Public Accounts Committee on May 11th, 2023

[The Chair, Conservative, John Williamson]

I call the meeting to order.

Welcome to meeting number 63 of the House of Commons Standing Committee on Public Accounts.

Pursuant to Standing Order 108(2), the committee is meeting today to begin its study on the Pierre Elliott Trudeau Foundation.

I would now like to welcome our witnesses.

From the Canada Revenue Agency, we have Bob Hamilton, commissioner of revenue and chief executive officer. It's good to see you again, sir.

We also have Geoff Trueman, assistant commissioner, legislative policy and regulatory affairs branch, and Sharmila Khare, director general, charities directorate, legislative policy and regulatory affairs branch.

Ms. Khare, I understand that you're hoping to be excused at five o'clock to catch a train. I think I'm prepared to grant that, given you're all from the same entity, provided that your two colleagues are willing to step in if that should be necessary.

Mr. Hamilton, you have the floor for five minutes. I'll let you begin, please. It's over to you.

[Bob Hamilton, Commissioner of Revenue and Chief Executive Officer, Canada Revenue Agency]

Thank you, Mr. Chair.

Thank you for the invitation to appear before you to discuss the role and responsibilities of the Canada Revenue Agency, or CRA, with respect to registered charities.

You already introduced my team members.

Given the many privileges it provides, registration as a charity also comes with an obligation to follow the long-standing rules for charities under the law.

As the federal regulator, the Canada Revenue Agency has a responsibility to ensure that all registered charities operate in compliance with the Income Tax Act. This is a critical factor in maintaining the integrity of the charitable sector, as well as the public's confidence in that sector.

The CRA administers the provisions of the Income Tax Act as they relate to registered charities. It fulfills this responsibility by monitoring the operations of registered charities and promoting compliance through a balanced program of education, client service and responsible enforcement.

There are several factors the CRA considers when making a determination as to whether an organization qualifies, or continues to qualify, for charitable registration. Such a determination may only be performed after a full consideration of all of the relevant facts on a case-by-case basis.

As part of Canada's risk-based approach to promoting and enforcing compliance, we have a number of educational tools and initiatives, such as outreach programs, client service programs, reminder letters and website information to help charities better understand their legal obligations. The CRA carefully reviews available information to assess the risk of an organization's potential non-compliance with the Income Tax Act and to establish appropriate next steps from an income tax enforcement perspective. Any next steps for enforcement would be informed by the conclusions of our risk assessment. Where warranted, the CRA may undertake an audit.

Non-audit interventions are intended to proactively prevent or address minor types of non-compliance, which in turn allows the CRA to direct its audit resources to those charities that are at higher risk of engaging in more serious acts of non-compliance. Generally speaking, a charity's non-compliance is deemed to be high risk when the charity's operations pose risks to charitable donors, beneficiaries, charitable assets or Canada's tax base.

Since the charitable sector is supported by all Canadian taxpayers, the CRA is committed to enhancing the transparency and accountability of charities by providing relevant information about charities to the public at large.

The Income Tax Act allows for the disclosure of certain information about registered charities, such as information about sanctions that have been imposed and the reasons for revocation. The CRA's list of charities and certain other qualified donees provides a significant amount of information about each charity, further identifies the other information about charities that is publicly available and provides instructions on how to the public can request this information. However, it is important for me to underscore that the confidentiality provisions of the Income Tax Act do still impose limits on the CRA that prevent it from commenting on specific organizations or cases. If members of the public are concerned that a registered charity is not complying with the provisions of the act, they are encouraged to contact our leads program.

The CRA reviews every allegation made or the information it receives to determine if there was non-compliance with the legislation it administers. However, it cannot provide any feedback or updates on leads it receives or subsequent actions taken, including whether an audit is ongoing, unless an audit results in a charity being revoked, annulled, suspended or penalized.

The CRA posts such cases on its website to provide transparency to Canadians regarding its decisions with respect to charities.

Thank you, Mr. Chair, for the opportunity to appear before you today. Given the technical nature of the matter before you, my team and I welcome the opportunity to answer any questions you may have.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you, Mr. Hamilton.

We will now begin the first round. Each member of the committee will have six minutes.

Mr. Lawrence, you have the floor for six minutes, please.

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

Thank you very much, Chair. It's an honour and a pleasure to be back here in front of the public accounts committee.

Mr. Hamilton, I understand that you can't talk about a specific case unless there's been some type of penalty dispensed, so I'll start out at the front: Is the Pierre Elliott Trudeau Foundation the subject of any penalty, either currently or in the last decade?

[Bob Hamilton]

No, not that I am aware of. If there was a penalty or a sanction it would be on our website, although penalties, if I'm not mistaken, do get eliminated from the website after a period of time. People can still request them, but to my knowledge, there has been no sanction.

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

Thank you.

I'm going to go through some of the facts as asserted by The Globe and Mail and Bob Fife. I'm not going to ask you to comment on the specific case, but I will ask you to comment generally on how the CRA would act with respect to it.

Of course, this all started in 2016 with the cash-for-access fundraisers, which were attended by Beijing businessman Zhang Bin, along with his business partner. He was at the fundraiser, which is odd, because foreign nationals are not allowed to donate to political parties. That's correct, right? That's more of an Elections Canada....

[Bob Hamilton]

I don't know if that is correct. I think you probably know better than I do—

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

That is correct. Thank you, sir. I'll answer my own question there.

He and his business partner wanted to make a million-dollar donation in honour of Pierre Elliott Trudeau, $200,000 of which was slotted to go to the Trudeau Foundation, which I think is a little bit unusual, to be polite. Eventually that money was given to the Trudeau Foundation, but it was $140,000 and not $200,000. In the public filing in the annual report of the Trudeau Foundation, it was initially put in the two businessmen's names and not in the corporation's name, which the receipt was evidently put into. This was Millennium Golden Eagle International of Canada.

Is it the CRA's policy to allow an organization to put their donation in any name they choose or must it reflect the actual substance of the transaction—in other words, where the actual money came from?

[Bob Hamilton]

The donation under our rules as we administer the income tax has to come from the true donor.

There's actually an interesting example that the team has raised with me. You might gather donations at a store near the cash register, and then the store submits them to us, but the true donors are the people who put in the money at the cash register.

From our viewpoint in looking at it and whether it complies with the Income Tax Act, we would look to the true donor of the property or the giver of the gift.

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

Thank you.

Just to put a hypothetical situation in front of you, I guess, if in fact a foreign state gave $440,000 to a shell corporation and the shell corporation then immediately transferred that money on to a charity, who should that receipt be issued to?

[Bob Hamilton]

Mr. Chair, I'm probably not going to go too far into hypotheticals in this world, because often when you look at it, there's what the charity knows at the time and what the true facts are of the situation, so it probably would be unfair for me to speculate on that in this case.

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

Thank you.

[Bob Hamilton]

I will say, though, that to the extent that the case comes to our attention, we would look to the true donor.

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

You're looking towards the substance. I'm not talking about a specific case, but in general, as in the example you gave with the cash register, you're looking to where the actual funds came from and you believe that in general that's where the receipts should go, correct?

[Bob Hamilton]

Yes.

I'll perhaps turn to my colleague Geoff, but in the legal world, there's the question of giving the gift and how you treat that legally, and I think we draw our rules from that basis.

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

That's fine. You've covered it well.

On that, if in a fact a receipt is given to the incorrect donor, I believe there is a penalty of 125%. If an organization has purposely and wilfully put the incorrect name on a donation receipt, that is punishable by a 125% penalty.

[Bob Hamilton]

Sharmila may be able to talk about the penalty. I would just note that people can give anonymous donations. There doesn't have to be a receipt with every donation. The receipt is valuable if you're going to claim the tax deduction.

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

But if an organization does issue one and wilfully puts the incorrect donor on the receipt—in other words, an individual who did not donate the money—there is a penalty attached to that. As you said, registration, although it has its privileges, comes with its responsibilities.

[Bob Hamilton]

Sharmila, can you elaborate?

[Sharmila Khare, Director General, Charities Directorate, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency]

When we are taking compliance actions, there are a range of options available to us. If it's a first offence, maybe it's something that can be corrected through an education letter. If it's something that the charity has repeated over time, it may be something that merits a penalty.

If you're interested in the various penalties under the Income Tax Act, we could certainly provide those to you in writing.

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

Would it also be potentially an offence if you put in an incorrect address, knowing that it's not actually the organization? Does the information on the receipt have to be correct?

[Sharmila Khare]

The income tax regulations outline all the requirements for proper receipting. The requirements are quite numerous for the receipts. They have to be followed, but in each situation you have to look at the facts and go in and see what's actually happened.

[The Chair, Conservative, John Williamson]

Thank you very much.

Mr. Fragiskatos, you have the floor for six minutes.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Chair.

Thank you to the officials for being here.

Mr. Hamilton, you will get questions today, I'm sure, about specifics relating to the Trudeau Foundation that you will not be able to answer. You've indicated the reason, or at least prefaced the reason, with reference to the Income Tax Act and the privacy provisions within it.

Could you speak about the importance of that in maintaining the overall integrity of our system with reference to charities, and overall in terms of fairness for Canadians in the overall process?

[Bob Hamilton]

Thank you, Mr. Chair, for that question.

Yes, as the commissioner of the agency, I get involved in this issue quite a bit, about what you can or can't say about specific individuals. I think it is important that we protect taxpayers' information that is provided to us, just as I can not talk about the tax situation of my colleagues or other people around the table. We need to keep that to ourselves and protect the confidentiality of it. That's an important aspect for us. It's set out in legislation. It's not something the CRA does on its own; it's section 241 of the Income Tax Act.

I would say, though, just as I mentioned in my opening remarks, that there are some specific places where we are encouraged to be transparent with charities because of the special nature of that incentive. There is transparency to some degree in that we can, as set out in legislation, effectively exempt a charity from section 241, but it's really one of the cornerstones of the Income Tax Act that we have to protect that information on specific cases.