Good afternoon, Mr. Rajotte, and members of the committee. Thank you for allowing me to present to you today.
I'm appearing in my capacity as head of business development and director of philanthropic services at PearTree Financial.
Prior to my joining PearTree over three years ago, I enjoyed an almost 20-year career as a major gift fundraiser. I worked with grassroots organizations, such as the Community Arts Council of Greater Victoria, with leading research funders, such as the Heart and Stroke Foundation of Ontario, and with social service umbrella organizations, such as the United Way of Greater Toronto.
I've experienced first-hand the frustration of fundraisers with no new incentives to encourage major gift owners to give more on an annual basis, not after their death but now, when a charity needs its funding and a donor can experience the satisfaction of immediate funding that is meeting immediate need.
I've also experienced the frustration of donors feeling that the charitable sector has not developed innovative gifting formats that provide rational financial incentive for increased giving.
Flow-through share donations have become a proven philanthropic tool, widely used by Canadian charitable organizations. It's a Canadian innovation. The format provides benefit to the charitable sector and to the junior resource sector by combining two well-established tax incentives: flow-through shares and charitable donation credits.
Within the format, a donor who is in pledge to their charity of choice subscribes to a flow-through share issue, and in so doing accesses the tax benefits of these shares. Flow-through shares are issued by a junior exploration mining company that gives up the deductions incurred because they are conducting high-risk surface exploration activities.
Our donor clients tend not to have a history of purchasing flow-through shares. They do so within our format to donate them to their charity, which means we have created a new source of capital funding for the Canadian junior mining sector. The donor immediately donates their flow-through shares to their charity, and under our guidance, the charity immediately sells the shares to an institutional investor. The charity receives a gift equal to the donor's pledged amount, and issues a tax receipt equal to the cash that has been received by the arm's-length institutional investor at no net cost to the charity.
Our recommendation number one respectfully requests that the mineral exploration tax credit, known as METC, be made permanent in the income tax system. Currently, it's reviewed on an annual basis in each federal budget cycle. Mining is a strategic industry for Canada, and exploration, the research and development phase of mining, is its driving force. Flow-through shares and the METC significantly improve returns on high-risk investments, and therefore make it more likely for investors to back Canadian projects than to back comparable international ones. Without METC there would be a critical investment gap in the mining industry.
METC is also a very important element to the efficiency of flow-through share donations. Without the METC, the efficiency of the gifting format would be materially reduced.
The mining industry in Canada is currently facing a confidence issue, which makes it extremely challenging for juniors to raise money, an activity that's crucial to the industry's existence. Making the mineral exploration tax credit permanent would provide the industry with more confidence. In particular, it would enable them to move more effectively to plan financing for multi-year exploration programs.
Though it may be obvious that mining occurs in remote and rural areas of Canada, if the industry has a great sense of predictability for investors, it can provide a sense of stability in these remote communities. Ancillary companies, suppliers, and service providers surrounding the mining companies would benefit and provide peace of mind for the rural and northern-based Canadians who depend on mining exploration for growth, employment opportunities, and local trade. Mining spinoff boosts the Canadian economy as a whole, but it makes a significant difference in the day-to-day lives of people living in rural and northern regions.
Within our brief we've provided supportive letters from a mining company, a charity, and a major gift donor. One donor in particular has allowed us to bring forward to you knowledge that they have tripled, even quadrupled, their donation. It's the Taggart family of Ottawa. In fact, they're going to be recognized on Thursday night as outstanding corporate philanthropists by the Association of Fundraising Professionals.
As competition for charitable dollars increases and major gift donors are faced with donor fatigue and their own financial limitations, innovative gifting formats are in high demand. Transforming high-risk resource funding into philanthropic dollars meets and fulfills two government objectives.
In our second recommendation, we suggest that the government take on an exploration of the benefits and the no cost to the fiscal authority of the METC. Based on the findings of this evaluation, policy can be formulated that entrenches the METC as a net tax addition to expand economic activity at little cost to the fiscal authority.
Thank you.