Finance Committee on May 8th, 2012

[Mark Blumberg]

Actually, just go on your computer. You go to GuideStar. It takes five minutes, and you can pick out any foundations you want and read their tax returns, which are much more extensive than what Canadian charities have to file, and you'd be able to find out that information.

I think the political thing is a little bit of a red herring. Quite frankly, I'm more worried about $20 million going to a terrorist organization in the Middle East than I am about some Americans who care about the environment in Canada and supporting stuff here. After all, if you're in Buffalo and something happens in Fort Erie, it affects you. I think these are our neighbours. They're not foreigners; they're our neighbours.

[Mark Adler, Conservative, York Centre, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Adler.

We'll go to Mr. Thibeault, please.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you, Chair.

First off, I'd like to thank each of you for being here, but also for all the great work that you do each and every day. Prior to being elected, 15 years of my life was dedicated to the not-for-profit sector. I was the executive director of the United Way and I worked for the Diabetes Association for a while, so I know some of the ins and outs and some of the things you face each and every day.

I recall many times sitting in front of my computer and pulling my hair out at some of the regulations that are in place. You're a charity trying to do the great work that you can do for the people that you're trying to serve within your community.

We're talking about the tax incentive piece, and yes, I think if you were a good fundraiser, you would look at calling Mr. Smith or Mrs. Smith, who last year gave a thousand dollars, and asking them to increase their donation this year because you need more money this year—there have been more closures of programs, or whatever is happening out there, and you need more funding. As a good fundraiser, you figure out why Mr. or Mrs. Smith would give that amount of money. Then you would put the phone call in or you would go and have that face-to-face meeting.

The one thing I think we never did was say that this was a great way to give, that you get your tax money back at the end of the day. You pull on the heartstrings. You talk about the importance of your charity and you make sure this person wants to give. I think those are the important things that charities recognize.

One of the things that I have always found difficult is that while we're evolving as charities—looking at databases, how can we be better at what we do—it seemed that CRA never really modernized. Ms. Hewitt, you spoke to it, I believe, or at least your report talked about even social enterprise. So many charitable organizations out there or not-for-profits are looking at social enterprise as another way of finding a way to raise funds for the programs they're offering.

Is that something we should be looking at, seeing the CRA modernize a lot of their rules and regulations to ensure that charities—not that they can have a free ride—can move forward in the things that charities see as ways to move forward and modernize?

Ms. Hewitt, I'll hand that over to you.

[Allyson Hewitt]

Thank you very much.

Yes, I would absolutely like to support that. When we look at what's happening for the three main sources of support for charities, you'll see government grants and donations are generally declining or, in some cases if we're lucky, staying the same.

Social enterprise, the revenue that not-for-profits and charities are able to generate, is the only source of income that's rising, and we need to create an enabling environment so that we can stop dependencies on grants and donations. I think they're critical. As a Canadian, I'm proud to support charities, I'm proud to work for a charity, but I do think it's really important to think about.

Let's catch up with the rest of the world on this, and then allow social enterprise in charities and not-for-profits, in guidelines that are very clear and are supported.

[Glenn Thibeault, NDP, Sudbury, ON]

Excellent.

Would anyone else have any comments on social enterprise?

[Michael Cloutier]

I agree. I think it's important that CRA recognize the net contribution and the ability—the funds we're able to use in order to do mission delivery, so it's important that it's recognized as such.

[Glenn Thibeault, NDP, Sudbury, ON]

Yes. Never straying from mission delivery I think is an important piece. All of a sudden, you can't have Charity A opening up a Tim Hortons. Right? That's not really social enterprise. If you're adapting it and changing it to teach someone some life skills, for example, and if it's a coffee shop, those types of things would fit, so I think those are—

[Mark Blumberg]

Charities can run Tim Hortons if they want to. If they do it all volunteer, that could be okay. Also, if they're going to do it, for example, in a hospital, it could be a related business.

There are avenues for charities—quite a few, in fact, for them to do business activities.

[Glenn Thibeault, NDP, Sudbury, ON]

I chose the wrong coffee shop. Thanks for clarifying, though. I appreciate that.

I have 45 seconds.

Mr. Blumberg, there are precedents out there in what's being done in other countries that we could really look at and R and D it. When I say R and D, it's “rip-off and duplicate” rather than “research and development”. Would that be fair?

[Mark Blumberg]

We can always learn from the examples of other countries, but I would point out that in some other countries, they have more liberal rules for business activities by Canadian charities, but they also tax the activities.

I think you could have a very broad system where you allow charities to do anything, if it's taxable. In fact, that's what we have here in Canada. You can just set up a little subsidiary for-profit entity and it could run any business it wanted.

Actually, we are good at one thing in Canada, and that's complaining. We do a very good job of that. I think we have tons of social enterprises and they do fantastic work. We can have some changes to the rules. The new community economic development guidelines are going to come from CRA soon, which will provide more flexibility. But I really think we need a can-do attitude.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Thibeault.

Thank you for informing me of how you pulled your hair out before you came to politics. I didn't know that.

[Glenn Thibeault, NDP, Sudbury, ON]

Yes. There's a reason why I'm this way; otherwise, I might have had long flowing locks.

[The Chair, Conservative, James Rajotte]

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

[Dave Van Kesteren, Chatham-Kent—Essex, CPC]

Thank you, Mr. Chair.

Thank you, everyone, for coming here today.

Ms. Hewitt, you have to explain this to me. I'm listening to what you're saying, and I'm hearing some really neat things, but a social entrepreneur: I looked up the definition of an entrepreneur; it's an “owner or manager of a business who makes money through risk and initiative”.

How do you square that round hole?

[Allyson Hewitt]

There is a huge movement to social entrepreneurs, and instead of focusing on a single bottom line of profit, they're focused on a double bottom line, to create social impact at the same time. Just to blow your mind a bit more, there are also triple-bottom-line folks, who are looking to make a profit, have social impact, and impact the environment in a positive way.

This is a huge movement. If you think about someone like Muhammad Yunus, who started microfinance, he is a classic social entrepreneur. In fact, here in Toronto I've worked with about 800 of those folks over the past year alone.

[Dave Van Kesteren]

Okay. In another committee, in foreign affairs, we're looking at how private enterprise can work alongside a charitable organization and be effective. This is the sort of thing you're advocating, and that's very good. I would concur with it.

Mr. Pegg, I've listened to what you said about receipts for foods from companies that package food. Couldn't it be argued that if there's a problem in housing, you'd want to do the same thing for building supply stores, to give them a charitable receipt if they do that? Would you take it even further, maybe to clothes, if we...? Isn't there a slippery slope? You'd say automobile dealers could then start to fix cars for people who can't afford….

How do you govern that?

[Shawn Pegg]

I think Mr. Blumberg is probably more of an expert on the other kinds of things that you could throw into the mix.

What I would argue about food is that currently food can be considered by the tax system as a charitable gift. So a food bank can give—

[Dave Van Kesteren]

Why not give a house? Why not give a home if somebody doesn't have a home, or clothes?

[Shawn Pegg]

There are ways to do that. You can value certain gifts and you can give a charitable tax receipt, and a donor can use that charitable tax receipt to reduce their taxes.

[Dave Van Kesteren]

So you want the same provision for a company that packages food?

[Shawn Pegg]

Right. Specifically with food, the problem is that there's no difference in donating food to a food bank, claiming it as a charitable gift, or just writing it off. It's a wash, basically. There is leeway with various types of goods and various types of gifts. We are just focusing very specifically on food. We think it fits within the current philosophy of the way charities are treated in Canada, so I don't think it's that far off the mark.

[Dave Van Kesteren]

I want to direct the next question to Madam Bahen and Mr. Blumberg.

You are taking the obvious groups that are abusing the system. What about an organization that would, for instance, create a magazine, say for firefighters, and then pass them out to children? They might produce 100 of these things and ask people to donate to that. Would that be classified the same?

You are saying no—

[Mark Blumberg]

You would have to know the details. If a charity is, for example, buying magazines for $3 and selling them for $3.25, and it costs the company that is producing them 10¢ to produce, then—

[Dave Van Kesteren]

Well, I'm talking about a person or a group that produces a magazine.