Debates of March 9th, 1999

Income Tax Act

[Gilles-A. Perron, Bloc, Saint-Eustache—Sainte-Thérèse, QC]

Madam Speaker, I thought I had risen.

I rise this evening to speak to Bill C-312, introduced by the Reform Party member for Dauphin—Swan River and entitled an act to amend the Income Tax Act (percentage of gifts that may be deducted from tax).

The purpose of this bill is to amend paragraph 118.1(3) of the Income Tax Act in order to put charitable gifts on the same tax footing as political contributions for the first $1,150.

In February 1997, the Bloc Quebecois asked that the amount qualifying for a tax credit be standardized. A tax credit equal to 29% of allowable gifts was proposed, so that low income taxpayers could benefit from a credit proportionate to that of wealthier taxpayers.

In Quebec, for instance, the credit is equal to 23% of total allowable gifts, regardless of the size of the gifts.

What we are now seeing, and have often seen in the federal system, is that the wealthy, those with higher incomes, always get the best deal.

In the last budget, for example, the Minister of Finance proclaimed to all and sundry that he had lowered everyone's taxes. Indeed he had, but the allowable deduction for an unmarried taxpayer with an annual income of $40,000 is $114.75, barely 31 cents a day, while the tax credit for a taxpayer with an income of $4 million is $30,000. It is obviously unfair.

The tax credit for charitable donations is 17% on the first $200 and 29% on the remainder, so that once again taxpayers in a position to make sizeable donations benefit from the maximum deduction.

It is estimated that those earning under $60,000 claim an average of $144 in charitable gifts, while those earning $250,000 and up claim an average of $3,670.

Currently, the first are entitled to a tax credit of 17%, whereas the most wealthy are entitled to a tax credit of 28%. We must not forget that these credits also reduce federal and provincial surtaxes.

This bill ensures that taxpayers with incomes less than $60,000 will enjoy a tax credit of 67% of the $144 paid, whereas those declaring incomes over $250,000 will receive a tax credit of 34% of the $3,670 paid.

I would point out that a dollar, for someone well off, has a smaller marginal value than the same dollar made available to someone more disadvantaged.

However, welfare organizations are seeing increased public need. The challenge is all the more difficult to face because these organizations have had severe budget cuts in recent years.

In addition, in recent years organizations have had increasing difficulty obtaining registration numbers. The forms contain a growing number of questions, and any political connection increasingly means the loss of registration.

I would mention a case in my riding, the Fondation jeunesse les Coopérants de la MRC de Deux-Montagnes, which has waited for a registered organization number for over two years.

The federal government will likely tighten eligibility criteria further to the detriment of the organizations in the field, whose resources are all too often strained to their limit.

Giving and tax credits must be encouraged, as proposed. Bill C-312 is a good initiative from this point of view, particularly when one keeps in mind that the Canadian Centre for Philanthropy calculated some three or four years ago that there would have to be a 5.8% increase in giving every time there was a 1% drop in government subsidies and transfers, if a constant level of funding was to be maintained.

In this connection, it needs to be acknowledged that services of a social nature would be delivered far more effectively by the charitable organizations themselves.

I have examined the report of the Canadian commission on the volunteer sector and it is my belief that the government ought to take action, and bring in the necessary amendments.

In conclusion, my party, the Bloc Quebecois, and myself, are in favour of Bill C-312.

[Tony Valeri, Liberal, Parliamentary Secretary to Minister of Finance]

Madam Speaker, certainly the government recognizes the motivation for the hon. member's bill and fully supports the principle of offering generous tax assistance to charitable giving.

In fact the government has provided additional incentives for charitable giving in four of the last five federal budgets. Some of the measures the government has put forward include lowering the threshold for eligibility for the 29% level of tax credit to $200 from $250, raising the annual income limit for use of charitable donations to most charities from 20% when the government took office to 75%, and reducing the income inclusion rate for capital gains arising from the donation of appreciated publicly traded securities to 37.5%. These initiatives have been recent and certainly the government is monitoring the impact to see if further changes are required.

The member should also recognize that the differences in the treatment of political contributions and charitable donations reflect the different policy intents of the two measures.

The design of the federal political contribution tax credit reflects the desire to encourage greater grassroots involvement by all Canadians in the political process. It is for this reason that generous tax assistance is given to small political contributions, that tax assistance is reduced for incremental amounts to the point that the federal tax assistance is zero for amounts contributed to federal political parties in excess of the $1,150 per contributor per year.

[Lee Morrison, Reform, Cypress Hills—Grasslands, SK]

That is officially noted, precisely.

[Tony Valeri, Liberal, Stoney Creek, ON]

The member says it is official. According to the law that is in fact the case. Perhaps the hon. member is not making reference to the law, but what I am stating is in fact what the law states.

In contrast, tax assistance for charitable donations is greater for amounts in excess of $200 in order to encourage larger donations to charities. It is a policy decision and one that we feel is the correct one. Indeed in the case of very large donations tax credits may be claimed for donations up to 75% of a taxpayer's income in a given year. Tax credits may also be carried forward for future years should the 75% limit be exceeded.

The donations of small amounts to charities is not strongly motivated by the availability of tax assistance. Consequently the greatest effect of the proposal would be the increase of fiscal cost of tax assistance according to donations that would have been made in any case.

Charities themselves would receive little benefit. Under the existing tax policy the level of tax assistance accorded for most charitable donations results in roughly a 50:50 partnership between government and the private sector in support of charities.

The government, while adhering to and supporting the intent of the hon. member's bill, cannot support it. The current design of the charitable donations tax credit acts to encourage larger donations while recognizing the value of smaller donations. It is appropriate. The fiscal cost of the measures would be large, approximately $125 million per year, for what in fact would be of little effect on the level of charitable giving.

The greatest effect of the measure would be the increased tax assistance to donations that would have been given in any case. Consequently charities would receive little additional support and therefore I cannot support the bill.

[Dick Proctor, NDP, Palliser, SK]

Madam Speaker, it is a pleasure to debate Bill C-312. I congratulate the hon. member for Dauphin—Swan River on bringing the bill forward.

In a previous job I had the opportunity to participate a little in the Royal Commission on Electoral Reform and Party Financing in the late 1980s and early 1990s. I remember distinctly one visit the committee made to Washington to meet with representatives of the political system in the United States. Practically their first question was why we were there to learn from them because our system was so much further advanced in terms of political financing and representation, the absence of soft money and everything else that goes with the American system.

While I do not necessarily have a problem with Bill C-312 and what it purports to do, I am also aware that governments can level up and can level down. My concern—and I thought the previous speaker on the government side put it well—is that the reason the tax endowments are greater for the person who makes a contribution to a political party as opposed to a small donor to a charity is to encourage grassroots participation.

It is incumbent upon us in this debate to talk a little about an important study that has just come out on the voluntary sector by a blue ribbon committee. It is very concerned about some aspects of charities and wants to make it accountable to end some of the abuses it sees.

It is staggering to note that there are 75,000 charities in Canada alone and that the amount of money donated every year is in excess of $90 billion. At the same time it is also noteworthy that apparently two-thirds of the revenues of charities come from government and only about 12% actually come from donations.

That may be hard to believe for some of us who are at home at 6 o'clock at night when the phones are ringing off the hook with callers wanting donations to this or that charity, but these seem to be the facts.

There certainly is some need to tidy up the problems. I will quote from the Canadian Unitarian Council on the voluntary sector and on charities which said the following:

What voluntary sector leaders told the Panel on Accountability and Governance about Canada's archaic charity laws:

“We are seriously concerned that the body charged with decisions about the public good is Revenue Canada. There is something fundamentally contradictory in the fact that an organization which has as its primary function the raising of government revenue also has control over determining which groups are acknowledged to have a contribution to make to a democratic society”.

The United Way in Drummondville said:

It is imperative that the legislation be in accordance with our modern Canadian values. It doesn't make much sense to come under the yolk of a law which is 400 years old.

We can see some good in the proposed bill. On the other hand we are concerned that the grassroots participation in the political field continues to be encouraged. I will await with interest to see what the mover of the bill has to say in his wrap-up comments.

[Ken Epp, Reform, Elk Island, AB]

Madam Speaker, I am pleased to add my contribution to the debate on Bill C-312 proposed by my hon. colleague.

There are some fundamental, philosophical questions to be asked when we have a bill like this one. When the government gives an exemption from taxation on income that is used to promote a charity or a political party, it becomes a tax expenditure. The Government of Canada by forgoing some revenue lands up indirectly subsidizing that particular activity.

If there is an organization in one of our communities whose job it is to pick up stray cats and keep them in a nice home with facilities and all such things for cats that is considered to be a socially beneficial activity, the government then feels it is justified in taking money from everybody in the whole country who pays taxes and putting some of it into subsidizing that activity.

Over the years in Canada the support of different charities and different organizations has grown into quite an industry. As a matter of fact, the finance department has a huge branch involved in the designation of charities. One problem that arises from this is that we now have a deputy minister and others who by the role of regulation and interpretation can determine which organization qualifies for the indirect subsidy and which one does not. It does make a substantial difference.

I know the parliamentary secretary said that small donations were not really driven by whether or not there was a tax exemption for them. That may well be because of the current tax law. The first $100 are not affected by it. Quite clearly one will not be giving a donation to somebody for $20 based on whether or not there is a tax benefit since there is not one. If it kicked in right away then perhaps there would be motivation.

Back in the old days it used to be that we could claim $100 of charitable donations even if none were made. We did not have to supply receipts. We could either do that or supply the receipts. It was always my argument that the person who was not able to accumulate $100 worth of receipts in a year for charity is probably such a cheap screw that he would not be giving anything so why should we give him $100. If there were no receipts it seemed to me that there should be no benefit at all because that is a person who does not reach out his hand to help charitable organizations or those in need.

Then we come to political parties. Political parties, according to governments of the past, are an activity which the taxpayer should be coerced to support indirectly through the granting of tax credits. In the old days it used to be a reduction of one's taxable income based on the amount of money given to a political party.

The rate at which political parties are indirectly subsidized by the taxpayer in general is much more generous than that for other organizations such as those that run safe houses for women and children who need a place to escape to when they are in danger or other organizations that help people who are ill.

I know several of those which basically run extended care centres for people with a long term illness. They are run as charitable organizations. My aunt was in one of those because the health care system in this country failed her and her family totally. She was moved into one of them so she could live out her final days with a good and reasonable amount of care.

Those organizations do not have nearly as much benefit and one could really wonder which one is better for society. Which activity provides a greater benefit to society as a whole, the existence of the Liberal Party or the existence of the extended care centre in the small town in Saskatchewan that looked after my aunt? I would contend that it was probably the extended care centre.

By the way, the family received donations to this extended care centre in lieu of flowers because of their great appreciation for the care she got.

The rate at which the government is indirectly subsidizing this should definitely be equal with that for a political party. I would even put my own political party into that category. It is as important to provide support for organizations like that as it is for even the Reform Party and certainly the Liberal Party and the other parties represented here in the House.

We then have the added question of who decides and how do they decide which organization gets the right to give tax receipts. That is a big problem which we have been made aware of just recently. The department tends to be rather discriminatory. It will accept one particular organization but not another, depending on what their supposed activities are and what their purposes are. Sometimes it is quite arbitrary. In my view, some of the situations that have come to my attention have been wrongly judged. These people then have a greater difficulty in raising money through donations.

My hon. colleague has put forward a bill that basically equalizes the contributions to charities as compared to those to political parties. With all due respect, I am not sure that I would go in that direction. I may have put it in the other direction. I would have perhaps considered bringing the political parties' benefit level down to where the charities were instead of what the member has done in bringing the charities up to where the political parties are.

They were quite far apart but there was a limitation on it for political donations. The maximum donation is $1,150 whereas for charitable donations, if I am not mistaken, it is now up to 50% of one's net income.

There is now a greater amount available for the charities even though the rate is lower. We need to consider this very carefully but I can certainly concur in principle with what my hon. colleague is doing. He is saying we should reflect what is valuable to Canadians. There is no doubt in my mind that most Canadians would consider the charities they support to be at least as valuable as the political parties, which many people unfortunately due to the growing cynicism across the country are failing to support.

I commend my colleague for bringing this bill forward. I hope that sometime in the near future we will actually be able to vote on something like this to bring a change and equality into this area.

[Lee Morrison, Reform, Cypress Hills—Grasslands, SK]

Madam Speaker, I applaud the general premise of the member for Dauphin—Swan River that politicians should not be treated more favourably by the income tax system than charities.

However, I have a severe problem with what is happening in the, I would hasten to say, charitable industry in this country. It is a little disconcerting that there are over 70,000 registered charities, all entitled to the standard deduction which is afforded to people who are able to get their hands on a number. I wonder how useful a lot of these organizations are, how much of their intake is actually swallowed up in administration and salaries and so on.

Seventy thousand charities. There has to be something wrong there. They are not all Salvation Army or the Canadian Cancer Society. These are people who have their own little private axes to grind. They are getting a tax break which in many cases I do not think could be justified if we could do a serious audit on them.

All of us who read the daily papers know what is happening. Audits are being done on a very selective basis. People that are not necessarily in accord with the government of the day are having their numbers revoked, whereas other charities that are perhaps more friendly to the philosophy of the Liberal Party are not having their numbers revoked, even though they are engaged in proselytizing, evangelism or whatever one wants to call it.

On that basis we may have allowed this thing to get a little out of control. I do have some very grave misgivings about the member's bill.

[Inky Mark, Reform, Dauphin—Swan River, MB]

Madam Speaker, first let me thank all hon. members on both sides of the House for debating this private member's bill. They brought forward many important points, one being that it is about societal values and the volunteer base of this country. We all come from communities where if it were not for the volunteer sector, not much would probably happen.

My colleague from Cypress Hills—Grasslands brought forward the important point that perhaps there needs to be a new set of standards. If the rules are to be changed, it is a good idea. We all need scrutiny. Audit requirements are probably a sensible approach.

In my brief closing comments, I would like to make some key points to tell the House why this bill should have been made votable.

It is the optics of our society, of equality in this country. Politicians really should not get the edge on the average Canadian, at least that is the optics out there.

The charitable donation of $1,150 or less should be put on an equal footing with political donations. The first $200 donated to charities results in a tax credit of 17% of that amount. Anything over $200 donated to a charity results in a tax credit of 29% of the amount. The maximum tax creditable amount is 50% of the filer's income.

The first $100 of a political donation results in a 75% tax credit. The next $450 results in an additional 50% tax credit. The next $600 results in an additional tax credit of one-third of the amount donated. The maximum tax creditable amount is $1,150 which results in a tax credit of $500.

In 1993 the average charitable donation claim was $626. Subject to standard rules, the tax credit was $158. As a political donation, $626 resulted in a tax credit of $325. That is a difference of $168. Again, as was indicated by previous speakers and myself, there is a discrepancy in our tax credit system.

What are the revenue implications? According to the reference branch of the Library of Parliament, these are difficult to nail down at this time. Estimates are that under present levels of donations this would probably result in the government taking in about $800 million or less. Perhaps we could just deem this as a tax break. As we all know, money in the pockets of the citizens of this country is certainly better than in the hands of politicians.

In summary, the key reason for the uncertainty on revenue is that increasing the tax credit for charitable donations could encourage people to give more to charities. At a time when governments are able to do less, and we all agree on that, I think we should encourage increased giving to charities. It is unfortunate that with the tax breaks political organizations currently get, it appears that people in this country still do not take an interest in politics.

I thank the members of this House for speaking to this bill.

[The Acting Speaker (Ms. Thibeault)]

The time provided for the consideration of Private Members' Business has now expired and the order is dropped from the order paper.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

[Lee Morrison, Reform, Cypress Hills—Grasslands, SK]

Madam Speaker, on November 6, 1998, I raised a question in the House regarding the loss of tax revenue by western rural municipalities when land is converted to Indian reserves.

In responding, the government House leader clearly did not have the faintest idea of what I was talking about. He stumbled and stammered that his government fully understood its obligations to aboriginal Canadians and as always he adhered to the standard Liberal policy of when you do not understand the issue, obfuscate. In order that the government can compose a rational response, I will now pose my question in great detail.

There are two types of native land claims being settled by federal and provincial funding of land purchases by Indian bands. Treaty land entitlement claims involve lands promised by the government as part of the original treaties with the Indian bands. Some bands were shortchanged mainly due to incorrect counts of band members. A recent recalculation has resulted in the awarding of huge additional entitlements based, not on the original 19th century populations, but on recent counts.

Using remarkable Liberal mathematics, I suppose that the treaties should rationally be reopened in 10, 20 or 30 years hence until ultimately all of the west has been returned to its original owners. However I am digressing. That is a subject for another debate. Tonight the subject is taxation.

Land purchased under treaty land entitlements and transferred to reserve status is land removed from the tax base of rural municipalities. However, for the loss of these particular lands, the rural municipalities are very fairly given a grant of 22.5 times the annual tax revenue as compensation.

Unfortunately there is a second type of entitlement which has a totally different outcome to the rural municipalities. Specific land claims are to return lands lost through unlawful acts or land arbitrarily taken away from a reserve without compensation. For such claims, rural municipalities will only be compensated at five times the previous year's taxes. This is blatantly unfair and it represents a disavowal of federal commitments made to the rural municipalities in 1991 and 1993. It is a breach of trust. The only rationale for the reduced rate seems to be that it is cheaper for the senior government to download its responsibilities onto the municipalities.

However, it is certainly not cheaper for rural taxpayers who will pay more to cover the shortfall. They are hit twice, once as Canadian taxpayers to purchase the lands and once as municipal taxpayers to provide the services in perpetuity, the roads primarily, for these alienated pieces of land. That is not fair.

It is very easy for a government to be generous at the expense of someone else. If a debt is owed to natives for land unfairly taken from them, it is a debt owed by all Canadians and not just by a handful of Saskatchewan farmers. Why does this government find that so hard to understand?

[David Iftody, Liberal, Parliamentary Secretary to Minister of Indian Affairs and Northern Development]

Mr. Speaker, it is a pleasure to respond to the member's question.

There are only two minutes to respond. I will consult my notes briefly but I think by listening to the premise of the hon. member's question, he is absolutely wrong. I wish he would review his history with respect to the rule of law, contract law and some of the legal decisions that were handed down to this country through the privy council office even in England long before any of us arrived in the House of Commons. This set out the rules very clearly that the first nations in Canada had a legal interest in the land.

We had signed the treaties, therefore, based on the legal process. The land was given away illegally by successive federal and provincial governments. We are trying to rectify that.

I agree with the member that it is collectively a Canadian decision. The hon. member will know as well that under section 91 we have responsibilities at the federal level and under section 92 those are responsibilities at the provincial level as well. We are working within those responsibilities, in this case with the Government of Saskatchewan, to address those compensation issues.

I remind the hon. member that legally in this case we have no obligation to provide those kinds of grants back to the municipalities. It is done as a gesture to work and facilitate relationships between all the interested parties.

The member said he spoke for western Canada. That is not the case at all. I am from western Canada and I do not share his view on this process.

We are talking about Saskatchewan. We are working very closely with the Saskatchewan government to work out under the treaty land entitlement process acceptable arrangements. We are still in discussions with respect to fair compensation for third party interests that we recognize as legitimate.

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Madam Speaker, I am pleased to pursue a question I raised in the House last December 3. It was about Bill S-13, the Tobacco Industry Responsibility Act.

This was the bill that would actually impose a levy on tobacco manufacturers of 50 cents per carton. This was the bill to help support this government's rhetoric around helping young people quit smoking and to encourage them not to start smoking in the first place.

This was the bill that was supported by all kinds of organizations, including the cancer society and hundreds of groups across the country and thousands of Canadians.

This was the bill that was supported by young kids themselves. I quote from a letter by Lee Smith from Chilliwack, B.C.:

I am 13 years old and I have smoked for a year. I am trying to quit. It is hard.

I support Bill S-13 that collects 50 cents on each carton of cigarettes because it will stop kids from smoking.

Thank you for your time.

P.S. Please help kids stop smoking.

Bill S-13 was the bill that the health minister said was a good idea. I quote from his comments to the media on June 3: “I think it is a good idea. I think it is clever. I think it is a good bill and we should go forward with it”.

That is what we are asking today. Where is the bill? Where is this government's support of the idea in the form of some legislation or financial measure to ensure the spirit of the bill put forward by Senator Kenny is adhered to?

Instead of concrete action, all we get from this government is rhetoric. We get the Minister of Health saying this country has the best record anywhere in terms of anti-smoking provisions.

Instead of a great record we have a situation where cigarettes are now cheaper than they were before, tobacco profits are up, more kids are smoking, cigarette advertising has increased, tobacco is killing more Canadians and funding for anti-smoking measures has not been put in place as promised.

What we are asking for is a comprehensive strategy. We thought we would have that when we heard the minister was making a big announcement on January 21. There was no complete comprehensive strategy. There were measures on packaging, on bigger warning labels on cigarette packages and on the particular health effects if one smoked and so on. There was no comprehensive strategy. There was nothing in terms of the need to look at taxation, especially given that many provinces are offering cigarettes at a much lower rate than in the United States. That puts to rest the whole notion of dealing with smuggling.

We have no evidence from this government that it is spending the money it promised in the 1993 federal campaign and in the 1997 federal campaign, $100 million, toward youth anti-smoking initiatives.

We are asking today where is the comprehensive strategy. When will we see the government act on the spirit of Bill S-13 and start acting in terms of protecting the health of our young people?

[Elinor Caplan, Liberal, Parliamentary Secretary to Minister of Health]

Madam Speaker, I am pleased to be here today to discuss the government's efforts to reduce tobacco use among young Canadians.

Protecting the health of our kids is a priority. We have put in place a comprehensive four pronged strategy that includes legislation, regulation, enforcement, research and public education.

In April 1997 the government passed the Tobacco Act, one of the toughest tobacco control laws in the world. It restricts access by young people to tobacco products, empowers governments to introduce stronger health warnings and establishes broad powers for tobacco regulation. Let me remind members that the World Health Organization has recognized our Tobacco Act as one of the toughest in the world.

We have initiated consultations on the process of regulation which would make those regulations among the most stringent in the world. We are addressing labelling and promotion of tobacco. We have already alerted Canadians to the realities of light and mild messaging. We have hosted a round table with experts to learn about strategies designed to increase public awareness and to ensure that concerns about tobacco are widely known.

We are working with provincial governments to increase compliance. We recognize this is a serious problem. That is why we are working with the National Cancer Institute on monitoring and surveillance activities.

We have committed $50 million over the next five years to encourage and support young Canadians not to smoke. In addition, we have a caucus committee which is looking at enhancing options for tobacco public education efforts.

Our priority is protecting the health of young Canadians. As I said, we have a comprehensive strategy. The one thing that is certain is that the critic for the New Democratic Party will never be satisfied. That is a good thing. It is her job to complain, to criticize and to issue rhetoric. That is why we are here—

[The Acting Speaker (Ms. Thibeault)]

Order, please. I am sorry to interrupt the hon. member.

The motion to adjourn the House is now deemed to have been adopted. Accordingly, this House stands adjourned until tomorrow at 2 p.m., pursuant to Standing Order 24(1).

(The House adjourned at 7.23 p.m.)