Finance Committee on Oct. 3rd, 2012

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Okay.

Mr. Houston, you mentioned that we should lift the prohibition on limited partnerships as investments. Now, the theory behind limiting charities is to ensure that charities are concerned with charitable purposes, and achieving those objectives, and not concerning themselves with investments and business-type arrangements, so that their investments should be in something solid and hard, that can't change, that they don't have to think about.

Wouldn't moving in the direction you're suggesting pose some unique problems for charities and for those who give with the expectation that they will only be investing in very safe and sound investments while they're concentrating on the things that they're supposed to do?

[J. Alexander Houston]

I have two responses to that. I don't think that investing in a limited partnership asset is fundamentally different from investing in a segregated investment pool. It's just another asset class.

My understanding of the prohibition on one level is a legalistic one having to do with the definition of “partnership law”, which says if you're engaged in a partnership structure you're carrying on a business. Foundations aren't allowed to carry on businesses as charities, so we're not allowed to invest in investment, in that kind of an investment structure. That's probably a question for lawyers; I think lawyers could argue about that. But my experience with those kinds of structures is that if you're a limited partner and investor in a limited partnership structure you are not carrying on a business, you don't have direction or control over that undertaking, you're simply an investor, the same way you would be in a large publicly traded company. So that's sort of the legal answer.

That second answer has to do with the fact that a lot of innovative new structures in the charitable world take the form of limited partnerships. So if a foundation wants to invest in something that's forward-looking, that's trying to do something in the world of social finance, the vehicle is often a limited partnership.

So I think there's an answer that has to do with law and range of asset classes and there's an answer having to do with enabling innovative structures within the charitable sector that will make more social finance feasible for investors.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Thank you.

Thank you, Chair.

[The Chair, Conservative, James Rajotte]

Thank you.

I have Mr. Van Kesteren on the list.

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

Very quickly, Mr. Hallward, you mentioned that the rate of giving is decreasing. Have there been any studies of the relationship of that with taxes?

I think we're being a little hard on Canadians in general, because many of the things we're talking about, many of the very things that we've agreed to support through charities, have been taken over by government. So in essence, aren't Canadians, given to charitable donations...? I mean, they've been usurped to some degree.

As the second part of the question—maybe Mr. Carmichael might want to just touch on this—have there been any studies done on countries that have a high tax rate to see whether or not their giving is less than a country that has a lower tax rate? Have we hit a point where we've taken so much from people in taxes that there just might not be that much room left for charitable giving?

To wrap that up, should we, as a government, be thinking about continuing to lower our taxes so that things like charitable giving will start to increase again?

[John Hallward]

I think, particularly if you look to the United States, and I don't think Canada is that different, it's about values. If you actually look at donations by the political parties that people support—I'm not saying anything that's not known—the more conservative people are in their politics, both sides of the border, the more they donate.

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

But they have a lower tax rate than we do.

[John Hallward]

No, in Canada as well. For those who claim to be Conservatives versus Liberals versus Democrats, and it's the same in the United States between the Democrats and Republicans, there is a direct relationship between their political alignment and their values of the role of government.

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

I don't mean to interrupt, but just to make it plain, what you're saying, in essence, is that if you're on the left side of the spectrum, then you expect governments to look after those things. And if you're on the right side, you say, listen, don't tell me what to do; I want to put my money in this.

So that's part of the problem as well too.

[John Hallward]

That's well documented on both sides of the border. That's exactly right, factually.

[Prof. Calum Carmichael]

With respect to studies as to whether the tax take would actually reduce inclinations to give, I'm not aware of those studies, but would look at the survey on giving, volunteering, and participating that indicates that richer people give a smaller percentage of their income than poorer people. So if you want to increase givings, maybe you should actually tax more.

But I don't want to be flippant.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

I want to thank our witnesses for being here today. Thank you for your presentations and responding to our questions.

If you have anything further—I know some of the members requested something further—please submit it to the clerk and we'll ensure all members get it.

Thank you so much for being here.

Thank you, colleagues.

The meeting is adjourned.