Evidence of meeting #41 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was donations.
A recording is available from Parliament.
5:15 p.m.
Head, Philanthropic Advisory Services, Scotia Private Client Group, Scotiabank
It's interesting. I have more faith in the intentions of the donor. The donors I have worked with who give ecologically sensitive land truly want the land preserved. What I'm hearing from the alliance is that it's about tax and not about the desire to preserve land.
5:15 p.m.
Conservative
The Chair Conservative James Rajotte
They talked about the relationship that has to be developed between the person encouraging that donation and the landowner.
5:15 p.m.
Head, Philanthropic Advisory Services, Scotia Private Client Group, Scotiabank
It's true. It takes considerable time to develop those relationships and the trust to secure the land. But for the most part, taxable real estate isn't going to be raw land. It's going to be urban. It's going to be developed, industrial. That's the focus.
5:15 p.m.
Conservative
The Chair Conservative James Rajotte
Okay.
I have about a minute left for two more brief comments.
Mr. Aptowitzer.
5:15 p.m.
Drache Aptowitzer LLP
If I may, I think there's an easy and obvious answer to your question.
Certainly there's a way to distinguish it. Instead of completely removing the tax on the donation of real estate, reduce it. Instead of to zero, reduce it to something less than that.
This was the situation with public securities prior to the complete removal of it under Prime Minister Martin. I think there's an obvious parallel. Eventually it was completely removed, and I think that was partially, I would imagine, a result of some study behind the scenes that said that was the right way to go.
5:15 p.m.
Conservative
5:15 p.m.
Senior Vice-President and Chief Economist, TD Bank Financial Group
I wanted to understand the concern before I came to committee. I reached out to a number of different groups that gave me a perspective on what happens in the United States. The response that came back from them was that, with respect to ecologically sensitive land being donated, local and public pressure prevented that land from being used for development purposes, except that, anecdotally, there were some instances when land donated to universities was subsequently developed.
The general feedback was that if we looked at the United States we might actually get some guidance as to what the risks are.
5:15 p.m.
Conservative
5:15 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you, Mr. Chair.
I'd like to seek your input on the true cost of the capital gains tax exemption on gifts of publicly listed securities, as an example.
Department of Finance officials who met with the committee in the initial meeting indicated that they attribute a cost of $34 million, I believe, per year, and that is based on the assumption that the shares would have been disposed of in any case. When I asked them the question around their methodology, that if in fact there was no transaction, if in fact the owner of the bank shares that they had held onto for a long time did not sell them in order to make a contribution...that there would be no cost to the treasury. As such, I think it's possible that the cost the finance department is attributing to this may actually exceed the real cost to government.
This is important as we're discussing tax measures during tighter budget times. I'd really appreciate your views on this, because I have some concerns that we may be inflating the cost to the government through the tax expenditure approach. I'd appreciate your thoughts on that.
5:20 p.m.
Head, Philanthropic Advisory Services, Scotia Private Client Group, Scotiabank
You've been very articulate throughout the hearing process on this point.
For the most part, capital property gets held as long as it can be held and it doesn't come into the tax system. Often a donation will trigger a tax expenditure when the alternative was that it would be continued to be held and held and held. So it's being brought into the system for public good, so is that a real tax expenditure?
With public securities working with donors I would say probably about 50% are expenditures that are going to happen anyway because they're rolling taxes, they're offsetting, there may be an M&A or something like that.
5:20 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Okay. So you'd say about 50% would be the real cost, from your experience?
5:20 p.m.
Head, Philanthropic Advisory Services, Scotia Private Client Group, Scotiabank
In public securities, yes....
5:20 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Any other input or thoughts on that as we consider potentially extending the same tax treatment to gifts of private shares and land?
5:20 p.m.
Drache Aptowitzer LLP
Again, I would refer back to the situation that existed prior to the complete elimination of tax when publicly listed securities are donated to charity. Prior to that, in fact, if I recall correctly, it was a reduced tax on the donation rather than a complete elimination. So if I were the Department of Finance official, I might look at the fact that it's reduced on donation as probably the right stage to compare to the after the fact when it's completely reduced to see what the net effect was.
Other than that, as some guidance, I have no other comments, no knowledge.
5:20 p.m.
Chartered Accountant, Tax Policy Specialist, Author, As an Individual
I am wondering why a private foundation would do more charitable work if it were a shareholder in a private company. We have to ask ourselves that question. If shares are transferred from a private company to a private foundation, in what way would that allow the private foundation to do more charitable work?
5:20 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
Do you have any concerns around the evaluation of private companies?
5:20 p.m.
Chartered Accountant, Tax Policy Specialist, Author, As an Individual
No, I don't think it's a question of evaluation, it's a question of what this private foundation will do with these shares of private companies in real life. So even if it's $34 million we're talking about, or $34 billion, if the organization won't do any charity with it....
5:20 p.m.
Liberal
Scott Brison Liberal Kings—Hants, NS
I have one other point on gifts of private companies. Throughout small-town Canada there are a lot of smaller companies, and quite wealthy people. The capacity to unleash that locally could make a big difference in a lot of smaller communities. In many cases, the principal asset of these small-town millionaires is the company they built. Any thoughts on that? Do you believe that to be accurate?
5:20 p.m.
Head, Philanthropic Advisory Services, Scotia Private Client Group, Scotiabank
I think it's a huge point of regional equity. With public securities, we've focused on big cities with head offices. Wealth is created in smaller centres through private companies and through real estate.
5:25 p.m.
Conservative
5:25 p.m.
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
Thank you, Mr. Chair. I appreciate the opportunity to have one more round.
My question is taking into consideration what we heard last day, which was that 9% of donors give 62% of donations in Canada. I'm interested in focusing on them because I think there's a large amount of untapped resource there. I think most people would give more if they had a larger incentive to give more, especially in these cases. I'm talking primarily about income, not even capital.
What opportunities do we have there? I looked at your briefs in relation to motivation. In essence, the incentive part that you suggested is that people don't look at that with an eye to a larger tax credit. I'm curious to know why they don't. I know a lot of people who give a lot of money and they all look at that exact thing. They plan it out on a year-to-year basis. They give it at the end of the fiscal year or at the end of December, and they do it based on the biggest advantage for them. That's why I don't necessarily think the stretch tax credit would be that good. I think it would manipulate giving and be inconsistent for charities.
But what ideas would you have on how we could get more money from those people—that 9%, so that instead of giving 62%, maybe they'd give 70% or 75%? How could we get more money out of those people?
Mr. Thomas.
5:25 p.m.
Federal and Ontario Director, Canadian Taxpayers Federation
We deal with a large number of taxpayers who are vitally interested in the tax system. They give us millions of dollars to come here and represent them to you. Tax filers, taxpayers, are frustrated by the taxation system.
5:25 p.m.
Conservative
Brian Jean Conservative Fort McMurray—Athabasca, AB
You're saying keeping it simpler would be better?