Finance Committee on May 19th, 2022

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

Maybe I will just go back to you, Mr. Clayton, to talk a little bit more about where and how this strong culture of direction and control has interfered with charitable organizations partnering with other organizations here in Canada that are doing work with various cultural communities and indigenous organizations.

[John Clayton]

I'll state from the outset that my experience isn't so much here in Canada, but is largely from working internationally. Nonetheless, I do know from the work we did last week on Hill days, when we were in Ottawa meeting with many of you and your staff and talking about these issues, that direction and control, or own activities combined with direction and control, is an impediment to achieving equitable partnerships and relationships with local community groups and others that are supposed to be able to access funds. It contributes to the inaccessibility of the system or of funds that are available to be activated into local communities.

It was very interesting to hear this indigenous perspective of what's going on and the need for community programming. This impediment stands in the way of doing this. What is currently in the BIA would continue to be that continued impediment to being able to connect with indigenous communities.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

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

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

That concludes our first round, members. Our second round will begin with the Conservatives.

MP Lawrence, you have five minutes.

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

Thank you very much, Mr. Chair.

My questions will focus on own activities, direction and control, and charities.

Thank you, Mr. Clayton, for all pf the great work you do, and not just with Samaritan's Purse. I know that you've been active for many years on this front of direction and control.

I want to clarify one thing. I had a similar discussion with Bruce MacDonald. It's on the idea that the amendment you would be suggesting would not reduce the amount of accountability and transparency; in fact, it may actually increase it.

What you are attempting to do is put in a different type of accountability, one that puts substance over form, in that while the 800 words will require a lot of forms, a lot of lawyer fees and a lot of bureaucrats, it won't provide any greater substantive review or transparency or accountability.

Am I correct in suggesting that, Mr. Clayton?

[John Clayton]

Yes. The accountability frameworks that we are proposing would emerge from CRA guidance that would be developed according to the amendments that would be put into place.

Again, nobody wants less accountability. We need accountability that's appropriate with the mechanisms that we have to work with. I think there's a great opportunity before us. It's been 70 years since this specific legislation has been opened up and potentially amended with what's being proposed here. All of us are very concerned about not wanting to make this situation worse, and about making it something that's accessible for these funding mechanisms to work but that also protects the accountability we have for both tax-protected dollars and our donor constituencies, who want to see us with integrity in terms of the public trust.

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

Thank you very much.

It's one thing to talk about the legal semantics of direction and control and own activities, but I think it's important to also draw people's attention to the fact that this has real-world consequences. If in fact you're able to get through your amendments that will reduce the amount of burden and paperwork, and really the legal fiction that own activities has created, that will result in, to put it simply, more good being done. Girls who wouldn't be able to access education will get it, children who are hungry will get more food and indigenous and other unique populations will be given more opportunities if we are able to get your amendments through.

Is that your testimony? Is that a fair characterization?

[John Clayton]

Yes. You know, as I look back on my history working within the current system, I've lost count of the things that we've said “no” to because we couldn't establish these parameters of own activities or we couldn't negotiate an agreement with someone and offend them with telling them they're going to have to do this work on our behalf. This is a challenge that is faced by every charity that wants to work together in partnership with local entities. Making these amendments or making this....

The preferred path has always been to get rid of “own activities”. That doesn't seem to be on the table, so we're looking at a workaround. I think it is a viable workaround for us. It will open up greater opportunities for us to be able to engage in partnerships and to be able to say “yes” to things that we've currently had to say “no” to.

Alternately, when my friend Céline at Oxfam-Québec and I go together with our Oxfams around the world and try to work together, or when I'm working with Samaritan's Purse around the world, we have to deal with this strange aspect of trying to define our own activities when we're pooling our resources together in a combined disaster response.

It really is an impediment. We need to clear it away. We need the amendments to be made.

Thank you.

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

Mr. Clayton, you make a persuasive argument. I'm confident that members of the government are listening intently to your comments.

For the last 40 seconds or so, I'm going to switch to the Council of Canadian Innovators.

You've had some discussions about SR and ED review and a patent box. Anyone who's heard me speak knows that I believe the Canadian income tax code is due for a massive revision. In fact, I believe that right now it is not an advantage, and is in fact a disadvantage, for Canadian businesses. Many sections are archaic. Many of them are full of onerous regulations that don't make sense anymore in the modern world.

Would you be in favour of a more modern, effective and competitive Income Tax Act? That's for the Council of Canadian Innovators.

[Dana O'Born]

I definitely agree with that comment. It's quite archaic and very difficult to navigate, which is probably why people like us are employed. Our piece rings true on SR and ED as well, which is really what we're here to talk about today. Modernizing, streamlining and making systems more effective for companies I think will reduce regulatory burden, which is critical for growth in the innovation and data-driven economy.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

We're moving to the Liberals, with MP MacDonald for five minutes.

[Heath MacDonald, Liberal, Malpeque, PE]

Thanks, everyone, for coming. I'll echo the sentiments on Ed Fast. I appreciate his professionalism on this committee.

I want to go to the Council of Canadian Innovators.

You talk about Canadian innovation and creating an investment agency. You noted that frameworks and policies must be in place to ensure that it's successful and so forth.

We put forth in budget 2022 a $15-billion Canada growth fund to attract private sector investment and job creation. What's the best utilization and/or end process of this funding going forward? Will it help your industry?

[Dana O'Born]

I'll just jump in here.

I think we actually had this conversation at the pre-budget consultation about creating some of the structures and marketplace frameworks that will require funding from government to benefit Canadians.

As to the investment agency, we're still waiting for details, recognizing that Minister Freeland said that we'll see more of them in the fall economic statement. I think this generates a discussion about benefits and maximizing investments for Canadian companies versus what that looks like for attracting foreign direct investment to Canada. Sometimes those strategies end up actually hurting Canadian companies.

As we are talking about investment attraction, I'll use the very perfect example of Amazon. When it was doing its shopping internationally for HQ2, we had a number of Canadian companies step forward and say they didn't understand why governments—not just Canadian governments, but municipal and provincial as well—were raising the white flag to attract this type of investment, which is only going to eat up our talent, suck away our customers and make the marketplace less competitive for our companies.

Certainly we recognize that the investment agency is part of budget 2022 and look forward to the details, but it will be critical to make sure that the structure of what the terms and conditions look like for that investment to come into Canada...and to create the economic outputs that we require for prosperity, productivity, etc., will be really important.

[Heath MacDonald, Liberal, Malpeque, PE]

I believe 2019 was a record-setting year for investment in Canadian companies, at $6.2 billion, so that was good. There was a large venture capital investment in 2021 of approximately $450 million. Don't quote me on that number.

We have talked a lot at this committee, and maybe even previously with some of your predecessors who were here, about the IP strategy. I'm just wondering about foreign direct investment. Do we require an additional strategy on the FDI part of the investment cycle for new companies in Canada?

[Dana O'Born]

It's a really interesting question and I think it's even more relevant at this particular moment in time, because probably many of you are seeing market slumps, and the stock markets and a lot of tech companies that were valued at very high valuations only six months are below their IPO listing share price.

Sorry, my dog is trying to join the session today....

As we think about how we need to attract investment into Canada, it will also require some of those marketplace frameworks I talked about. One of your colleague's had questions today about getting IP strategies right, getting data and marketplace frameworks right, i.e., what happens to a foreign company when they come and set up a branch plant operation in Canada? How do we create those structures? Do we still provide SR and ED tax credits to them, and do we allow them to come in and harness data without paying tax on that data for commercial benefit?

I think the concept of FDI is a very broad one. It's investment, it's branch plant operations, it's economic activity that is done from outside of organizations. Simply and always our mandate and mission has been to level the playing field, because for so long Canadian companies have had a really hard time competing in their own jurisdiction.

[The Chair, Liberal, Peter Fonseca]

Thank you.

[Heath MacDonald, Liberal, Malpeque, PE]

Do I have much time, Chair?

[The Chair, Liberal, Peter Fonseca]

You have 15 seconds, MP MacDonald.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you, and say hello to your dog for us.

[Dana O'Born]

Thank you.

[The Chair, Liberal, Peter Fonseca]

What's your dog's name?

[Dana O'Born]

Her name is Honey.

[The Chair, Liberal, Peter Fonseca]

Now Honey will be in Hansard forever. Great.

[Dana O'Born]

Wonderful.