950s. Well, it was set up as an income-only structure, as opposed to using capital. So to get 8% you would have to use capital. There are complexities within the sector that perhaps prevent that.

The vast majority of modern private foundations are actually set up to go way beyond the 3.5%...huge grants of capital. I was recently involved with one that was essentially there for two years as it transitioned money and got it out into the community to wonderful charities. So you also see that extreme.

[Shelly Glover, Conservative, Saint Boniface, MB]

This lends to your wanting to minimize the erosion of the word “gift”, which is my concern as well. As we're doing this study, there are all these suggestions about how we might get the wealthy to further change behaviour, to somehow inject more, but then “gift” is lost. We're trying to figure out ways so that we can incentivize those who may not give at all to start doing so and developing a culture, as Monsieur Giguère said. So I appreciate that.

I would like your opinion, though, Mr. Burrows, on another matter, which is the ecologically sensitive land issue. I want you to tell me what the consequences might be if we were to adopt the real estate measures that have been proposed. What would the consequence be? We did hear from an alliance member who was very afraid that it would have a severe consequence environmentally on those gifts in ecologically sensitive land. Please, would you respond?

[Malcolm Burrows]

I listened to the hearing on Tuesday and I heard the comments. I do not believe that the elimination of capital gains on taxable real estate will affect it. The way the conversation went on Tuesday was it seemed like we were talking about the same land, but let me give you examples of taxable real estate. Well, it could be a commercial property in Surrey. It could be a rental property in Toronto, a condominium in Florida. These are not ecologically sensitive. These donations are few and far between but represent significant wealth, particularly in smaller communities, whether they're in Canada or outside Canada. So they're having the broader benefit across the community. I'm a huge believer in the ecologicial gifts program and the importance of land conservation, but I think the greater benefit for the whole sector is unlocking this asset class.

[Shelly Glover, Conservative, Saint Boniface, MB]

Does anyone believe it would have...?

Go ahead.

[The Chair, Conservative, James Rajotte]

Okay, but please be brief.

[Adam Aptowitzer]

Just very briefly, I would like to point out that the donation of a principal residence has the exact same tax treatment as what's being proposed here. Principal residences are owned by people all over this country, and yet we don't see a major impact on the donation of the ecological property.

So I empirically have some questions about the feeling that the land trust alliance might have.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Glover.

We'll go to Mr. Chisholm, please.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Thank you.

To Mr. Alexander, you talked about the concern that by making proposed changes by sweetening the deal, somehow we'd diminish altruism. I guess I appreciate that sentiment; however, having been somebody who worked in the community trying to raise money for very worthy causes, you kind of say, “But what does it matter? Whatever it is, whatever instrument that's going to work to raise the money so that our charity can do the work it does, that's what is important.”

So I wanted to say that, and I also wanted to ask you to confirm, because I wasn't clear on it, your position on the stretch tax.

[Craig Alexander]

First, just to be clear, I don't recollect making any comment about altruism taking away the.....

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

No?

[Craig Alexander]

I think it was Mr. Burrows.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Was it? Well, maybe he can answer next.

[Craig Alexander]

My view is that I would actually endorse all three of the proposals, the donations of real estate, the donations of private shares, and the stretch target. However, I want it to be quite transparent that there are issues around implementation regarding the stretch target.