Mr. Speaker, it is a pleasure to rise in this debate on the budget. I will address one small aspect but one which is very important to me.
During his budget speech the finance minister suggested there would be increased opportunities for Canadians to donate to charities and he proposed raising the annual limit on charitable donations from 20 per cent to 50 per cent and that the limit would be increased to 100 per cent for gifts willed to charities.
The rationale behind this, as it emerged from the minister's remarks, was that as government gets more and more out of services to Canadians it is hoped charities in Canada will take up the slack, as it were.
I applaud the minister's intention in giving greater opportunities for charities to have a larger role in bringing services to Canadians and giving Canadians, in turn, an opportunity to donate more effectively to charities.
In one sense the finance minister's move is premature. Unfortunately the charitable industry in Canada, which consists of some 73,000 charities with about $86 billion in revenue, is an industry which is essentially unregulated.
It is controlled almost solely by certain amendments to the Income Tax Act, 1976, which pertain basically to a few rules about how charities should spend their money and provide for an annual information return that charities have to fill out.
Beyond that there is little regulation of this huge industry. This is exceptional. In Britain, the United States and in France the charitable is very closely controlled under a great number of regulations.
The problem is that with the lack of government regulation comes lack of accountability. Over the past two months I have undertaken a rather elaborate study of charities by looking at their T3010 forms. This is an annual financial reporting instrument they have to fill out. This form is very inadequate for getting a grip on what they are doing but it is the only tool the public has.
In reviewing these forms and in examining quite a spectrum of charities, perhaps 500, all kinds of problems come to the surface. There are charities engaged in actual political activity, supporting or opposing political candidates. There are companies giving funds to foundations and then borrowing back the money, which is not something we want to see. We see excessively disproportionate fundraising costs versus the amount of funds raised.
There are marketing firms that actually set up charities in order to give themselves an income. There are charities that do not fit definitions of charities. The definition of charity is so loose that virtually anyone can apply to set up a charity and be successful and get the tax breaks associated with it.
Some charities are engaged in all manner of special interest group campaigns that have little or nothing to do with helping the general public. It goes on and on. There are offshore charities that raise money in Canada that are controlled entirely offshore. There is no accountability even there.
Perhaps the most salient point, there are charities that have huge finance and management costs quite disproportionate to the amount of money they spend on the charitable activities.
When the finance minister proposes getting the charitable sector more actively involved in serving Canadians, we have to consider whether the charitable sector is at present able to fulfil the function adequately and effectively.
The ultimate problem is that for years Revenue Canada has resisted suggestions, including suggestions coming from the auditor general, that charities be subject to penalty when they fail to comply with existing rules and regulations.
Unfortunately there is no penalty to discipline charities that are abusing their responsibility other than revocation of charitable status. This is a lengthy and difficult process which usually does not occur except in very small numbers.
We have the fundamental problem associated. Where it has enormous meaning to what the finance minister has proposed with respect to encouraging Canadians to participate in charities is something called the 80 per cent rule.
In 1976 an amendment to the Income Tax Act required that charities spend 80 per cent of their tax receiptable donations on charitable services. That left 20 per cent for management, administration and salaries.
Unfortunately the authors of that amendment confined it purely to tax receiptable donations when charitable income is mainly and ultimately, believe it or not, from government. Most governments at every level support charities which may be universities, hospitals or CIDA charities associated with foreign affairs or charities associated with Heritage Canada or Health Canada.
Unfortunately because the 80 per cent rule applies only to tax receiptable donations, it does not apply to grants from government or funds raised by other means, for instance, bingos. It does not apply to bequests left by people in their wills. If we examine a couple of hundred T3010 forms we would find that the vast majority of charities are nowhere near the 80 per cent rule with regard to their total revenues.
Charities are by a large not very well managed. Some charities are spending perhaps 30, 40 or 50 per cent of their total revenue on actual charitable activities. This is quite an enormous inefficiency which Canadians would be very concerned about when they put up their charitable dollars.
The problem is we have no way of controlling that with charities as the legislation now stands. The revenue minister cannot dictate to a charity to improve its management. There is the possibility of an audit of a charity but an audit looks only at fraudulent use or improprieties by a charity. It does not look at the ethics of spending by a charity. Consequently a charity could be very small and could choose to pay $180,000 to its executive director or, as was recently in the news, the case of the Red Cross deciding to pay $1,000 a day to a former principal officer so he could testify before the Krever commission.
There are all kinds of ethical problems within charities because there is no mechanism for an ethical audit. One reason there is no mechanism is that there is not the level of disclosure or regulation existing either within the law or any other means which pertain to charities. We have no decent control on how well charities do their business. Therefore the finance minister proposes involving charities more and more with helping Canadians and taking over where government leaves off in providing services to Canadians.
We are sure the level of management of these charities is actually below that of our own bureaucracy. We must ask ourselves if the finance minister's move is wise. The finance minister is aiming in the right direction. Before we can involve charities in the way proposed in the budget speech we must have legislation which will set the house of charities in order.
We need new legislation similar to what has been put forward in the United Kingdom where charities have been completely overhauled. We need to do this in Canada and then the finance minister's proposal to tap the generosity of Canadians to support charities, bring new services to people and to encourage the very good charities and get rid of the ones that are poorly managed. Then it will be a very fine move.