Finance Committee on May 16th, 2022

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. MacDonald.

When I compare Bill C‑19 with Bill S‑216, my take-away is that the Department of Finance was concerned that certain provisions of Bill S‑216 could be abused, making it possible for resources to be used for a non-charitable purpose. That is problematic from an accountability standpoint. I'd like to hear your thoughts.

Do you think ill-intentioned people would be able to use charitable donations for non-charitable purposes?

The prescriptive nature of this legislation seems to be borrowed from the American law. Are we to understand that the American model is the best way to oversee a charitable partnership system?

[Bruce MacDonald]

The short answer is no. If we take a look at the U.S. system, we see that it's so different from what's here in Canada. There are fundamental issues. First, it doesn't really fit. Our system has been based on the common law premise that's more general than the U.S. Internal Revenue Code rules, which are more black and white. By importing one small section from the complex U.S. tax regime, we're mixing systems with unsatisfactory results.

The second challenge is that the U.S. system is incredibly prescriptive; even the current CRA guidance format allows the charity to figure out the best accountability instrument. Essentially what's happening is that this prescriptive approach takes out the context. It's trying to say that every charitable partnership needs to look the same, and that's not the way it works on the ground. We need a system that allows charities, non-qualified donees and, yes, CRA to work together to find good demonstrations of accountability.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. MacDonald.

My last question touches on a more sensitive topic.

In recent years, the government has faced controversy over its relationship with WE Charity.

Could the proposed amendments in any way open the door to a similar situation?

[Bruce MacDonald]

Well, I think that is an entirely unique and different situation. I think what's important to stress here—and I will say this over and over again—is that “different accountability” does not mean “less accountability”.

Organizations will still be required to demonstrate that the partnerships with non-qualified donees further the charitable purpose, documentation will still be required and financial accountability will still be in place.

Again, what we're asking is for this idea of context, reasonableness and the uniqueness of each relationship to be reflected in the system in which it operates.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Your answers are very clear and convincing, Mr. MacDonald.

Let's hope the amendments you're proposing are supported by the committee so they can make the new legislation better.

Am I out of time, Mr. Chair?

[The Chair, Liberal, Peter Fonseca]

We're at six minutes right now, MP Ste-Marie.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

All right.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Now we will hear from the NDP for questions.

MP Blaikie, you have six minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you.

Thanks to all our witnesses for appearing here today.

Mr. Strickland, I want to start first of all by congratulating the Canadian building trades for getting the building trades tax proposal over the finish line. I know that it's something the building trades have worked on with a lot of my NDP colleagues over the years and, of course, members from other parties as well. Congratulations to you on that.

I just wondered if you had any comment on the specific wording of the budget implementation act and on anything that you think needs to change in the wording. My impression is that it's a pretty decent representation of what you've asked for, but I wanted to give you a quick opportunity for some reflections there.

[Sean Strickland]

Thank you very much, MP Blaikie, and, indeed, thank you to your party for your support over the years.

Our view on this.... I've looked at some of the language. We haven't had a detailed examination of all the language. I'd be happy to take the opportunity to do that and provide you some more feedback through the committee chair.

Our view is that we have worked on this for such a long period of time and the need is quite immediate, so we would like to get something in place as soon as we possibly can. There's nothing in the wording that I reviewed—somewhat superficially— that would cause us any amount of concern.

I would say that it might be a little confusing for the trades worker, because the wording is “not less than 150 kilometres greater than the distance between” their lodgings, meaning the distance of work from their residence. It took me and the team a little while to try to figure out exactly what that meant, and we had to draw some maps.

When it comes to the income tax and Canadians filing their income tax, transparency and simplicity are always best. If we're having a hard time trying to interpret exactly what it means, I think there might be some room for clarity, with maybe some interpretation briefs related to that to help our workers.

Because, as I understand it, the implementation is effective—once this has passed—for this calendar year, so we're going to be asking our workers and all construction workers to start keeping their receipts so they can claim the tax deduction, and we want to make sure we're communicating to them clearly what the guidelines are.

I think there's some room for improvement around that, MP Blaikie.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

I want to go next to Mr. MacDonald.

I think you mentioned in your opening remarks that you did have some amendment language that you weren't going to read into the record, but I wonder if you might be able to provide that to the committee in writing after the meeting, just so it's part of our record of testimony as part of the study of the bill.

Also, if you wanted to, you could provide some quick remarks or perhaps a little note in your written follow-up on how you envision the accountability mechanisms working under your proposal, what exactly that would mean and how Canadians might expect that accountability will continue to be a part of the system despite allowing for some improved flexibility.

[Bruce MacDonald]

Absolutely. We would be happy to do so.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much. That's very much appreciated.

I want to go next to Mr. Cochrane.

You said that you had hoped for the opportunity to talk a bit about some of the housing measures that are contained in the budget implementation act. I wanted to make sure that you got some time to do that.

[Dr. D.T. Cochrane]

Yes. Thank you very much for giving us the opportunity to comment on that.

Our main concerns with all of the speculative housing measures have to do with how that is targeted.

We think that taking steps towards reducing the treatment of housing as an asset first and a home second are very welcome. We just don't think there's any reason to limit who is excluded from that activity to non-Canadians.

To us, we think it risks fostering xenophobic attitudes towards immigrants and other people who are perceived as being non-Canadians. Frankly, most of the speculative activity that is affecting housing prices is going to be coming from within Canada, so we think that all measures that are addressed at speculation should not be limited in that way.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

I'm looking to the chair for a little guidance on time.

[The Chair, Liberal, Peter Fonseca]

You have about a minute.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Okay. Great.

I want to ask you as well about some of the other measures that were announced in the budget to try to increase the amount of money that Canadians can save to acquire a home, for instance. I'm wondering how you think those types of measures that might help Canadians save up for a down payment, for instance, cash out in the current market if there isn't any action taken to try to reduce the force of speculation in driving up housing prices.

I'll defer to you as the expert, but it seems to me that if you put more money in the hands of Canadians right now to buy a house, that just ends up increasing the max bid. We're not breaking the pattern that's been pushing up housing prices. We're just allowing Canadians to maybe get a little bit of a competitive edge at a moment in time in a particular bid, but we're not addressing the kind of structural problems with the housing market.

[Dr. D.T. Cochrane]

Yes. They absolutely risk being fuel on the fire. I get the instinct behind these measures. My concern is that they're rooted in an impulse to always try to adhere to the market logic and let the market work the way it wants to work. But where housing is at, we need to look to the side of how the market is pricing these things.

While measures like encouraging savings to be able to buy a house will benefit some individuals and help them access the housing market, you're absolutely correct that they will just help propel housing prices up further. Speculators, who already have access to plenty of capital and aren't being restricted as much as they need to be, are going to anticipate that and already be piling in.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

Members and witnesses, that's the end of our first round.

We will start our second round with MP Lawrence from the Conservatives.

You're up for five minutes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you, Chair.

My questions will focus around direction and control. I'll be talking to Mr. MacDonald for most of my questions.

First of all, Mr. MacDonald, I think some of the concerns with moving towards more of an accountability and transparency base, as opposed a micromanagement base, might come from the government and the concern that if in fact charities gift to non-qualified donees, somehow this money might go to a non-charitable purpose, or even, in a worst-case scenario, to illicit purposes. But I know, because I've reviewed Bill S-216 and I've looked at the current legislation, that this won't happen.

Perhaps you could share with the committee the types of challenges a charity would face, both reputational and legal risk, if in fact the amended legislation went through and one of the non-profit organizations or non-qualified organizations did something outside the charitable purposes.

[Bruce MacDonald]

Yes. It's an interesting question, because, again, it goes back to this idea that having different accountability is less accountability. That is simply not true.

What we're looking to see is saying that organizations who want to work with non-qualified donees must do so in furtherance of their charitable purpose. Both Bill S-216 and the amendments we're providing to the BIA create a system where that takes place. There's not less documentation. There's not less accountability. There are appropriate accountability measures that speak to the unique partnership and relationship set up with the non-qualified donee. CRA would play its role in ensuring that those are observed.

Charities want to do their good work in furtherance of their charitable purpose. They're not looking to step outside. What we're suggesting is a system that preserves the ability to have innovative programming and to also have trust and confidence that the accountability measures are in place.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much.

Maybe you could also talk a little bit about the unintended or negative consequences on marginalized and racialized and vulnerable groups if this legislation goes through without any amendments. I've certainly seen, underneath the direction and control, given the troubled history between the Canadian government and indigenous peoples, the challenge, because basically, direction and control means a Canadian charity must take over an indigenous non-profit.

Don't you think, and disagree if you feel that way, that with the prescriptive nature, we're going to repeat that error over again if we don't amend this legislation?

[Bruce MacDonald]

We won't just repeat it but, in fact, enhance it, because the direction control provisions remain with the budget implementation act. Own activities are not being changed in the Income Tax Act. That's preserved. In addition, there's this whole series of prescriptive measures.

We are working in a different world, which requires charities to work with partners that are non-charities. As such, we need a system that allows this to happen, because in a sense, many of those organizations are the experts on the ground providing the services and working with their charitable partner. It's critically important that the ability to do so is preserved.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Perfect. Thank you, Mr. Chair.

I'll use the last minute for you to explain directed gifting. The reason this exists is to prohibit a donor from directing a gift to help them, specifically. In this circumstance, it could have real challenges when a charity wants to focus particular funds toward Ukraine, perhaps, or something like that. They could be technically offside.

I know you'll do it much more eloquently than I would, so could you elaborate on that, Mr. MacDonald?