Finance Committee on Oct. 3rd, 2012

[John Hallward]

Primarily that's the goal we see within our initiative, within GIV3. It is not to unfairly penalize the government in terms of costs, but instead to encourage and incent.

In our experience, what happens is that at the higher-income levels people stop at an absolute level. They may have a huge salary and give $1,000, look around and ask who else in their neighbourhood gave $1,000, and go, “Great; then I'm done”—not realizing that $1,000 may be a quarter of 1% of their salary.

What we feel we need to do is in a sense define a new norm. I've seen this in my fundraising experiences. People don't like to be taken advantage of and give far more than anybody else, but neither do they want to under-give. If everybody in the neighbourhood is giving $100 and you only give $25, then somehow you feel cheap and not keeping up with the Joneses.

Part of what needs to be done...and we see this in various religious institutions and groups. They define a certain level, and their members live to that level.

[A voice]

Like tithing.

[John Hallward]

Like tithing.

So under the same tax system, if that group can do it, then what's missing with this group? A lot of it is defining, leadership, mentoring, education, and setting the social norm. And that's what we want to do.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Jean.

We'll go to Mr. Brison, please.

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

Thank you very much to each of you for joining us today.

Some of you have referenced the proposal to eliminate the capital gains tax on gifts of real estate or shares in private companies. Would each of you opine—just yes or no—on if you think we should go in that direction? Some of you have not given us your views on it, so I'd be interested in your thoughts.

[The Chair, Conservative, James Rajotte]

We'll start with Mr. Broder.

[Peter Broder]

Our view is that diversification of tax-incentivized vehicles is a good thing because, given the ups and downs of the economy, to give donors different options is a good thing.

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

In addition to...[Inaudible—Editor]

[Prof. Calum Carmichael]

I have not looked at that directly, but my concern is primarily not how much is given, although that is important, but where it is given. Typically, large donors are inclined to give to education or to cultural organizations. Here's my question to the government: is that where you want your tax dollars to go? It's not simply a matter of quantity; it's venue, I think.

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

Yes, I think so.

[John Hallward]

I think our point of view is that anything that helps to encourage greater giving needs to be looked at. Obviously, it has a cost and benefit to it. Our point is that it can't be just tax policy. That alone won't be the difference.

[J. Alexander Houston]

Our view is that this is something worth looking at. It's an untapped asset that could go into a variety of charitable activities, so we support looking at it. I think the issues that have been raised around it have been issues of valuation. Various submissions have been made about meeting that concern, so it seems to us that it's an opportunity worth a much closer look than it has had so far.

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

Yes. The changes to the elimination of capital gains tax on gifts of publicly listed securities certainly have yielded a significant increase.

You're speaking of the cost of the measure. The Department of Finance refers to tax expenditures when they're referring to this sort of thing. It's based on the assumption that the disposition of the shares would occur in any case, that they would occur even without the favourable tax measure or the changes in the taxes.

In some ways, that's a specious assumption, because ultimately it may not have occurred. The transaction may not have occurred without it, so in fact I think they're assigning a cost to this that in fact may not be legitimate.

I think, Mr. Hallward, you said that it's not just tax changes. In addition to that, could the government be involved more in the promotion and encouragement of more giving through a national program of advertising and support? Is encouraging more giving something that the government ought to do more of? Are there examples of other jurisdictions where that is occurring?

[John Hallward]

I'm not sure exactly where the responsibility of the government stops and starts, but take something like ParticipAction, which has its own financing. Then the money itself is managed by a board and a team. The Own the Podium program is another one where money is assigned and then that team manages it and executes it as best as possible. There has to be accountability for sure, etc.

So yes, that's our view: that by defining, encouraging, and rewarding, for youth, for seniors, and for new citizens coming to Canada by just raising expectations, then a rising tide floats all ships. We think there's very good return on the value. For a program of $5 million, with partnerships from the private sector, even if we fail miserably and only get 10% of our goal, that's $200 million against $5 million spent. It's an incredible ROI.

[The Chair, Conservative, James Rajotte]

You have one minute left.

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

Mr. Carmichael, you're saying that the government ought to identify priorities and then create the incentives based on that. You referenced the U.K. as having done that, I believe, or...?

[Prof. Calum Carmichael]

It was one of the countries.

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

It was one of the countries. Is there a risk that government, in prioritizing to that extent, can sort of pick...? There's always that question of government picking winners or losers or potentially...government tends to be better at picking losers, generally, on these things. But is there a risk of government actually picking the wrong priorities, and wouldn't private donors potentially be better at that?

[The Chair, Conservative, James Rajotte]

A brief response, please.

[Prof. Calum Carmichael]

I see that as a risk in any budget exercise.

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

Thank you.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Thank you, Mr. Brison.

Mrs. McLeod, go ahead please.

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

Thank you, Mr. Chair.

I'd like to start by directing my questions to Mr. Houston.

Towards the end of your brief, you talked about approaches that Revenue Canada could take. You did reference that you found the new guidelines helpful, but that we need to go a number of steps further.

Can you talk about how you anticipate it would help? Would we actually not be just giving...? It sounds like you're putting charities into private business almost, and if they're gaining advantages, really what you're doing is creating a non-competitive situation.

So I was intrigued, but I certainly want to understand better the pros and cons behind your thoughts.

[J. Alexander Houston]

The proposal comes from the recognition that an enormous amount of charitable capital is not deployed in support of charitable activity. I'm providing that from an endowment foundation perspective, where the money essentially dribbles out every year in small increments and the large amount of money that sits in capital in those foundations is not employed towards the mission of those organizations.

In much of the sector over the last five years, the conversation has been is there some way in which we could enable the deployment of charitable capital more directly towards charitable missions? How would we go about doing that and what are the enabling steps that we could take to make that capital work more directly towards the kind of charitable purposes the organization is set out to support?

I think we're getting there slowly. There's an enormous interest now in much of the foundation and endowment sector in pursuing that idea a little more muscularly and imaginatively, and the Canadian Task Force on Social Finance was very influential in that regard.

The challenges start to come in as foundations and other funders look at the possibilities of how they would make those sorts of investments. The ability to do that is severely restricted by the kinds of corporate and legal structures that they're permitted to support and the ones that they aren't. So the suggestion we're making is to be more flexible on the types of structures and tie the investment to the charitable purpose that the investment is designed to support.

I think with those intentions and some regard to the nature of the investment, the effect could be to more readily deploy a very large amount of money, currently sitting largely idle, in support of the larger charitable sector.

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

Could you give me one or two examples of how you would see this working?