House of Commons Hansard #9 of the 40th Parliament, 3rd Session. (The original version is on Parliament's site.) The word of the day was percenters.
Albina Guarnieri Liberal Mississauga East—Cooksville, ON
moved that Bill C-470, An Act to amend the Income Tax Act (revocation of registration), be read the second time and referred to a committee.
The Deputy Speaker Conservative Andrew Scheer
I am now prepared to rule on the point of order raised by the hon. Parliamentary Secretary to the Leader of the Government in the House of Commons, concerning the requirement for a ways and means motion for Bill C-470, An Act to amend the Income Tax Act (revocation of registration), standing in the name of the hon. member for Mississauga East—Cooksville.
I would like to thank the hon. parliamentary secretary for having raised this matter, as well as the hon. member for Mississauga East—Cooksville, the hon. member for Mississauga South, the hon. member for Scarborough--Rouge River, the hon. Parliamentary Secretary to the Minister of International Cooperation, the hon. member for Algoma—Manitoulin—Kapuskasing, the hon. member for Eglinton—Lawrence, and the hon. member for Brampton West for their comments.
The parliamentary secretary pointed out in his remarks that the purpose of Bill C-470 is to allow for the revocation of the registration of a charitable organization, public foundation or private foundation, if it provides annual compensation in excess of $250,000 to any of its executives or employees. On this point, he and the member for Mississauga East—Cooksville agreed.
Beyond that, however, the parliamentary secretary contended that such a revocation would extend the incidence of a tax to organizations which are not currently subject to it. Specifically, he noted that such organizations, on losing their registration, would be subject to the revocation tax imposed by subsection 188(1.1) of the Income Tax Act, since the revocation tax is a tax imposed on a charitable organization which loses its official registration under the act.
He further characterized the effect of the bill as follows in the House of Commons Debates of December 1, 2009, at pages 7410 and 7411:
Upon deregistration of an entity in the circumstances proposed by Bill C-470, that entity loses its tax exempt status as a registered charity and, assuming it remains a charity, it will not be able to benefit from the other exemptions from tax provided for in subsection 149.1.
In other words, Bill C-470 would result in an extension of the incidence of a tax by including entities that are not already paying the revocation tax, or potentially, a tax on their income.
Finally, the parliamentary secretary noted that the issue of ways and means is one which the Chair takes very seriously. He referred to a November 28, 2007, Speaker's ruling regarding the case of Bill C-418, An Act to amend the Income Tax Act (deductibility of remuneration), introduced in the second session of the 39th Parliament. That bill had the effect of removing an existing deduction, and hence of increasing the amount of tax payable by certain corporations. It was clear that the bill, in removing a tax exemption, effectively increased the tax payable and therefore required that it be preceded by a notice of ways and means.
In her submission, the member for Mississauga East—Cooksville, in Debates of December 1, 2009, page 7,458, contended that the purpose of Bill C-470 is simply to add another reason that would allow the minister to revoke the registration of a charitable organization.
Bills involving provisions of the Income Tax Act can be complex and confusing. However, after careful examination of Bill C-470, as well as the authorities cited and the provisions of the Income Tax Act referred to by the parliamentary secretary, I have found the following reference from House of Commons Procedure and Practice, 2nd edition, page 900, particularly relevant. It states:
The House must first adopt a ways and means motion before a bill which imposes a tax or other charge on the taxpayer can be introduced. Charges on the people, in this context, refer to new taxes, the continuation of an expiring tax, an increase in the rate of an existing tax, or an extension of a tax to a new class of taxpayers.
It seems clear to the Chair that Bill C-470 does not propose a new tax, nor does it seek the continuation of an expiring tax, nor does it attempt to increase the rate of an existing tax.
The question which remains to be asked is the following: Does the bill extend a tax to a new class of taxpayer?
A close examination of the provisions of Bill C-470 indicates that the bill targets all registered charitable organizations, public foundations and private foundations, and seeks to introduce consequences for those within that class which pay to a single executive or employee annual compensation that exceeds $250,000.
I have difficulty in regarding organizations finding themselves in that situation as constituting unto themselves a “class of taxpayer”.
In the Chair's view, class of taxpayer refers in this case to registered charitable organizations, public foundations and private foundations, and Bill C-470 does not seek to alter that class.
It seems to me that the bill instead seeks to provide a new criterion that would allow the minister to determine into which existing class of taxpayer an organization falls. The existing tax regimes and the existing tax rates are not affected.
Accordingly, I rule that Bill C-470 does not extend the incidence of a tax to a new class of taxpayer and therefore need not be preceded by a ways and means motion.
I thank the House for its attention.
Albina Guarnieri Liberal Mississauga East—Cooksville, ON
Mr. Speaker, I would like to begin by thanking the Speaker for his charitable ruling. I would also like to thank the member for Newton—North Delta for seconding Bill C-470, an act to bring more transparency and charity to our nation's charities.
Every year, Canadians dig deep into their pockets to contribute billions of dollars to some 85,000 registered charities. That is one charity for every 300 Canadians. Most of the donors are far from millionaire philanthropists. They choose to make a financial sacrifice for what they hope is a worthy cause. They choose to save less for their retirement, their own children's education or some other personal investment or expenditure because they believe their dollars will be put to a higher purpose: helping sick children, aiding the poor and curing disease.
It is the goodwill and trust of these donors that must be a priority for this Parliament. However, the donors are not alone in putting their trust in charities. In the most recent year, the taxpayers of Canada contributed almost $3 billion in federal tax credits, so every Canadian has an interest in how this money is spent.
Last year, the Toronto Star shocked donors and taxpayers with the revelation that the head of one of Canada's largest charities, the SickKids Foundation, took home $2.7 million in salary and severance in a single year. Money intended for sick children was instead building a private fortune because of the lack of legislation. However, he is not alone in making charity pay. Others of the same charity reported making $430,000 and $290,000. In fact, one out of every dozen staff members was making over $160,000 U.S. to raise funds by asking others to sacrifice.
I refer to U.S. dollars because the only reason this information is public is because the United States is years ahead in transparency and this charity was registered in the United States as well as in Canada. Canadian laws keep donors in the dark about where their money is going. We know that 2,147 individuals earn more than $120,000 a year at charities. We do not know how much more. We can suspect that it might be a lot. We can suspect that because the average salary at charities is $71,000 compared to only $51,000 in private business.
It might be that people working in call centres are making $70,000 a year. However, it is more likely that they are making near-minimum wage while executives are earning many hundreds of thousands and driving up the average. Why should we not know? Why should donors not know? Why should taxpayers not know?
Six years ago, the United States recognized that it too had a significant problem with salaries at charities. At that time, the internal revenue service announced a new enforcement effort to identify and halt abuses by tax-exempt organizations that pay excessive compensation and benefits to their officers and other insiders. At the time, the IRS said:
We are concerned that some charities and private foundations are abusing their tax-exempt status by paying exorbitant compensation to their officers and others.
That was 2004. Where are we in Canada? The Library of Parliament has to scrape together bits and pieces to get any picture at all as to how executives at charities are spending money and, particularly, how much they take home for themselves.
I will read to the House some of what little we know. Some of our charities spend money on dining club memberships, golf memberships, fitness memberships, business-class travel, so-called flexible expense account provisions and even scholarship programs for their own kids. It is reported that of those who receive benefits, there is an average of $6,000 in retirement benefits, $4,000 in fringe benefits, $4,000 in auto benefits and another $4,000 in health benefits.
That is what we know from only one charity in one thousand responding to a survey. It is also far beyond what most donors could even hope for themselves.
The Province of Ontario requires charities that receive direct money from the province to disclose salaries above $100,000. Even in this small category, the top salary was more than half a million dollars.
We know that Canadians and taxpayers are contributing billions every year. We hope that most of it is spent with frugality and purpose. We know that some of it is spent on luxury rather than on charity.
I believe that the Minister of National Revenue has the moral imperative to ensure that donors know exactly how their dollars are spent. Bill C-470 is a basic first step.
Years behind the United States, Bill C-470 would not deal with many of the practices that have grabbed attention in recent years. From fundraising organizations that get a $180 commission for signing up a donor, regardless of the amount contributed, or to other high-class fundraising techniques that cost more than 30¢ of every $1, all that is left up to the minister to explore.
Bill C-470 would require charities to disclose the salaries of its five highest paid employees. In addition, a charity could be deregistered by the Minister of National Revenue if it pays any employee more than $250,000 in a single year. The threshold of $250,000 is more than a minister or a deputy minister earns to run a federal department. More important, it is about five times what the average donor earns.
At present, the revocation of a charity that violates the requirements of the Income Tax Act is at the discretion of the minister. Bill C-470 would not reduce that ministerial discretion. It would simply add to the existing grounds available to the minister.
An effective date of 2011 is included in the legislation so that charities would have time to adjust.
Bill C-470 would give the minister a much needed additional tool in the interests of the millions of Canadians who donate billions of dollars to charities every year.
Bill C-470 would also give charities a powerful incentive to maintain the trust of their donors while giving the minister the responsibility, the capacity and the discretion to respond to breaches of that trust.
I will respond to some of the usual resistance we can expect from those who do not wish to disclose and others who may want to maintain the luxury to which they have become accustomed.
First, on disclosure. Governments across Canada are forcing disclosure of top salaries of all those who rely on the taxpayer for their income. It does not matter whether one is the chief executive of a crown corporation or a transit worker with a lot of overtime, the person could find his or her name and income published. The principle is clear. If people take home taxpayer money, they cannot hide how much. As Canadian charities distribute almost $3 billion a year in tax credits, taxpayers have every right to know whether the salaries they are subsidizing are excessive.
Even more important, however, is the individual sacrifice of the donor. Publicly-traded corporations need to disclose their top salaries to the public. Why should donors not be told how much the top five employees at their chosen charity make? What is the excuse for that secrecy?
Perhaps a donor may decide that his or her money is better spent on charities that take less home for themselves. Charities that are really in it for the cause would benefit at the expense of charities that operate like a business, marketing a cause like it was a COLA, and being richly rewarded for every dime that comes in.
We all know people who have visited the offices of some charities and looked at the marble and grandeur and said that they do not need our money. All Canadians should have the same right to compare and direct their generosity to where it is most frugally managed.
One can only expect a hail of complaints and cries of impending doom from charities that pay more than $.25 million. They will say they need that money to attract top fundraising talent, people who know how to market a charitable cause.
I would submit that they will not because all 85,000 Canadian charities will be under the same rules competing for the same donor dollar. Therefore, charities would not need to keep upping the ante to keep the top people from going down the street because the charity down the street would have the same cap. The result would be that more money would end up where the donor actually intended it to go, not in the paycheques of executives but in the programs that the charity is there to serve.
Filings in the United States indicate that some very large Canadian charities are run by people earning very reasonable salaries. The CNIB, United Way and World Vision all reported top salaries far less than the $250,000 limit proposed in Bill C-470. Clearly, it is not necessary to pay people exorbitant sums to attract talent. However, we have an obligation to assure Canadian donors that whenever they donate to charity their dollars are not siphoned into luxury lifestyles.
This bill also aims to replace doubt and cynicism about the management of charities with the confidence that the personal financial sacrifice of donors is managed by people who are paid well but no so well as to make a mockery of the concept of charity.
Bill C-470 is about charity, transparency and respect for the generosity and sacrifice of millions of Canadian donors.
Blaine Calkins Conservative Wetaskiwin, AB
Mr. Speaker, I listened with great intent to my colleague and I thank her for bringing this important debate before the House of Commons. I have a couple of questions and concerns about her speech.
She mentioned that by setting this bar, the competition within Canada to attract these fundraising people would create an equal playing field. That is fine for an equal playing field within Canada but can she speak to whether it is an equal playing within North America? Does her bill propose to harmonize closely to what is happening in the rest of the fundraising world, in the wealthy countries of the world. If she could enlighten the House in that regard, I would be very appreciative.
Albina Guarnieri Liberal Mississauga East—Cooksville, ON
Mr. Speaker, I look forward to delving into those very issues more fully in the standing committee. In the moments we have today, perhaps I can share how our counterparts in the United States are reacting to the million dollar salaries.
Last week, Senator Chuck Grassley of Iowa, the top Republican on the finance committee, said, “The question is whether or not a very top-heavy organization might be siphoning off federal dollars that should be going to help kids...”. He was reacting to a $1 million payout package to the head of the Boys & Girls Clubs. He knew that was how much was paid because it is not a secret like it is in Canada.
The bill we are debating today would add and bring some transparency north of the border and give the minister the power to revoke any charity where $250,000 is not a big enough paycheque. I would say that would put us in sync with our neighbours south of the border.
Jim Maloway NDP Elmwood—Transcona, MB
Mr. Speaker, I congratulate the member on her bill, Bill C-470. She has described it as disclosure requirements for the five highest employees with a threshold of $250,000. She mentioned that the Province of Ontario requires disclosure of salaries over $100,000 for the top earners.
I would point out that in Manitoba for the last 15 or 20 years we have something called the public sector compensation act that lists all employees working for the government whose salaries exceed $50,000.
Does the member have any comments on whether this could be added into the bill at committee so that we would have more than just the top five salaries, that we would have a list of everyone earning beyond a threshold of $50,000, $75,000 or $100,000?
Albina Guarnieri Liberal Mississauga East—Cooksville, ON
Mr. Speaker, the hon. member makes the point that I made in my speech. Many of the provinces are ahead of the federal government when it comes to disclosure of how charities are dealt with. I welcome any suggestions from the hon. member and I encourage him to bring his comments forward in committee so they can be more fully explored.
Blaine Calkins Conservative Wetaskiwin, AB
I have just one more question, Mr. Speaker, which I forgot to ask the first time I stood.
I think most Canadians, when they choose to make a donation to a charity, are busy people and do not have a lot of time. They are consumed with their daily lives but they also want to do something good. They have a few seconds to make a quick decision as to whether or not they want to choose to support a charity.
Could the member enlighten the House on any of the research she has done? Would it be helpful to have in legislation that during a fundraising ad, on a fundraising leaflet or on any advertising on television that top executive salaries should be displayed for the purpose of the people who are about to make those donations? Should that be listed and does she think that we should go that way?
Albina Guarnieri Liberal Mississauga East—Cooksville, ON
Mr. Speaker, the member made a suggestion and I welcome all suggestions, but what I wanted to bring forward in the debate today is that members have a clear choice. They can choose transparency or secrecy. They can choose frugality or support excess.
We have been thwarted on this road before in Parliament and now we are behind the rest of the world and we are playing catch-up.
I implore all members to support this legislation. It is straightforward and it is about transparency. It would give the minister a much needed tool to deal with charities.
Ted Menzies ConservativeParliamentary Secretary to the Minister of Finance
Mr. Speaker, thank you for the opportunity to address today's proposal by the member for Mississauga East—Cooksville, in the form of Bill C-470. I am sure it will stimulate some very interesting debate. It is very timely and I congratulate the member for getting her private member's bill on the floor of the House. That is an accomplishment for any member of this House. As I say, it will provide an interesting discussion of charitable organizations and the compensation given to those employed by such organizations, a discussion that is certainly worth having.
Before addressing the specifics of today's proposal, let us look at the overall role and contribution of charities and the charitable sector in Canada.
As all members of this chamber would agree, charities are a very important part of the fabric of any country. Of course, that holds true for Canada as well. The Canadian Centre for Philanthropy has labelled charities and the larger voluntary sector as the vital third pillar of Canada's civil society. Indeed, there are approximately 85,000 highly diverse registered charities in Canada. These charities operate in a wide variety of areas, such as local services, health, the churches, arts and culture, education and research. I am a member of the world's largest service organization, the Lions Clubs International, and have been involved in many fundraising events all across this country.
What is more, according to Imagine Canada:
The nonprofit and voluntary sector is a significant economic force in Canada. When the value of volunteer effort is included, this sector contributes 8.5% to Canada’s GDP and is almost as large an employer as the country’s entire manufacturing industry.
Some of the smallest entities are run entirely by volunteers, with very limited budgets. At the other end of the spectrum are hospitals and universities and colleges, which are large organizations, both in terms of their budgets and in the number of people they employ.
Accordingly, the revenue base of these charities is equally diverse. Some depend primarily on donations they receive from the public, some raise considerable income from fees, while others operate related businesses. Still others depend highly on revenues from the federal and provincial governments.
There are three types of registered charities in Canada: charitable organizations, public foundations, and private foundations. The designation a charity receives depends on its structure, its sources of funding and its mode of operation.
The first category, charitable organizations, includes the majority of registered charities here in Canada. A charitable organization primarily carries on its own activities. It has a board of directors that is made up mostly or entirely of individuals who operate at arm's length from one another. Finally, it generally receives its funding from a variety of donors.
The second type of registered charity is a public foundation. Local community foundations or hospital foundations are typically structured this way. A public foundation is similar to a charitable organization in that it also receives its funding from a variety of arm's-length donors, and also has a board of directors that is made up primarily of persons who are at arm's length from one another. However, a public foundation primarily exists to help finance one or more charitable organizations. It may deliver some of its own programs, but most of its activities generally involve helping charitable organizations to run their programs.
Finally, the third type of registered charity is a private foundation. A private foundation differs from a charitable organization and a public foundation in that its funding often comes from one person or a group of related persons. This is often the case with a family foundation. A private foundation may fund other charities or it may operate its own programs.
The diversity of the charitable sector in Canada is especially noticeable in the size of its operations. Over half of the registered charities in Canada have total annual revenues of less than $100,000. At the other end of the spectrum, about 10% of charities have annual revenues that exceed $1 million. Again, as mentioned earlier, while charities have numerous sources of revenues and volunteer support, the generous donations of individual Canadians continue to be one of the principal sources. According to the recent “Canada Survey of Giving, Volunteering and Participating”:
In 2007, Canadians donated a total of $10 billion, an increase of 12% or $1.1 billion since 2004, and volunteered 2.1 billion hours, a 4.2% increase. The average donation increased to $437 from $400 in 2004.
In some of the larger charities, such as hospitals, health care institutions, universities and colleges, executives are responsible for overseeing the spending of millions of dollars in resources. They manage hundreds of employees. These charities are often involved in carrying out highly complex work. Because of the responsibilities placed on the shoulders of the leaders of large charities, such charities offer compensation for their executives. Today's proposal surrounds that issue of compensation.
Let us briefly turn to the regulation of charities in Canada and provide the chamber an overview of the measures currently in place to deal with just that issue and other issues related to today's proposal.
The Canada Revenue Agency, or CRA, has various tools to monitor and report on compensation at charities. At the federal level, the CRA administers a system to register charities under the Income Tax Act. As the regulator of charities, the CRA's responsibilities include processing applications for registration, offering technical advice on operating a charity, handling audit and compliance activities and providing general information to the public. Regulation of the charitable sector by CRA is based on both common law and the provisions of the Income Tax Act.
The common law requirement that charities devote their resources to charitable activities is central to how CRA provides guidance to the sector and enforces the rules. For instance, recent legislative and administrative reforms have given CRA additional compliance tools to use in the regulation of the charitable sector. An example of these include intermediate sanctions in the form of taxes or penalties for charities that do not comply with the requirements of the Income Tax Act. Prior to this, the only sanction available to the CRA was revocation of registered charity status.
At the same time, the concept of undue personal benefit has been clarified in the Income Tax Act. As a result, in the case of excessive executive compensation, the CRA has the authority under the Income Tax Act to conduct an investigation to determine whether the charity is indeed fulfilling its charitable purposes. It also has the authority to determine whether there is undue personal benefit and to impose a range of penalties up to and including the suspension of receipting privileges.
There is also more public information available today on the activities of registered charities. This helps increase accountability in the sector by providing prospective donors with information to determine for themselves whether they would like to donate to a particular charity. Under the Income Tax Act, all registered charities are required to complete a registered charity information return. This in turn is published on the CRA website and includes information about compensation.
What is more, our Conservative government recently made a key change to further improve the accountability surrounding charities. Up until 2008, charities were required to report on the compensation of the five highest paid employees and indicate their salary range, with the last threshold being $119,000 and over. We have changed that. Starting in 2009, charities were required to report the 10 highest compensated positions. The annual compensation categories were also expanded, with the last threshold being $350,000 and over.
The introduction of this new reporting on employee compensation has served as a key tool to help increase transparency in terms of how charitable resources are being used. Increased transparency is providing the generous Canadians who are donating their hard-earned money with even more information to help guide their giving decisions. Such concrete measures are examples of useful initiatives that our government has taken to address the broader accountability concerns.
Christiane Gagnon Bloc Québec, QC
Mr. Speaker, today we are talking about Bill C-470, which would amend the Income Tax Act in order to create certain conditions under which a charitable organization's registration could be revoked.
I will start by saying that the Bloc Québécois is in favour of this bill and will support it at second reading. We will then be able to study it further in committee and amend it as needed.
I would like to discuss the various amendments that Bill C-470 would make to the Income Tax Act. I will then outline the reasons behind the Bloc Québécois' support as well as some of the reservations we have about this bill.
Bill C-470 would cap salaries and other compensation given to directors of charitable organizations and would, by preventing excess, ensure the overall credibility of these types of organizations. The bill would cap charitable organization directors' salaries at $250,000.
Bill C-470 would also allow the minister to provide the public with a list of the five highest-paid employees in each registered charitable organization. This would make charitable organizations more transparent and would allow the public to trust them more.
The bill does not cover everything; it is a little bill. I would like to speak about the Bloc's stance regarding the two amendments to the Income Tax Act proposed in this bill.
We feel that this bill's goal is to create balance. On one hand, the ceiling for salaries cannot be too low because that would turn off the most qualified candidates. On the other hand, organizations have to maintain a certain level of credibility so that the public will trust them. We must strike a balance.
It is also important that this credibility and trust be maintained. More and more people in Quebec are making donations to charitable organizations.
According to Imagine Canada, from 2004 to 2007, Quebeckers increased the value of their donations by 24%, giving $1.17 billion of the $12 billion donated annually in Canada. That is the biggest increase in the country. There has also been an increase in major donations, that is, donations over $500,000.
If we want this trend to continue, the public must have confidence that these donations are being put to good use, especially in the current context, and that they are not being used to pay excessive salaries. Also, scrupulousness and performance must be a key part of the commitment made by the directors of such organizations.
However, the Bloc Québécois believes that a thorough review of the compensation paid to directors is necessary, so that charitable organizations can continue recruiting qualified staff despite the $250,000 salary cap.
As Peter Broder, a lawyer with an Edmonton foundation, stated:
—those salaries need to be seen in a broader context. That means a hard look at both the nature of the responsibilities of these individuals, given the mandate and scope of their charity's work, and better consideration of the salary structure within the sector as a whole...if we are to have a sector where people want to make a career, and a sector that attracts innovative and dynamic individuals, the other inadequacies of the current model need to be addressed.
A salary cap must be established in order to avoid excessive salary inflation. In recent years, the salaries of directors of charities have increased significantly. Last year in Canada alone, they went up 17%, and between 1999 and 2008, they went up 44%. That is a significant increase.
Since there are no guidelines or safeguards, many concerns have been raised regarding excessive salary inflation in the very near future, which has happened in the United States, where the median salary was $410,000 U.S. in 2007. That is a lot of money.
When this bill is being studied in committee, we must consider adding a provision that will allow us to ensure that salary increases remain reasonable. This will act as a control mechanism.
In Quebec, with the average salary of organization directors being $125,000, a $250,000 ceiling leaves a lot of room to manoeuvre when it comes to salary increases. We know that it is more outside Quebec where somewhat higher salaries are paid to directors of charitable organizations. That is not the case in Quebec.
For greater transparency, people would also like to know how the money they donate to charitable organizations is spent. Some organizations have shown some reluctance to disclose the salaries of their directors, thereby fuelling a culture of secrecy that could hurt the image of other organizations.
The salaries of the directors could be disclosed without naming the people who earn these exorbitant salaries. We also feel that such a measure would contribute to making charitable organizations more transparent.
I believe it is necessary to look at a person's salary without that person being named in order to comply with the Privacy Act. The purpose of this initiative is to increase public trust in charitable organizations and make people more inclined to make donations. If there were more transparency, the public would be more inclined to make donations since people would see that their money is well spent and that directors are not too greedy when it comes to their salaries.
Nonetheless, we have to make sure this bill does not encroach on the private lives of the directors, as I was saying earlier, so that their lives are not paraded through the media. When this private member's bill is studied, we have to be careful of any possible invasion of privacy. That is why we are proposing that the requirement to publish the names, job titles and salaries of the five highest-paid employees of each organization be studied in committee and possibly amended to remove the name of the person whose salary will be published.
The publication of the salaries, as set out in Bill C-470, will allow comparisons to be made between the salaries of the directors of agencies of similar size and will help determine whether any stand out as being unjustifiably high.
In my opinion, that should be the objective. We cannot compare apples and oranges, that is, salaries paid by a large corporation and those paid by a small one. We must be fairly vigilant when it comes to employees of charitable organizations that we deal with. A public list would make it easier to establish an acceptable average based on data for the sector as a whole.
The Bloc Québécois is in favour of this bill, which should be studied in committee. We have a few minor reservations. However, the member who introduced the bill is willing to examine the reservations about this bill expressed by other parties.
If this bill is adopted at second reading, committee members will have the opportunity to sit down, discuss it and get the facts about a number of charitable organizations. I believe that the member who introduced this bill got it right and has identified a specific problem. For example, when a charitable organization pays $500,000 to an executive, and that amount represents a significant percentage of the funds collected by the organization, the salary has to be justified.
As I was saying, that may not be the case for our charitable organizations in Quebec. I know that, in Canada, there are other ways of doing things and charitable organizations are on a different scale, as they have patrons and receive significant donations.
We must also examine the qualifications of the incumbents of these positions. We believe that it is very important to maintain this balance and to reassure the public about how charitable organizations spend their donations.
We will be following this matter with a great deal of interest. We hope that the committee will make amendments to ensure that transparency is the objective of this bill.
Carol Hughes NDP Algoma—Manitoulin—Kapuskasing, ON
Mr. Speaker, I am glad to be able to join the debate and express my support for Bill C-470, a bill that I feel is of utmost importance in ensuring that Canadians retain faith in giving money to charitable organizations across the country.
The bill will provide Canadians with the knowledge that the presidents, CEOs and other executives of the thousands of registered charities throughout Canada are limited in the amount of compensation they are receiving. Therefore Canadians will feel more confident donating to charities without having to worry that the money they are providing is going to line someone's already-deep pockets.
With the current state of the economy, perhaps more than ever we need charities that act in the best interests of Canadians. We need food banks to ensure that people who find themselves fallen on hard times can eat property. We need health and wellness charities to guarantee that we can adequately support the individuals and families of those who find themselves sick or injured.
To ensure Canadians feel confident in giving what they can to charities, we need to give them the benefit of the doubt that the money they provide is actually going to support their chosen cause.
The bill will put a much-needed cap on the amount of compensation executives of charities can receive. The bill will limit executives working for charitable organizations to a yearly compensation of a more-than-reasonable $250,000, with compensation in this instance to include all salaries, bonuses, wages, commissions, fees and honoraria.
It seems only logical to place a limit on the amount of money executives of charitable organizations receive, both as a benefit of providing greater oversight into the inner workings of charitable organizations, and as a method of restoring and maintaining donor confidence in an industry that has been tested by scandal over the past few years.
Here is an example of why this bill is needed. Some members may be familiar with one of the more high profile scandals over the past year with regard to executive bonuses. It involved former SickKids Foundation president, Michael O'Mahoney. O'Mahoney reportedly received a salary of $600,000 for the fiscal year of 2008-09. In addition to this, O'Mahoney also received a bonus of $2.1 million upon leaving his post, a bonus that the SickKids Foundation referred to as an incentive payment for the work he did for the charity.
Most of us called it a golden parachute, the kind of excess we are all too used to in the corporate world but would not expect in a charity. Is it not a little ironic that the president of one of Canada's most highly regarded philanthropic organizations pulled in a yearly income that would rival that of all but the most lucrative corporate salaries? Is it not also ironic that O'Mahoney pulled in a far greater salary than Mary Jo Haddad, president and CEO of the Hospital for Sick Children, for whom the SickKids Foundation does its primary fundraising?
To reiterate, this is not a slight against the SickKids Foundation or the Hospital for Sick Children. SickKids is one of this country's most beloved and well respected charitable organizations. They have done exceptional work to ensure that the Hospital for Sick Children is adequately funded and is provided with the latest in cutting-edge treatments and preventive care. The problem I have with a situation such as this is that the money provided to Mr. O'Mahoney would have been taken out of the coffers of the SickKids Foundation, thus undercutting the amount of money the charity could provide to the Hospital for Sick Children and damaging the reputation of the charity, which in turn hurt their donations. And that is exactly what happened.
When this story broke in the news media, the SickKids Foundation received a backlash from donors in the form of a reduction in donations. People were not willing to pad someone's golden parachute. They wanted to help their community. The end result was a 10% decrease in donations and a 38-staff layoff.
Why would we allow an individual to walk away from a post with $2.7 million while the charity he was supposed to support lost vital donations, income and staff? Many will argue that paying these kinds of salaries and bonuses is the best way to attract the brightest talent, but these are charitable organizations and should not be the types of places for upper-tier executives to act in a manner that is comparable to Bay Street executives.
If the main focus for these executives is to line their pockets, I am certain there are many corporations that would love to hire them, but I cannot in good conscience sit and watch them play with funds that are designed to help people. At least with this bill, the minister will be able to exercise discretion to de-list charities whose executives see fit to claim massive salaries under the guise of charitable work.
The Canada Revenue Agency's charities directorate has the ability to audit roughly 1,000 charities per year. With approximately 100,000 registered charitable organizations in this country, that amounts to currently being able to perform an audit of a charity once every 100 years. Not only that, if the charities directorate actually digs up some form of unscrupulous dealings within a charity, it has very limited means to warn the public about such matters, as current tax laws keep the CRA from warning the public.
We need more stringent oversight into how charitable organizations do business. Many charities have been using commission-based incentives for employees, which can lead to aggressive, often-misleading tactics designed to lure people into donating to charities they might not wish to support otherwise. The use of such tactics is certainly frowned upon in the charity community. But with such lax oversight in this industry, it is almost impossible to discover who is using these methods.
It is not enough to simply expect charitable organizations to perform their duties in an honourable manner. I would assume most charities do operate nobly, but to simply assume they are is not enough. Take the example of the Wish Kids Foundation controversy of 2005. The fraudulent charity, which in name closely resembles the renowned Make-A-Wish Foundation of Canada, took $900,000 from donors who thought they were helping to give terminally ill children their dying wish.
As it turns out, not a single dime of the money raised by the Wish Kids Foundation went to sick kids. Instead, the executive director of the foundation, and I use the term loosely, took the money, purchased a new car, funded flying lessons for his son and put a down payment on a private jet. Think of the good $900,000 could have done for terminally ill children to enhance their quality of life, if only for one great day.
We need to work to ensure Canadian charities are acting in the best interests of the Canadian people. I am positive most are, but the few who are acting unethically tarnish the reputation of those looking to do some good for our country and the world at large.
If nothing else, limiting the amount of money executives earn within charitable organizations will provide much-needed oversight into how these organizations are run. It will allow us to more accurately see whose hands are in the till. People are cynical enough these days. We need to feel that institutions that stand for the name of good and charitable work are in fact delivering on their promise.
To summarize, given that there are so many charities out there, it is important that regulations are in place. We need to ensure that those dollars actually go to the right locations. I think the problem here is that we are seeing CEOs who are earning more than the Prime Minister, and he is running the country. If this were in place, I think we might end up seeing an increase in donations.
I would like to leave it at that. I certainly hope every member in this Parliament will support this bill.
John McCallum Liberal Markham—Unionville, ON
Mr. Speaker, I am pleased to rise in support of the bill proposed by my colleague, the member for Mississauga East—Cooksville. We on this side of the House believe the charitable sector is extremely important and it is important for government to act to strengthen it and to increase the credibility of the charitable sector in the minds of Canadian donors.
My colleague's bill would do just that. It is particularly timely because the government recently has acted to undermine the credibility of the charitable sector in the eyes of Canadians. Therefore, my colleague's bill is particularly important in order to redress the imbalance caused by the government's behaviour.
The first example I will mention is this. On January 14, the government promised to match the donations of Canadians for earthquake ravaged Haiti through the Haiti earthquake relief fund. However, two months and one day later, news has broken that the government has not sent a single matched dollar down to Haiti. This is causing a certain amount of anger in the Haitian community and among those who have contributed to Haiti on the understanding that the government would expeditiously match their contributions dollar for dollar. That hurts the government's credibility. The next time there is a disaster and the government promises to provide matching funds Canadians, who will no doubt respond with generosity, may not be as likely to believe the government will act swiftly and with purpose.
The second example where the government has undermined the charitable sector concerns the finance committee and prebudget proposals, which would have had the effect of enhancing the ability of Canadians to make charitable contributions. I believe the finance committee unanimously endorsed the following:
The federal government examine incentives that would have the effect of increasing the level of charitable giving by businesses and individuals. In particular, the government should consider:
an increase in the charitable tax credit rate to 39% for incremental annual increases in giving, provided that annual giving is more than $200 and less than $10,000;
the creation of a corporate structure for not-for-profit organizations that would allow the issuance of share capital and other securities;
and the elimination of the capital gains tax on donations of real estate and land to public charities.
Unfortunately, the finance minister did not share the finance committee's enthusiasm for strengthening Canada's charitable sector in one or more of the three ways that I have just described. However, as we know, there was no mention of any of these recommendations in budget 2010.
My first point is that while we on this side believe it is important to strengthen the charitable sector and to strengthen the credibility of that sector in the minds of donors, the government first, by not following through expeditiously on its matching donations to Haiti, and second, by totally ignoring the proposals to improve the ability of Canadians to give to the charitable sector, particularly at a time of recession when those donations are needed more than ever and when Canadians are less able than normally to afford to give them, the government declined to do. Therefore, it is more important than usual that a bill like that of my colleague arrives in order to strengthen the credibility of the charitable sector.
In the United States, charities file the salaries of their CEO and other top executives with the IRS and they are publicly accessible for anyone who is thinking of donating to that charity. Canadians are not so lucky.
Last fall, one CEO departed a very well known charity, with a $2.7 million incentive payment in cash for leaving that charitable organization before his contract was finished. This was on top of his annual $600,000 salary.
The old saying is “It takes money to make money”, and there is no doubt some truth to that. Some of Canada's largest charities obviously require some very good talent at the top if they are to raise the funds they need to provide services.
Even more important than this, however, is that Canadian donors can feel confident that the money they have worked hard for and donated to charity goes almost entirely toward the charitable purposes it was intended for and not toward very large executive compensation packages. Think about the example I just gave.
It takes a lot of donations from a lot of Canadians to pay someone $2.7 million. To make this tangible, let us assume that someone signed up to give $10 a month through automatic withdrawals to a charity. That is $120 a year. It would take more than 22,000 Canadians, at this level of donations, just to donate enough money to pay the departing CEO of that charity. I would argue this could be enough to damage the confidence some Canadians have in our charitable sector.
Worse, news only emerged about this case because the amounts were discovered in publicly available IRS documents, as this charity operates on both sides of the border. Media reports indicated that Canadians were so outraged by the revelation that the charity had to set up a special phone line to deal with all the incoming calls.
Canadians had a right to be outraged. Canadians listening at home should know that my good colleague, the member for Mississauga East—Cooksville, has heard them, which is why we are debating Bill C-470 today.
What exactly would Bill C-470 do to help deter this kind of behaviour and restore the confidence of donors in the charitable sector?
First, it would limit the pay of a charity's CEO to $250,000 per year. It would similarly limit the pay of other executives who work at a charity. The penalty for non-compliance would be that the charity would face revocation of its charitable status, quite a stiff penalty that I am sure every charity would want to avoid.
On the face of it, $250,000 seems to be a reasonable pay threshold for 2010. Should the bill go to committee and it is discovered that a very large charity cannot hope to find a CEO for that amount, I would be amendable to amending the bill slightly.
However, as my colleague has pointed out, there is also a further safeguard in that the minister is not obliged to force the cap of a $250,000 salary, so one cannot exclude the possibility that in some few cases there may be very large charities that, in order to be effective, may have to exceed that limit. The discretion would be in the hands of the minister to allow that and/or there could be amendments to permit it under certain circumstances.
Recent media reports have revealed that some of our larger charities, such as Big Brothers Big Sisters of Canada and the United Way of Canada, would not run afoul of the law without current executive pay incentives. Therefore, on the surface, $250,000 seems to be a good starting point for Bill C-470.
Once again, I would like to congratulate my colleague, the hon. member for Mississauga East—Cooksville, on her excellent work on behalf of Canadians. I have certainly heard from my constituents about the $2.7 million example I mentioned earlier. I am sure that many of the members of the House have as well.
I hope all members will listen to those Canadians and vote to send Bill C-470 to committee.
Blaine Calkins Conservative Wetaskiwin, AB
Mr. Speaker, I am happy to have the opportunity to comment on today's proposal brought forward by the member for Mississauga East—Cooksville, regarding registered charities and accountability.
Before discussing the proposal, let me stress that our Conservative government, and I hope all parliamentarians, recognize the invaluable role that charities play in communities across Canada.
Since forming government in 2006, we have taken measures to support charities and to make it a bit easier to support the great work that they do. Indeed, in our very first budget, budget 2006, our government took a key step when we completely exempted donations of publicly listed securities to public charities from capital gains tax. This gives charities a powerful tool for raising funds necessary to meet the needs of Canadians.
In the next year, in budget 2007, we further enhanced support for charities by extending this complete exemption to donations of publicly listed securities to private foundations. As a result of these measures, the rate of tax assistance is about 45% on cash donations and can range as high as 60% on donations of publicly listed securities to charities.
Both of these measures have resulted in a significant increase in donations to charities. Let me read from an article in the Saskatoon StarPhoenix newspaper. It states:
—this is already making a difference in charitable giving in Canada...For a charity such as the Saskatoon Community Foundation, there is a new path ahead for long-term growth, thanks to the tax change...Trevor Forrest, the executive director of the Saskatoon Community Foundation, says in less than two years the foundation's endowment has grown by several hundred thousand dollars through donated stock.
We built on that record recently in budget 2010 when our Conservative government proposed significant reforms to what is known as the disbursement quota.
The disbursement quota was originally intended as a means to track registered charity resources when introduced nearly three decades ago. However, since 1976 the government, through Canada Revenue Agency, now has more powerful legislative and administrative tools to track the fundraising of charities and other practices.
As stated in the budget, the new tools are widely viewed as more effective and a more direct way of tracking charities than the disbursement quota. What is more, many have observed that the present overlap caused by the disbursement quota has led to excessive duplication and a costly red tape burden on charities, particularly for small and rural charities.
The Deputy Speaker Conservative Andrew Scheer
Unfortunately, I will have to stop the hon. member there as he was forewarned he would not get his full time slot in. However, the good news is he will have seven and a half minutes to conclude his remarks the next time the bill is before the House.
The time provided for the consideration of private members' business has now expired and the order is dropped to the bottom of the order or precedence on the order paper.
Wayne Easter Liberal Malpeque, PE
moved:
That, in the opinion of this House, the government should show leadership in reducing government waste by rolling-back its own expenditures on massive amounts of partisan, taxpayer-paid government advertising, ministerial use of government aircraft, the hiring of external “consultants”, and the size of the Cabinet, the Prime Minister’s Office and the Privy Council Office, which together could represent a saving to taxpayers of more than a billion dollars; and to show its own leadership in this regard, the House directs its Board of Internal Economy to take all necessary steps to end immediately the wasteful practice of Members sending mass mailings, known as “ten-percenters”, into ridings other than their own, which could represent another saving to taxpayers of more than $10 million.
Mr. Speaker, I am most pleased to move this motion. I will be splitting my time with the seconder of the motion, the member for Winnipeg South Centre.
I am most pleased to move this motion as it gives both the government and the House direction in a realistic way in a number of areas where substantial savings could be made. The first part of the motion deals with government waste and rolling back a lot of government expenditures that are paid for by taxpayers, everything from advertising and the size of the cabinet to the size of the Privy Council Office. The second part of the motion deals with what we call ten percenters. I will get to that in a moment.
Adoption of this motion and these expenditure reductions would make for better government, less propaganda and maybe even a little more honesty in what goes out to Canadians from this place. Let me start with the part of the motion that deals with reduced government waste by rolling back massive amounts of taxpayer-paid partisan government advertising.
I know I am not allowed to use props and I will not, but I have in my hand a full-page ad that was in Prince Edward Island's Journal Pioneer last Wednesday or Thursday, and Saturday's The Guardian. This ad has been in every paper across the country in the last few weeks.
Never in Canadian history, I believe, have we seen as much propaganda come from a government, no doubt straight out of the PMO, designed not so much to provide information as to leave the impression that the governing party is doing more than it really is but, worse, attempting to leave the impression that it is doing something it really is not.
All Canadians have seen the ad in the papers, on TV and on the Internet. I would love to go through the copy I have to point out the areas of error but I do not have time at the moment. It would be one thing if it were honest fact, but to a great extent this ad and others like it are a work of fiction, with some truths and a lot of half-truths thrown in. Taxpayers' money in the hundreds of millions of dollars has been used I believe to manipulate the public mind.
Let me mention a couple of points to show where this ad is misleading. The full-page ad talks about measures in the budget, such as lowering taxes. Nothing could be further from the truth. What about income trusts being taxed? What about payroll taxes going up an extraordinary amount to a point in 2011 where it is expected that that tax increase alone could cause the loss of 200,000 jobs? The ad leaves the impression that the government is lowering taxes.
My role is agriculture critic for the Liberal Party. The government is leaving the impression it is doing something when it comes to agriculture. Never have we seen such a record of failure. In the hog industry, there is the worst financial crisis ever in Canadian history. The beef industry is not far behind. There has been a $9 billion increase in farm debt in the term of the Conservative government. Safety nets are paying out $1 billion less and there is not one dime in the budget. It is mentioned in the ad to leave the impression that the government is doing something. I would love to go through them one by one, but time does not allow me to do that.
There is more waste with the huge increase in the size of the cabinet, as was mentioned in the motion. Everyone in the cabinet is a full cabinet minister with huge staffs, cars and drivers, research departments and heaven knows what else. One can only ask whether it is to have more people to push photo ops, publish propaganda, raise funds for the party or what? It is the first cabinet in our history in which all cabinet ministers have cars and all the paraphernalia. What a waste.
Greg Rickford Conservative Kenora, ON
Is it any different from the way you were, Wayne? Is it different or what's your point?
Wayne Easter Liberal Malpeque, PE
I will say in the House that I believe it is designed that way so that they can get out there, do the photo ops—
The Deputy Speaker Conservative Andrew Scheer
Order. I just want to assure all members that there will be a period for questions and comments. When the hon. member for Malpeque has finished his speech, those members interested in furthering other points can do so during the questions and comments period.
For now we will give the floor to the hon. member for Malpeque. I would like to hear his remarks.
Wayne Easter Liberal Malpeque, PE
Mr. Speaker, they react over there, but the truth hurts. They hate to hear the truth but the truth does hurt indeed.
Let us look at the PCO and the PMO. Wow, the expenditures there; that is where the big spending happens. That is a power centre controlled by the Prime Minister, which is interesting and sad at the same time. In that area spending is going up, a 21% increase, while everywhere else spending is frozen. Again, this is being used to propagandize the Canadian people.
Under the Conservatives, spending on transportation and communication has risen by $820 million or 32% over its 2005-06 level. Spending on management consultants has gone up by $355 million over the same period, an astounding 165% increase over the previous Liberal government. That is atrocious. That is an area where there can be spending control and it could make such a difference.
The second part of the motion deals with an area that this House could direct. I will read this part of the motion again:
...the House directs its Board of Internal Economy to take all necessary steps to end immediately the wasteful practice of Members sending mass mailings, known as “ten-percenters”, into ridings other than their own, which could represent another saving to taxpayers of more than $10 million.
I have here, Mr. Speaker, and I will keep it down so it is out of camera—
The Deputy Speaker Conservative Andrew Scheer
This is the second time the hon. member for Malpeque has held something up. If he is using something that is a legitimate tool to read off, that is one thing, but if he is holding things up to show the House, I would ask him to refrain from doing that, and to stick to his remarks.
Wayne Easter Liberal Malpeque, PE
Mr. Speaker, I could fire these in the air. There is so many of them they would pollute this place with Conservative propaganda. Those are what come into my riding.
As far as I am concerned, it is just propaganda. I cannot say in how many instances when I have gone into a post office that about 50% of them have been thrown into the garbage can because constituents across Canada actually believe those ten percenters are nothing but a waste of money. It is not about providing information. It is about providing propaganda. The original intent was to provide information on government programs to constituents. Ten percenters have evolved into being little more than propaganda pieces for partisan purposes by all parties, but worst of all, the government party.
What comes into my riding is mostly misinformation, personal attacks on me and my leader. In some instances, it is nothing short of hate mail. Let me give an example. One that came in goes after my leader; I know I cannot name him in the House. It states that he has called himself (a) a samurai warrior, (b) a cosmopolitan or (c) horribly arrogant. It is full of lots of pictures.
This literature, this ten percenter, is designed to undermine an individual's credibility. It is certainly not designed to outline government policy. It attempts in subtle and not so subtle ways to demonize the leader of the official opposition or, in my own case, me. It undermines him as an individual. It personalizes the issue. It raises questions in people's minds on character. It raises suspicions. Is that good use of taxpayers' money?
We all came here to debate issues. That is what we came here to do, instead now, it has become personalized and there are attacks on individuals. These ten percenters are part of the problem. They are a huge part of the problem. They are a waste of money. Millions of dollars are being wasted.
I would like to get into the one about me, the one the Conservatives sent about me which basically asks if I am here. It leaves the impression that I was not here for a vote, when actually I was here 100% to vote in the last Parliament.
The bottom line is that this kind of propaganda must stop. I encourage the House to vote against this propaganda, to stand up and stop these attacks.
Harold Albrecht Conservative Kitchener—Conestoga, ON
Mr. Speaker, I actually had to chuckle a few times during the member's speech because the hypocrisy was overwhelming. His motion refers to reducing government waste. I wonder whether he is able to tell this House and the Canadian people when he expects the $150 million that was diverted to his friends in the Liberal Party will be returned to Canadian taxpayers.
Wayne Easter Liberal Malpeque, PE
Mr. Speaker, this is what we get into with the current government. Rather than accepting their responsibility as a government and dealing with the motion, the Conservatives go back to some of the misinformation that was provided when they were in opposition.
Let us deal with the real issues. Let us deal with these ten percenters going out to the ridings. Let us deal with the government waste.
The member must admit that this is the biggest full-size cabinet and there is waste there. He must admit that the Privy Council Office spending is going up. He must admit that the Conservatives have sent out something like 10 million pieces of literature, called ten percenters, that is nothing more than propaganda, hate mail and misinformation and that it has to stop.
I am asking the member to deal with the real issue and to help us stop this stuff from going out to Canadians and angering Canadians about the political process.
Libby Davies NDP Vancouver East, BC
Mr. Speaker, the member has given some detail of the kinds of waste and massive propaganda that we have seen from the Conservative government.
I did want to make a comment about the second part of the motion having to do with what is called the ten percenters. This has been a very hot topic of debate. We often get emails from people saying that they do not like these kinds of mailings. We also get other emails and feedback from the public saying that these ten percenters or other mailings from their members can be very important.
I want to question the member on the way the motion is worded. As I understand it, the way it is put forward, it would basically eliminate all mailings from members other than in their own ridings. I would like him to clarify this point.
For example, at least in our party when one is a critic of a particular issue, perhaps agriculture or housing or foreign affairs, one does mailings legitimately across the country. Is the member suggesting that those mailings be eliminated as part of this motion?