Finance Committee on Feb. 9th, 2012

[Malcolm Burrows]

I think social finance impact investing represents a really important new trend and an opportunity for the sector. I personally believe it's going to take many years to develop. There have always been elements within society. For example, co-ops are a form of social finance. They're essentially businesses with a social purpose. So the big question is figuring out how much it can grow, how much we need to provide extra incentives, because at this time there's a lot of excitement without a lot of activity right now. So we're in that gap.

[Adam Aptowitzer]

If I may add, I've spent some time thinking about this issue as well. First of all, it's very attractive to say that a charity will be able to engage in business activities in order to either accomplish its objectives or to increase its revenue. But losses and funding and what happens in those circumstances are part of the problem—and this may not be limited just to charities. Of course a charity with registered charity status can keep giving out, can effectively subsidize a losing business with charitable donation tax credits.

The other problem is from a trust law and perhaps a confidence perspective. How confident do donors have to be, and what is the impact going to be on the donors when donations are given to these charities, which are then maybe lost in business?

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

It's a complicated issue to give a granular opinion on in such a short time, but would you recommend to the committee that we study the issue of impact investing and potential public policy to catalyze impact investing as part of this study? Would you think it's meritorious as a proposal broadly for us to study it as a committee?

[Adam Aptowitzer]

I think the sector would be grateful if you would. As Mr. Burrows was saying, it's a very important topic in the sector right now, and if some guidance came from the committee and there were the opportunity to give submissions, I think most people would be very happy with that.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Brison.

We'll go to Mr. Van Kesteren, please.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Chair.

Thank you all for appearing before us.

Mr. Waters, the Prime Minister stated in his last throne speech that when we balance the budget he will allow split income to occur. In light of your comments, and you spoke about the fact that we have wage discrepancies within families, is that going to be an improvement in our charitable giving? Will we see a possibility that charitable giving will increase with that kind of a tax policy?

[John Waters]

I'm sorry, I was having trouble hearing you.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I'm sorry.

The Prime Minister stated in his last throne speech that the intent to balance the budget will result in income-splitting for couples. In light of your comments, will that improve charitable giving?

[John Waters]

To some degree we have that already in the tax system with the ability to combine your credits with your spouse, and that tax credit could be taken by either spouse. Typically it would be the spouse who is paying the higher tax bill, although in a lot of cases it won't matter. If one spouse, for instance, is not taxable and the other is, then from a tax perspective it would be the person paying the tax.

In terms of being able to allocate the income, to split income between the two spouses in the couple, I don't know if that would necessarily impact the tax benefits of charitable donations. I say that because our system, at least above the $200, provides the same level of tax credit or tax benefit for any taxpayer, regardless of what income level they are in.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

That's fine, okay. So you haven't done any studies in that regard.

Mr. Thomas, you've said we have steadily reduced taxes. In light of what Mr. Alexander said just a few moments ago, that the lowering of corporate taxes should have a positive effect on contributions by corporations.... We've lowered taxes and we've made that a priority. We've said too that we wouldn't grow the economy by.... We'll do it by keeping taxes low and finding other ways to reduce...for instance, by government spending.

Do you believe we'll have the same effect on charitable giving that Mr. Alexander believes corporate lower taxes will have on charitable giving?

[Gregory Thomas]

There's no question that lower taxes will have a salutary effect on charitable giving. It already has. There's no question that the tax regime in Canada, the tax reductions that have been implemented already, have done a tremendous amount to support employment and the ability of Canadians and Canadian companies to support charity, especially when you compare it with other countries in the G-7 and with the United States. We've done a lot better weathering the storm.

I return to our message of simplicity, though. As we've seen with the political tax credit, when you have a simple pitch that everyone understands it makes it easy for people to have the discussion about giving to charity: if we give x number of dollars, we get x off our tax. That's not something that's not widely understood. It's too complicated.

[The Chair, Conservative, James Rajotte]

Okay.

Mr. Van Kesteren, you have Mr. Burrows, Madam Alepin, and Mr. Alexander, who all want to comment. But it's your time, it's up to you. Do you want to—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I had another question I wanted to ask Mr. Aptowitzer.

Does somebody want to make a quick comment? No?

[The Chair, Conservative, James Rajotte]

Let's have a brief response from each of you on Mr. Van Kesteren's question.

[Craig Alexander]

If I could go back to the first question about income-splitting, there are two offsetting effects. If the person is making donations in order to minimize his tax payments, reducing the tax paid by the one would actually be creating a disincentive. On the other hand, real household after-tax income would increase, and as a consequence it would create more income that would be available for donations. My intuition is that the second one would win out.

[The Chair, Conservative, James Rajotte]

Mr. Burrows, does that address your point, then?

[Malcolm Burrows]

No.

[The Chair, Conservative, James Rajotte]

I'm just trying to manage time here.

[Malcolm Burrows]

No, I'll let it go. It's all right.

[The Chair, Conservative, James Rajotte]

You're okay? Okay.

Ms. Alepin, very briefly, please.

[Brigitte Alepin]

We are talking about tax relief for businesses, more specifically lowering their tax rate. But, in those cases where there have been tax cuts, economic theories do not tell us clearly whether it is the shareholders, the employees or the clients who benefit. I have yet to see a study that establishes a direct link between lower tax rates and corporate giving. I think that for government to be truly efficient, we have to make sure that corporations pay their taxes and that the federal government has the money it needs to act.

[The Chair, Conservative, James Rajotte]

All right. Thank you.

Mr. Van Kesteren, please keep it brief.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I have a quick comment to Mr. Burrows.

I guess we have altered the saying “Nothing is sure but death and taxes” in this country when we can eliminate taxes through death.

[Malcolm Burrows]

That's correct, yes.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

On that note, Monsieur Mai, s'il vous plaît.