Finance Committee on Feb. 9th, 2012

[Adam Aptowitzer]

It's difficult, and I can tell you that since writing my paper I've had some talks with some of the provinces that are interested in what I have to say about it, so it might be a little easier than one might imagine.

The other factor, which I mention in my paper and which is somewhat contentious, is the fact that if the provinces have the power to determine what a charity is, which is the constitutional matter, then the Income Tax Act could be amended to say anything regulated or registered by this council of the provinces and the federal government together is deemed to be a charity under the Income Tax Act. That would mean that if a province is not participating in that council, then the charities in that province could not get registered under the federal Income Tax Act. That's not to say it's a hammer, but it is a strong incentive for the provinces to participate.

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

That's a good point.

I also wanted to ask you this. I think your idea on the legislative.... Putting in the definition of charity and so on is important. Could you explain to me why that hasn't happened? It seems to make common sense.

[The Chair, Conservative, James Rajotte]

Just a brief response, please.

[Adam Aptowitzer]

Fundamentally, the answer is in Hansard of the 1930s. It was too politically sensitive a topic, so they left it to be decided by common law. Unfortunately, over the past 30-odd years, the evolution of common law in the area has stopped. So we are left with law that is quite old and is not evolving to meet our definition.

If I might add just one more thing, the U.K. had a similar issue—we've been relying on their case law—and they have actually legislated the definition.

So we're stuck.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Chisholm.

Ms. McLeod, please.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Mr. Chair.

I'd like to also thank all of the presenters. I think as each session goes on we become a little more enlightened. It has been a very interesting study and I think a very important one.

First of all, I would like to perhaps ask Mr. Waters.... We've talked a lot about individual donations, but you alluded to some very generous giving by your company, so can we talk a little bit in terms of corporations? Have you done any thinking there? We know that some of the balance sheets are in good positions. Is there anything that we could or should be doing in that area?

[John Waters]

Thank you for the question, Mrs. McLeod.

I hadn't specifically thought about that. I think my focus for today's discussion was more on individuals and on encouraging individual donations.

As you are probably aware, the incentives that exist for corporations are very similar to those that are available to individuals in terms of the tax savings that can be achieved and, in particular, I guess, through the more recent incentives of the donating of publicly traded securities, for instance.

It's not something that I've particularly addressed or thought about in preparing for today. It's perhaps something that I could get back to you on. I could give that some more thought in terms of the corporate response, or some incentives from the corporate perspective as well, if you like.

[The Chair, Conservative, James Rajotte]

Mr. Aptowitzer.

[Adam Aptowitzer]

Yes, if I may, part of the issue with corporations giving, especially publicly listed corporations, is a fundamental philosophical discussion about how appropriate it is for corporations to be giving away revenue that would otherwise go to the shareholders. It might be that no matter what tax incentives you put in place, you're not going to be able to overcome that philosophical discussion as to what right they have to distribute money, when in fact it could go to the shareholders and back to the charity.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

It looks like in many cases, though, that there has become what is a norm or an accepted amount with corporations among the shareholders, because certainly we do see some pretty generous support from our corporations.

Does anyone else have any comments on that?

[The Chair, Conservative, James Rajotte]

Mr. Alexander.

[Craig Alexander]

Yes, I think corporations actually have a very strong incentive to donate to charities. You can see that from the donations that are already given under.... Basically, it falls under the agenda of corporate and social responsibility.

I would suggest that things like the reductions in the corporate tax rates that we've had in the past are actually supportive of increasing charitable giving—indirectly—because what it does is that it actually creates an incentive for companies to invest more in their corporate and social responsibilities.

Number one, I think there's a lot of pressure and there are a lot of expectations by Canadians that corporations will give back through corporate and social responsibility. I think the overall mix of the tax policy in Canada plays its part in providing financial capacity.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Good.

I certainly appreciate, Mr. Aptowitzer, your definition around charity. We also heard earlier that we need to do a better job at defining gifts. I think that was something else that we heard: that there are often challenges with what is the appropriate definition of gifts.

At this point, we've heard again about the stretch tax credit. I think we almost have a split in terms of the appropriateness of that particular measure.

I think, Mr. Thomas, that you wouldn't be in favour of it, and perhaps Mr. Waters....

For the people who don't believe that a stretch tax credit is a good idea, I wonder if you could share your thinking. Alternatively, we could let the debate go back and forth a bit.

[The Chair, Conservative, James Rajotte]

Could we have just a brief response from each, please?

Mr. Thomas, you're first.

[Gregory Thomas]

Recently we've done some work on employment insurance. There's a study out from the Mowat Centre for Policy Innovation graduate school, at the University of Toronto. They make the point that the most popular things the Government of Canada does are things from which all Canadians benefit equally. If you take maternity benefits, it doesn't matter where you live or what your postal code is or what province you're in or what the rate of unemployment is in your region, as long as you just became a parent you receive the same benefits.

Old age security--and I hate to touch the third rail there--is actually pretty popular, as is the Canada Pension Plan, because they're pretty straightforward programs. As Canadians, we all follow the same rules; we all put in the same amount of money, and we all get the same benefits.

You've all done political fundraising. You say, “Hey, buy this ticket to the dinner. It's $100, and you get $75 off your taxes.” That makes it super-simple. Having a simple charitable thing that you can explain to someone in a heartbeat would be great.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Waters, go ahead just briefly, as we are over our time here.

[John Waters]

We didn't comment on that directly. I'm certainly aware of the stretched tax credit. We were proposing, I guess, a simpler measure in terms of eliminating the discrepancy between $200 and amounts above that. I'm certainly a proponent of anything that would increase the amount of charitable giving going on. Certainly the stretch tax credit would do that, I believe. Our methodology, our argument, was more based on just a very simple measure to eliminate discrepancies above and beyond $200. I think it's something very palatable to the population.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

Thanks to each of you for appearing before us today.

The first question is on the proposal to eliminate capital gains on gifts of private company shares and real estate.

Mr. Waters, members of this committee have been dealing with Donald K. Johnson for about 12 years on the issue of eliminating capital gains tax on gifts of initially publicly listed securities and cutting it when our government started that process and reduced it. We believe that was the right thing to do. I'd appreciate your view on eliminating capital gains tax, giving an exemption for gifts of private companies and land.

[John Waters]

Mr. Johnson is certainly affiliated with our bank. The comments he was making in that regard were from his personal perspective. That said, again I'm very much a proponent of anything that would seek to increase the amount of charitable giving happening right now in Canada. Certainly there has been very significant success with the other proposals that he put forward 10 or 12 years ago.

[Scott Brison, Liberal, Kings—Hants, NS]

In addition to a single rate, you would advocate the elimination of capital gains on those gifts as well?

[John Waters]

Yes. There are obviously some practical implications there, particularly around evaluation--

[Scott Brison, Liberal, Kings—Hants, NS]

Yes, evaluation and--

[John Waters]

I know he's suggested some ways of dealing with those practical implications, but I think that would need to be worked out.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you very much.

I'd like each of you to opine on some of the recommendations from the Canadian task force on social finance and the whole emergence of this type of approach to social finance. I believe the Royal Bank recently put a $25 million fund in place for this.

The task force has actually made some specific recommendations, including those regarding some tax reform measures around tax incentives: “to encourage private investors to provide lower-cost and patient capital that social enterprises need to maximize their social and environmental impact”. They've cited some examples in the U.S. with the new markets tax credit. I'd appreciate your views on this. It seems like an exciting development within the philanthropic sector, and particularly the accountability and the milestones and the almost traditional term-sheet disciplined approach to giving.

I'd really appreciate your views, because we as a committee have not yet heard from the round table, but I'd pre-emptively like to hear from you today.