EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 7, 1995

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[English]

The Chair: Could we come to order. The finance committee is beginning its pre-budget hearings. Today we have with us leaders from the charitable sector throughout Canada. We have 15 different groups, and we're very grateful to all of you for having come before us on such short notice.

What I would propose, because of the number of presenters we have, is that opening remarks be limited to a maximum of six minutes. After we have heard from every group we could take a short break and then continue the questions.

I would like to start, please, with Mr. Don Johnson from the National Ballet of Canada, who has with him today Mr. Ron Gage, the chief executive officer of Ernst & Young, and Satya Poddar, also of Ernst & Young.

Mr. Gage has to leave early, so, Mr. Johnson, if you could start off, I'd appreciate it. Thank you very much.

Could I also suggest to our presenters that members of this committee are very aware of the importance played in our society by the charitable sector and the not-for-profit sectors. Therefore, you could perhaps limit your remarks to suggestions as to how the federal government could change its role in relationship to you so that your efforts might be enhanced. Thank you very much.

Mr. Johnson.

Mr. Donald Johnson (Director, National Ballet of Canada): Thank you. I'm here today representing the National Ballet of Canada, but the same principles I'm recommending apply to all cultural organizations as well as all charitable institutions.

We're here today with some constructive suggestions as to how the government can deal with its objective of deficit reduction and at the same time help solve the problem of the funding crisis faced by arts organizations in Canada today as a result of government spending support reductions.

We looked at how other countries treat charitable donations from a tax perspective. We focused particularly on the United States to benefit from their experience, because we believe the U.S. experience is the most relevant to Canada.

Of the two prime differences between the tax treatment of charitable donations in Canada and the United States, first, and most important, in the United States donations to charitable organizations of gifts of appreciated property are exempt from capital gains taxes. The other significant difference is that in Canada there's an annual limit of 20% of one's net income that can be deducted for charitable donations whereas in the United States the limit is 50%.

We have two recommendations to make. They are that gifts of appreciated property be exempt from capital gains taxes and, secondly, that the current 20% limit be raised to 50%.

Perhaps we can focus on the U.S. experience and identify the benefits that their tax incentive system has given charitable organizations. First of all, it's relevant that 95% of the donations to charitable institutions in the United States are given by 5% of the donors. Second, 90% of endowment giving in the United States is represented by gifts of appreciated property. Third, 85% of all charitable donations in the United States are made by individuals, the other 15% by corporations and foundations.

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Those three examples, which are a by-product of the capital gains exemption, are very relevant to our circumstances here. I'll give you a couple of other interesting examples or tangible evidence of their tax treatment.

The total endowment funds for orchestras in the United States is $858 million. The comparable figure in Canada is $11.8 million. Private endowments in the United States total $137 billion. The comparable figure in Canada is $2.7 billion.

These are examples of the benefits that the U.S. system has conveyed on their cultural and other charitable organizations. I'll give you two other examples.

The Metropolitan Opera has a charitable endowment of $200 million; the Philadelphia Symphony, $100 million; and the San Francisco Opera, $100 million. In Canada, the National Ballet, the Toronto Symphony and the Canadian Opera Company have endowments of between $4 million and $5 million.

We believe that if Canada were to change the tax treatment on donations to charitable organizations in those two ways, there would be a significant increase in private sector donations. This private sector donation increase would allow the government to continue to cut back its direct financial support of charitable organizations, help balance its budget, and help turn over that dimension to the private sector.

We think there are significant benefits there. Deficit reduction is consistent with that goal. Turning over the support to the private sector for these cultural organizations will allow these cultural organizations and other charitable institutions to continue to play an active role in stabilizing their funding and to maintain employment; hence the government would continue to obtain the benefits from income taxes from that employment, from PST, GST, unemployment insurance premiums, etc.

I think that not only cultural organizations but all charitable organizations would continue to benefit from that.

I'll give you one example of how to deal with this issue of concern about the tax reduction from these donations. A $1 million gift of a stock that has a zero cost base would result in $1 million of incremental revenue to that charitable organization. The government would lose $500,000 in tax revenues, but could then cut back by at least $500,000 in its direct support. So that can be beneficial to the deficit reduction process. The government wins, the charitable organization wins, and the people of Canada continue to benefit from the benefits that these cultural and charitable organizations give to the people.

The Chair: Thank you very much, Mr. Johnson.

Mr. Friedman from B'nai Brith Canada, would you like to go next?

Mr. Rubin Friedman (Director, Government Relations, B'nai Brith Canada): Thank you very much, Mr. Chairman. I don't know if I will even use up the full six minutes.

I think basically it comes down to establishing a new kind of balance, of the kind that was just outlined by the previous speaker, between how one approaches direct funding and how one uses the tax system.

Governments in Canada have been schizophrenic about this in the past. An example would be earlier programs to promote voluntarism in communities, which function through local grants. This, of course, had the result of destroying the voluntary activity, because who will do something voluntarily when you can get paid for it?

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More recently, we have been talking about putting a greater load on the voluntary sector by cutting direct support to various kinds of activities through the spending reviews the government has undertaken and through deficit reduction. Yet while the load increases on the voluntary sector, it is exactly the means that the voluntary sector uses to raise funds, increase donations and increase voluntary activity that is also under attack by other measures the government is contemplating.

By simultaneously tightening up rules on what is allowable as a charity and what is allowable as a tax deduction, and at the same time cutting back on direct support, the capacity of voluntary organizations to function gets more and more narrowly defined, gets put more and more into a straitjacket.

I think our main point would be that we have to come to grips with a coherent approach that would deal with a balance between the direct funding and support through the tax deduction system, not a complete elimination of both at the same time.

The Chair: Thank you very much, Mr. Friedman.

The next presenter is Nancy Palmer.

Ms Nancy Palmer (Manager, Planned Giving and Major Gifts, Foothills Hospital Foundation; and Chair, Legislation and Government Relations Committee, Canadian Association of Gift Planners): I'm here representing two organizations. The first is the Canadian Association of Gift Planners, which is a national organization of about 400 to 500 members. We are all involved with charitable organizations, particularly in the area of gift planning, which in itself involves tax planning. The other entity I represent today is the Calgary regional health authority, which is a charitable organization with assets over $1 billion and revenues of about $750 million.

I raise that because I know many people don't think of those types of entities as being charitable organizations, but I think that reflects the new reality of what is happening in our country.

That's all I really wish to say at this point, until we get into further discussions.

The Chair: Thank you, Ms Palmer. We'll have an opportunity to come back.

Mr. Floyd, would you like to follow?

Mr. Gordon Floyd (Director, Public Affairs, Canadian Centre for Philanthropy): Thank you, Mr. Chairman.

The Centre for Philanthropy, as I know some of the members are aware, is an organization that looks at the charitable sector and the voluntary sector in Canada. When we speak, we speak about the sector, not for the sector. We're not a membership organization and we're not an advocacy organization. But we do have insight into what is happening in the voluntary sector and the charitable sector in Canada right now, which we summarize as being a triple whammy hitting the sector.

The first hit is a very significant cut in government revenues to the sector. The second hit is a very sharp increase in demands upon voluntary organizations and charitable organizations as governments reduce their own service delivery and their own program delivery. The third hit is a much more intensely competitive fund-raising marketplace, which is creating enormous pressures and enormous difficulties for organizations that must raise money. This marketplace is becoming more competitive not only because organizations that used to raise a little bit of money now have to raise a lot of money, but also because many organizations that never had to fund-raise before are now, for the first time, having to get into that fund-raising marketplace and go after the same dollars.

I might note that some of the organizations appearing in the marketplace for the first time are government organizations, including departments of this government, which have been approaching foundations to fund projects for which they apparently can no longer get tax funding. We see this most dramatically not at the federal level but at the municipal and provincial levels, where we find schools and libraries and a whole host of other organizations that used to exist solely with tax support now competing with charities and other voluntary organizations for what is, and what has been for several years now, a stagnant amount of donations.

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Donations in Canada, in real dollar terms, have not been growing now for four or five years, and this is creating an enormous squeeze for organizations in this sector.

We all know that the government is cutting back, and I don't think that part of the equation is up for debate. But the public policy challenge that it's creating is a need to find a balance between maintaining our quality of life and reducing the size of the government sector in this country.

If I may, Mr. Chairman, I would draw on one of the many lessons that I read in the recent referendum results. It is that a single-minded focus on economic values will not hold our communities together and will not hold our country together.

I think the voluntary sector and the charitable sector express a number of other values, non-economic values, that need to be recognized and encouraged in this environment, just as the private sector in this country has dramatically restructured in the last five or six years and just as the government sector is now restructuring. The voluntary sector and the charitable sector are undergoing a major restructuring and a major recreation of themselves.

I know there are many questions in the minds of some people in this government about some particular stories they have heard and read about organizations in the charitable sector, about problems in the charitable sector. There are some people who are concerned that additional tax expenditures within that sector might not be well managed. There have been concerns raised in the media, in the House of Commons, and in committees here, about governance in the sector, about oversight of the sector. I fear some of those concerns may be standing in the way of decisions to enhance the tax treatment in this sector.

One of the things I would like to propose is that it may be time in Canada for us to do what has recently been done in Great Britain and most recently done in Australia; that is, to create a commission, an inquiry, that will take a look at the regulation of the charitable sector, that will take a fresh look at how we define charities and who makes it in and who doesn't.

It is, for instance, an anomaly in the minds of many people that organizations involved in community economic development are not now able to get charitable status in this country. It's an anomaly in the minds of many people that most organizations involved in environmental issues are not able to get charitable status in this country.

There are also issues related to the ongoing reporting, the ongoing affairs of organizations after they're registered as charities, that bear some hard looking at. A charities commission, perhaps not only as an initial inquiry but as an ongoing governing mechanism, as exists in Great Britain, may be something we should be examining seriously so that we can deal with some of the issues and concerns about public confidence and government confidence in this sector.

I believe the problems are much less than some people fear, and I think we can move past those and get to some of the real incentives that are needed to deal with the sorts of concerns thatMr. Johnson raised.

Certainly, if we are moving towards the American model of government funding to this sector, we need also to look very hard at the American model of tax benefits and tax treatment of this sector.

The capital gains tax exemption that Mr. Johnson spoke of is one of those. Raising the threshold for deductions of individual gifts, above 20%, towards 50%, is another one of those.

In the midst of all this, we may also need to take a hard look at incentives for corporate giving. There are none now in this country. A corporate contribution gets exactly the same tax treatment as a corporate computer purchase. Why couldn't we have at least some small symbolic incentive? Perhaps one could treat a corporate contribution as equivalent to 110% of its real value for tax purposes just to make the point that this is valuable.

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I will stop there, Mr. Chairman. I've probably gone several seconds over my time. Thank you.

The Chair: Thank you very much, Mr. Floyd.

Ms Rose Potvin from the Coalition of National Voluntary Organizations.

Ms Rose Potvin (Executive Director, Coalition of National Voluntary Organizations): Thank you very much, Mr. Peterson.

I have had the privilege, as you well know, of appearing before you about a month ago. At that time, I talked long and hard. I will give the floor to others here today, because you have heard my point of view on many issues.

I just have two quick points to make.

The first one, as I probably mentioned to you all before, is that the voluntary sector has long wanted to see itself as a sector. We wanted to see ourselves around the discussion table in government. We are absolutely delighted that you have created this table, you are here, and you are listening to us for a couple of hours. This is unprecedented. We're delighted. We thank you very much.

The second point is that the National Voluntary Organizations, along with eight, nine, ten other national, large, umbrella organizations is in the process right now of preparing a paper recommending changes to charitable tax credit and other points that may help the sector.

It isn't completed. Had we known this would be happening today, we would have rushed it up. But we will have it in a week's time, and we will get it to you.

It's a very reasonable request for changes, in our view. It may not be as reasonable in your view, though we hope it's reasonable enough that you will give it your consideration. Thank you very much.

The Chair: Thank you very much, Rose.

Next is David Armour from United Way of Canada, please.

Mr. David Armour (President, United Way of Canada): Thank you. Let me join Rose in congratulating and thanking you for having this forum and letting all of us, who are representing different community-based and voluntary organizations, speak to you and talk a bit about the juggling acts and challenges we have in the voluntary/charitable sector. We will learn a little bit more of the challenges you face in preparing for the budget and future issues.

United Way of Canada is an organization that provides leadership and support to 122 local, autonomous United Ways. Many of you will know them well. Across this country, the United Ways fund over 3,800 health and social service agencies directly through allocated funds, and another 10,000 organizations through donor-directed funds.

We have values of creating a self-healing mechanism for the community to grapple with its own issues and problems. Right now, that's pretty significant for the organizations that are in front of you. We're community-based organizations that look at the true human health and social service needs in the community. What are the needs that need to be balanced and rebalanced on an annual basis? As funding and priorities shift and as problems in the human struggle shift, how do we move and shift with those balances?

The overall policy direction of the federal government, in a number of departments, is essentially a transfer of a range of responsibilities to the community level. Whether it's the impact of cuts in funding, the impact of block funding, or the reduction of transfer payments, you're essentially looking at a transfer of responsibilities to the community level.

I appreciate what Gordon said about the triple whammy. I could repeat that, as well.

At the community level, charitable organizations are grappling with how to restructure services and how to fund the services that are needed most. I speak to you not, as you would often think, of the United Way as a fund-raiser but also as a co-funder of services. Our role is increasing a community's capacity to respond to needs at the community level.

We believe that the biggest single factor in community capacity is a charitable tax credit. At this point, the single point I would bring to this committee is the issue of the impact you could have by increasing the charitable tax credit on a community's capacity to support self-healing mechanisms, whether they are United Ways, Ys, or community foundations. It could be a whole range of organizations.

The issue of capacity is quite simply one of increasing the charitable tax credit. We have done some public research. We have found that with those who give significant gifts - I'm not talking about huge ones, just over $200 - any positive or negative change in the charitable tax credit would significantly impact on their behaviour.

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I know that in the past it's been positioned as an $800-million drain on the budget. I think, with a bit of research, you would find that it is in fact a leveraged investment from the budget. Any change you could make in increasing the charitable tax credit would, we believe, have a multiplied effect on the ability of organizations to respond at the community level.

We work with the Coalition of National Voluntary Organizations, CCP, and a number of organizations. There are specific proposals that can come to you. I know the finance department can work out different models in different areas of modelling.

There's no unique, magic store of funds that you are going to find to let you do something huge in one year. You may look at phasing it in over a few years. You may look at enhancing it to individuals and corporations over a couple of years, but our simple request to you is that you significantly look at increasing that area.

We wouldn't get into other areas like crown foundations and other areas in which the playing field has been tilted. We'd be more interested in having the entire water level raised so all the boats can ride a little higher. That's really our presentation.

Thank you.

The Chair: Thank you very much, Mr. Armour.

Heather Stonehouse from Easter Seals.

Ms Heather Stonehouse (Acting Executive Director, Easter Seals/March of Dimes National Council): The Easter Seals/March of Dimes National Council is the principal national advocate and coordinator acting in partnership with its enfranchised members, disability-related organizations, rehabilitation professionals, and Canadians with disabilities and their families.

All of the council's activities are directed toward enhancing the quality of life of Canadians with disabilities, but the primary focus is on social and economic integration as a key to achieving that goal.

We believe that the federal government now has two critical jobs, which is to build a stronger national economy and sustain our system of social programs.

Charitable organizations raising funds to provide services for Canadians with extraordinary needs are a key element in the maintenance of social programs. They are, however, faced with ever-increasing cutbacks.

Recently, sustaining grants through the national welfare grants program have been eliminated. The grant we received for 1995-96 through this program represented 7% of our budget. Our national organization, which has been providing information and public education for professionals and consumers on disability issues since 1962, is now operating on a much reduced budget, which is almost entirely supported by the fees of our members.

The services previously provided to the public, namely, information, advocacy, disability awareness, publications, conferences, and seminars, will be severely curtailed in future. Our member organizations however, continue to provide transportation, recreation - including camps - medical rehabilitation, assistive devices, education, independent living, employment, and vocational rehabilitation. These are all essential services for children and adults with disabilities in Canada.

The volunteer strength of Easter Seals and March of Dimes organizations in Canada is in excess of 10,000. Service clubs all over the country raise funds for Easter Seals.

Three issues have been brought to my attention that make it more difficult for our member organizations to raise funds most effectively.

First, there's the unfair position that crown foundations enjoy in this country. The crown foundation status that universities, hospitals and some museums have allows for a 100% tax credit. This has created two tiers of charity: an A list and a B list.

One of the concerns brought to us from various volunteers and donors is their consternation that some charities are more attractive to donors because of their relative return to the taxpayer rather than the services they provide to the public.

Second, the reduction in the federal government support for social programs and the promotion of national standards, all in the name of cost cutting, has disastrous implications for Canadians with disabilities and service providers. If the government is relying on the voluntary sector to pick up the slack in the provision of services and is asking at the same time for charitable organizations to rely less on government funding and more on the private sector for donations, then we ask you to consider increasing the tax credit to make it possible to attract more donations. We can't be cut from all sides and still achieve our goals in terms of serving Canadians with disabilities.

Third, we recognize that the government has a tax credit problem, or investment, as David Armour put it so well. Tax credit costs the government in the neighbourhood of $800 million each year. If you must reduce this, we ask you to consider differentiating between charities that provide assistance within Canada and those that provide assistance offshore, which could be assisted through government foreign aid programs rather than the charitable tax credit system.

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In summary, we recognize that government tax policies provide incentives to the private sector to encourage certain results in the economy. We would like to see more attention given to government instruments that can provide incentives to the voluntary sector to enhance their ability to be an economic force in this country. Rather than have an A list and a B list of charities, we suggest that you consider creating a level playing field, perhaps by lowering the tax credit for crown foundations and increasing it for others.

The Chair: Thank you very much, Ms Stonehouse.

The next witness is Arthur Drache from the Canadian Museums Association.

Mr. Arthur Drache (Tax Lawyer, Canadian Museums Association): Thank you, Mr. Chairman.

Just for the information of the committee members, I'm a lawyer in private practice. About 80% of my practice relates to charities and non-profits. I've been asked by the Canadian Museums Association to represent them here today.

I'd like to make one preliminary observation. I think all my colleagues around this table would agree with it, but I think it's worth saying.

Apparently there is a belief, which is often voiced, that the tax benefits associated with charitable donations are of huge economic benefit to the individual donors. It is important that you recognize that nobody who gives anything, whether it's a donation of $1 or $1 million in appreciated assets, whether it's a painting or whether it's land, does better economically than if he or she had sold that item in the market, paid the tax, and walked away. It's very important to understand that everybody who makes a major gift in this country deprives himself or herself economically.

So if you get a 100% write-off, whether in the form of a deduction or a credit, the donor bears the cost, depending on his or her marginal rate, of anywhere from 46% to 75% of the cost. The idea that giving attractive tax incentives is somehow enriching the donor is false. I think that should be on the record.

In preparation for this meeting, I looked at the submission the Canadian Museums Association made to this committee on November 29, 1994. The temptation is simply to suggest that you look at it again, because not one of the recommendations was adopted. Rather than go through them all, I would like to focus on only three items.

First, I'd like to associate the Canadian Museums Association and myself personally with the comments of Mr. Johnson. The inability to get a capital gains exemption on the transfer of appreciated property is probably the single largest hindrance to the building up of capital within charities in the style that has happened in the United States.

In the United States, there are individual foundations that, in terms of their capital, represent almost the entirety of the capital endowment of Canadian foundations. We have no foundation in Canada that even begins to approach the size of the American foundations, and that comes simply because the Americans have been able to transfer in appreciated assets.

In the case of the museums, of course, we have had somewhat more of a benefit because, at least in the case of cultural property going to designated institutions, donors have been able to be exempted from the capital gains. The museums have benefited significantly from that.

I should note that museums don't live with gifts in kind alone. For instance, when the Hudson's Bay Company made the munificent gift of its archives to the Museum of Man and Nature in Winnipeg, it added to it $7 million or $8 million in cash, because the gift otherwise becomes essentially a white elephant. To get it and not be able to maintain it and use it is as though you didn't get it.

So the members of the Canadian Museums Association also need cash.

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We very much associate ourselves with the comments of Mr. Johnson.

The second point I'd like to emphasize is the status of gifts to Her Majesty, either in the right of Canada or with so-called provincial crown foundations. While we recognize, of course, there is a problem not only between those broad groupings of agencies that have access to crown foundations and those that don't - and the last speaker, Ms Stonehouse, made reference to that - there's probably no single sector where there are so many different rules as in the museum sector.

To give you an example of the problem, if I asked those members from Toronto to tell me which of the McMichael, the AGO or the ROM is a crown foundation and which isn't, I have grave doubts whether any of them would be able to do that. Only one of them is a crown foundation, yet they're competing for exactly the same gifts.

Our position is that in terms of the museum community only, the problem we have is that we cannot rely on provincial governments in order to set up these kinds of foundations. We are looking to the federal government to set up a federal museum crown foundation to allow the free transfer of gifts, on a flow-through basis, to museums across the country to level the playing field. A foundation was actually set up with the blessing of the Department of Canadian Heritage, but it did not get crown status.

I have only one further point about membership fees. It was not in our original submission last year but is drawn from recent American experience. The Americans, as well as Revenue Canada's people, have gone mad trying to determine what part of a membership fee, if any, is a charitable donation and what part is not a charitable donation.

The Americans have simply adopted a kind of de minimis rule. They have said, in order to simplify life for everybody, any membership fee paid to their equivalent of a registered charity of $75 or less is deemed to be a charitable donation. So neither the charities nor Revenue Canada nor the individual donors would have to sit down to try to determine the monetary value of any particular benefits that may flow from becoming a member of a particular organization. Whether it's a museum, the YMCA or the YWCA, let the first $75 be treated as a charitable donation and simplify administration for both Revenue Canada and the institutions. Thank you very much.

The Chair: Thank you very much, Mr. Drache.

Next is Monica Patten from the Communities Foundation of Canada.

Ms Monica Patten (Executive Director, Community Foundations of Canada): Thank you. It's a pleasure to be here. I'd like to take a few moments to describe to you the concept of a community foundation, because it is my sense that it is relatively new to a number of people. I would then like to raise one particular issue with you that you have already heard about - an initiative that is of quite considerable interest and concern to the community foundation movement.

Let me start by telling you that there are presently 70 community foundations in Canada, and you'll find them from Vancouver to Fundy to Yellowknife. They represent communities in which Canadians are coming together to create the capacity to become more self-reliant through something we now call a community foundation. It's a very ingenious and indeed a very simple concept.

A community foundation is a registered charity that pools individual gifts - large gifts and small gifts - and places them in a community endowment fund. The earnings of the fund are distributed in support of a range of charitable causes. They could be for such things as feeding hungry children, cleaning up the environment, caring for frail elderly people, supporting local arts organizations, and so on.

Last year, community foundations in Canada made over $33 million in grants and held collectively over $600 million in our asset pools. The assets are permanent and they are growing sources of funds in support of local community priorities. As current foundations grow their assets they will have more money for granting at the local level. As new communities create foundations - in the past nine months there have been fourteen new community foundations created in Canada - they demonstrate their desire and the willingness of Canadians within their communities to become more self-reliant.

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Community foundations work very closely with other grant makers. Many of them are my colleagues here in the room this afternoon, and I can identify partners like the United Way, for example.

Community foundations are also convenors. We bring people and ideas together. We discuss ideas. We discuss priorities. We discuss, plan and encourage action on priorities that are of great interest and critical priorities for our local communities.

I offer to you an example that took place in London, Ontario within the last couple of weeks when the Communities Foundation convened a meeting of local grant makers - the United Way, local government, local business, potential donors - to take a look at the planning of a community economic development plan for that particular community. That's one example of the kind of activity that is occurring in many communities across the country and in which community foundations are providing some leadership.

Communities Foundation very much supports the current notion that donations from individuals and others have to increase so that community needs can be addressed, especially, as we've heard, in light of significant government restraint and cutbacks. But we very much believe, like all of our colleagues, that we too must build our own capacity if we are going to have an impact on communities. By building our capacity I am referring, of course, to the building of significant and growing endowment funds.

Our capacity remains limited at this point and we want to suggest to you that one way in which we can enhance the capacity of community foundations is to ensure that we offer favourable tax benefits to donors. Presently, all donors to community foundations are subject to the 20% of net income rule.

There is in place - and this is the piece that you've already heard about this afternoon, and I know you know about it from other sources and other conversations you've had - a significant tax bias favouring crown gifts over gifts to registered charities. We believe the playing field is not level and that this is creating major problems within the charitable sector. I personally know of several gifts that had been intended to go to community foundations and were directed to agencies that could offer a different kind of benefit to the donor. I'm speaking of one gift in particular of $10 million in one community, which was redirected.

While we very much believe that hospitals and universities and cultural institutions will benefit, we do not want all the gifts to be diverted from other community organizations and other community agencies.

We have taken the position that it is in the best interest of everyone to ensure equity in tax treatment for charitable gifts. We would like to be part of those discussions. We have technical expertise and we have technical experience, and we bring with that a great willingness and enthusiasm to participate in addressing the critical issues in which we are all engaged.

Thank you.

The Chair: Thank you very much, Monica Patten.

Could we turn now to Mr. Bill Hallett from the National Society of Fund Raising Executives.

Mr. Bill Hallett (President, National Society of Fund Raising Executives): Thank you for inviting me today.

I represent the National Society of Fund Raising Executives, which is beginning to expand into Canada. Currently there are 16,000 fund-raising executives as members in the United States, Canada and Mexico. The NSFRA was founded in 1960 and is only beginning to develop in Canada.

We exist to serve the professionals who are involved in philanthropy in Canada. This means those executives who make a living through the raising of funds for volunteer and charitable organizations. We absolutely believe in philanthropy as a value and encourage volunteer and giving, through our expertise, hopefully. We train and develop fund-raising professionals.

I think the reason we are beginning to expand in Canada is because of some of the issues we're talking about today, but particularly those issues around compensation for fund-raising and the cost of fund-raising. Some of these issues are making it imperative that we have good codes of ethics and standards of practice that every professional in the field must follow.

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We are absolutely in favour of any law that will force the charlatans in fund-raising out of the business, as they only serve to discredit those who are legitimate fund-raisers in the field.

We have a code of ethics and a statement of purpose. Our statement of purpose is the development and growth of professional fund-raising managers committed to the preservation and enhancement of the philanthropic process in society.

Related to the federal government role...obviously our association believes in self-regulation, and we would hope that the federal and provincial governments would encourage self-regulation versus licensing.

We think the federal government, through improvements to the tax credit system, can improve the climate for giving, but let me make it clear that people do not give to get a tax credit. People give because they're involved in a voluntary way, or they have a passion for the charity they're involved in, or it's had an effect on their life. The enhancement of the tax credit will enhance philanthropy as a cultural value in Canada, and, quite honestly, philanthropy isn't that much of a value in our culture today.

Related to government cutbacks, the Centre of Philanthropy conducted a study showing that for every 1% of cutbacks from the government, it takes approximately 6% of raised funds to fill the void. If you put that on a graph, charitable giving in Canada cannot possibly fill this gap. So we believe the federal and the provincial roles in funding charitable organizations are crucial to serving society and preserving the safety net.

We also think the federal government in particular can enhance vehicles for giving, especially in this new area of planned or deferred giving, as it's referred to. In the United States there are many more vehicles that can be used for charitable giving and in Canada there are relatively few. If these vehicles were allowed in Canada, then the opportunity for giving would be improved.

In closing, at the provincial level right now there are governments considering licensing. I realize it's a provincial jurisdiction, but the fact of the matter is our charities are broad in scope. Even local charities deal in various provinces across Canada. So we really believe that self-regulation is important and we really believe in the profession of philanthropy.

Thank you very much.

The Chair: Thank you very much, Mr. Hallett.

I would like to turn now to Pauline Mantha from the Learning Disabilities Association.

Ms Pauline Mantha (Executive Director, Learning Disabilities Association of Canada): Good afternoon. The Learning Disabilities Association of Canada is a registered charity established in 1963. It's a grassroots organization. We have an association in each province and territory of Canada, 140 chapters across the country, and a membership of over 10,000 individuals.

Before I start, I would like to state that LDAC, the Learning Disabilities Association of Canada, supports this government's deficit reduction target and we expect it to be achieved primarily through spending reductions.

I think a number of the issues that I would have liked to address have already been covered. Certainly the triple whammy that Mr. Floyd referred to is reality for organizations such as ours. The reality for organizations such as ours is that we must use our meagre resources in the 1990s to fund-raise for our survival instead of focusing on programs and service delivery that are needed and required by our membership.

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LDAC strongly recommends that this committee introduce stronger tax incentives for Canadians and Canadian corporations to invest in charitable organizations in the upcoming budget. A good start would be to increase charitable tax credits for donations to charitable organizations to the same level as charitable tax credits for donations to federal political parties.

The Chair: Thank you, Ms Mantha.

Next is Ann Mowat from the YWCA.

Ms Ann Mowat (National President, YWCA of Canada): Thank you for including us in the pre-budget dialogue.

The YWCA is the oldest and largest women's membership organization in the world. In Canada the YWCA has worked with women and their families for over 100 years in over 200 communities. We strive to be a voice for equality and a strong voice for women.

The UN's 1995 human development report, which ranked Canada first among nations in terms of human development but which ranked it only ninth when gaps between men and women were considered, lets us know that we're still needed and there's still work for us to be doing.

Through our member associations, YWCAs and YMCA/YWCAs, we provide employment development services, child care, programs to end violence against women, fitness and wellness programs, housing services, and residences and shelters.

Our experiences in working for and with women and their families has led us to believe that economic independence for women is necessary for a healthy society and that women are critical to economic and social progress. We see investing in the lives and well-being of girls and women as the best route to that kind of social progress.

Our fund-raising appeal this year points out that Canadian women and girls are a significant resource and that this resource has yet to be tapped. We invite our donors to invest in women and girls for the well-being of all of society.

At the YWCA we know that fiscal restraint and structural adjustment are inevitable. Our concern is that women suffer disproportionately when cuts to social programs are made. I'm sure most of the members of this committee have probably heard the statistics, such as that 72% of Canada's lowest-paying jobs are held by women.

Women need the kinds of social programs that fund their maternity leaves and their child care so that they can remain in and re-enter the workforce. So we would ask, in part, that the budget process analyse decisions in terms of their economic impact on the status of women.

We would also note that gender-based analysis is one of the objectives already articulated by Status of Women Canada in the federal plan for gender equality announced in August. That plan also contains a commitment to improve women's economic autonomy and well-being.

We feel the budget should support these goals and be sensitive to women, their families, and their institutions. The YWCA wants the Canadian government to follow through on its commitment and to demonstrate the value of investing in equality. We want those to whom we appeal to feel encouraged to make that same investment, and we want them to have resources to invest.

As a women's charity we find ourselves without the same level of financial support as charities led by men who have greater access to wealth. We note that as women gain economic independence this should change. In the meantime, though, your efforts to encourage our limited base of donors through the charitable tax credits, which many others have spoken to, would certainly be of assistance, as would your commitment to creating an environment in which our work is valued.

The Chair: Thank you very much, Ms Mowat.

Next is Sarah Iley from the Council for Business and the Arts in Canada. Welcome.

Ms Sarah Iley (President and Chief Executive Officer, Council for Business and The Arts in Canada): The Council for Business and The Arts in Canada represents the major corporate donors not only to the arts in this country but also to many of the charities across the country. In fact, the statistics gathered each year by the Centre for Business in the Community of the Conference Board of Canada looks at the donations made, and approximately 50% of corporate donations made in this country come primarily from the largest companies. That is the association of businesses that I represent, the association of businesses that has seen the need to support charitable activity across this country.

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As Mr. Johnson so eloquently pointed out earlier, the main source of support for charities across this country comes in fact from individuals - from individuals who have decided to make a gift. Again, I want to underline the point that was made by Arthur Drache and also by Bill Hallett that the primary goal of any donor is to make a gift to a charity that matters to them. What I think we are all talking about here today is the opportunity to enhance the possibility for individuals to make a gift.

In another capacity, I serve as vice-chair of the Canadian Association of Gift Planners, so I will be turning over to my colleague Nancy Palmer to go into a little more detail. There are a couple of things we believe very strongly can be done to enhance the possibility of individual donors making gifts. We think what we're trying to do is to encourage the transfer of wealth from private hands into the service of the public good. We believe one of the most significant things we can do, therefore, is to encourage larger gifts, particularly of appreciated property. By doing so, we will be able to build the capacity of voluntary organizations, as many of the organizations around the table have spoken of the need to build the capacity for those voluntary organizations to serve their communities.

I'd like to turn it over to Nancy, who is going to speak about gifts of appreciated property in some depth.

Ms Palmer: I don't think I really have to speak to it too much because I think it's been said very well around this table, and we're all getting to the same point here. If we want to transfer these assets from private hands to the public good, that is certainly the incentive that needs to happen.

There are two other issues we have identified within our organization, and the reason I raise this - they may sound technical - is that from our conversations with Revenue Canada, we believe they may need a legislative cure, and that is, whether public foundations can re-insure gift annuities. I'm sure many of you would have no idea what I just said there with those technical words.

The other one is setting a discount rate for use in valuing residual interest. That is something very significant for us in gift planning, in building endowment, and in attracting these gifts, having a guideline set by Revenue Canada that we can all follow.

There is one last thing I want to say before we close. Because there seem to be no organizations here - and correct me if I'm wrong, I guess there are some - that have crown status, I feel it's unfair, particularly from the point of view of the universities that are not present here to talk about that particular issue and the fact that some organizations want to take away something that other entities enjoy right now. I think it needs to be said that those people are not here at the table, and as an entity that has just been very involved in getting introduced in the Alberta legislature this week the Health Foundations Act, we would certainly not like to see that effort come to pass.

The Chair: Thank you very much, Ms Palmer. Would you run through your second and third points? You talked about appreciated property, and I missed what you said about the second one.

Ms Palmer: It was whether public foundations can re-insure gift annuities. The third is establishing a discount rate for use in valuing gifts with residual interest.

The Chair: Thank you very much, Ms Palmer.

We have with us today officials from Finance and from Revenue Canada. From Finance we have Andrew Marsland and Lucie Brickman, and from Revenue Canada we have Denis Lefebvre and Carl Juneau.

[Translation]

Would you care to comment on any of the points that have been raised today? Is there something further you wish to add?

[English]

Mr. Andrew Marsland (Senior Tax Policy Officer, Personal Income Tax Division, Tax Policy Branch, Department of Finance): A number of points were raised. Perhaps the most frequently raised was on the gifts of appreciated property.

I think there are a number of points to bear in mind on that issue. The first is, perhaps, that right now with the charitable gift, the level of tax assistance is around 50%, taking into account the provincial taxes as well. With a system like the U.S. system, which permitted a non-realization or a non-taxation of the capital gain, the level of tax assistance would be in the range of 80% to 90%. I think it is an important point to bear in mind that in that case, the government would be bearing a significantly higher portion of the cost.

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The second point to bear in mind in comparing the U.S. and Canadian systems is that we use a credit system and the U.S. uses a deduction. Our credit system provides a better incentive for most taxpayers to give. There are obvious exceptions, which have been pointed out - the capital gains issue - but I think it's important to compare the whole system against the other.

The other point that was raised was the 100% limit for crown foundations. On that point it is important to bear in mind that crown foundations aren't provided for specifically in the Income Tax Act; they are creations of the provincial government. As far as we are aware, they are mostly set up to benefit hospitals, libraries and similar public institutions that are principally funded by the province and to some extent controlled by the province.

To that extent, with crown foundations the rationale behind allowing a 100% limit for gifts to the crown applies. For charities with a 20% limit, that limit restricts the extent to which a person can reduce his or her taxes by giving to a charity in any one year. That rationale doesn't really apply when you are talking about gifts to a government, and that's really the rationale underlying the differential in treatment.

The Chair: Thank you, Mr. Marsland.

Mr. Lefebvre.

[Translation]

Mr. Denis Lefebvre (Assistant Deputy Minister, Policy and Legislation Branch, Revenue Canada): One of the participants testified that persons who contribute to political parties receive a more generous tax break than those who contribute to charitable organizations. That may be true on the first few dollars, but the tax treatment of donations to charitable organizations is more generous. That's all I wanted to say.

[English]

The Chair: I am going to suggest that we have a brief round-table discussion among the participants before we take our break.

Mr. Drache, I saw your hand.

Mr. Drache: On the last point, I would just like to point out that the break-even point at which charitable treatment is better comes at over $1,200 a year. While that may be relatively small potatoes in terms of major capital gifts, the vast majority of charities represented around the table will find their donors do not give anywhere near $1,200 a year. In other words, I am saying that at $1,200, to be more precise $1,227, the tax relief for political donations, even though they don't get provincial - that's only the federal level - is better than it is for charitable donations.

This is not a de minimis issue, for the vast majority of Canadians do not give $1,200 a year to charity. If they were faced with a choice that was purely economic, they would be making their donations to political parties.

The Chair: Mr. Floyd.

Mr. Floyd: There are a couple of things that arise from other comments. I am not sure it was laid out clearly why we keep looking at the American experience and the American tax structure.

The research is quite clear about the differential in giving rates between Canadians and Americans, and the evidence on this is stunning. On a per capita basis Americans donate four times as much as Canadians. On a GNP basis it is three times as much as Canadians.

The reason so many of us have been talking about capital gains tax exemptions and other changes to the tax structure that would apply to large gifts is that an analysis of the differential between the Canadian and American giving patterns seems to indicate that when you are looking at the smaller gifts, the gifts we make out of our annual incomes, we are roughly comparable. Americans give a little bit more, although we are all in the same ballpark.

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Where the big difference comes is in the big gifts, the gifts of wealth. The gifts of income are comparable, but in gifts of wealth, the Americans beat us all over the place. This appears to be because of the very significant differences in the tax structure.

For most of us who are making smaller gifts out of our income, it has been said many times today that we're not motivated to give because of the tax credit. For most of us the significance of the tax credit is not that it motivates our gift, but that it affects the size of our gift.

Research we've done at the Centre for Philanthropy indicates that people who claim the tax credit give on average three times as much, gifts that are three times as large, as those who do not use the tax credit.

The Chair: Mr. Johnson.

Mr. Johnson: I want to respond to the issue that was raised that the government would be giving up 80% to 90% in taxes, roughly 50% from the current deductibility, and ultimately would get the capital gains tax anyway when the person passes on. I guess my response to that would be that the donor may pass on 10, 20 or 30 years from now. Who knows when? One doesn't know what the value of that asset is going to be at that time. So I think the immediate and relevant impact over the next few years is really the 50% loss in revenues as a result of the deduction.

The government is cutting back on its support for charitable organizations. We understand that. That's consistent with the deficit reduction objective. But we need the tax incentive to encourage these major additional gifts to offset that.

I'll give one example, and this is a dramatic example. A similar type of thing can happen in Canada, and will happen in Canada, in my view, if these changes are implemented.

About four years ago the two founders of Hewlett Packard, Bill Hewlett and David Packard, gave to charitable organizations in the United States $1 billion of Hewlett Packard stock. Of that, $600 million went to an endowment at Stanford University. The gain on that stock was tax exempt. That $1 billion went to charitable organizations, mainly in the endowment field. In Canada, if a person had $1 billion worth of stock that had a very low cost base and they gave the stock, they would have to pay a capital gains tax of $400 million. It just doesn't happen, understandably.

So I think what we're talking about is major potential gifts to charitable organizations, whether they be education, health, welfare, the arts, or whatever. This is where the real leverage is. We're removing a major impediment to donating to these causes in Canada if we remove that capital gains tax. It allows the government to reduce its support for these organizations and move towards a balanced budget, which we're all in favour of. Because these people aren't going to give their assets if they have to pay a capital gains tax, this would change passive wealth into active capital assets that allow these organizations to flourish.

I feel very strongly that if we make those two changes, it will be in the best interests of all the stakeholders: the government, the charitable organizations themselves, the people of Canada, and the people who donate the money. The reality is that these big gifts come from a very small percentage of the people. The major impediment to their giving major amounts of their wealth is this capital gains tax. If I have one message to leave today, that's the message.

The Chair: Mr. Armour.

Mr. Armour: Governments can't do everything, and you're faced with a budget of struggling with what you're able to do with the resources you have and a whole series of balances and saw-offs.

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From what you've heard at the panel today I think you have an opportunity to make a positive signal to the Canadian public. You have an opportunity amidst what may be a number of difficult news items and difficult choices to give a positive signal that: you recognize the transfer of responsibility to the community level; you recognize that governments can't do everything; and you are taking a stand to assist charitable organizations to pick up a bit more to assist communities to pick up a bit more.

I wouldn't underestimate the opportunity for making a positive signal and having some good news in a budget at a time when, at a community level, organizations do need some good news. As Monica said, a number of our organizations can work with you, can work with staff, and pose scenarios, do different surveys and look at how you might do it, and at the mechanics and some of the structuring of it.

I just want to return to my comments by saying you have a real opportunity here. While much of the financial discussion is complicated - some of the tax issues are very intricate and complicated, and the comparisons are at times difficult - and while there are very different scenarios in very different countries, the bottom line is that you have a positive opportunity here to give a signal to the community level.

Thank you.

The Chair: Thank you, Mr. Armour.

Mr. Friedman.

Mr. Friedman: I'd like to pick up on the previous comments. When I talked about creating a new balance, I think that reflects very well what the previous speaker just talked about.

I'd also like to say that from the perspective of B'nai Brith, which operates on a membership basis, on the use of volunteers across the country for local and national community initiatives, fund-raising has become crucial and central to our continued ability to do what we've done in the past, at the same level.

Many of the issues people have talked about - the issue of attracting funds; the issue of a very competitive marketplace; the absolute requirement to have some type of incentive that can be used in making one self-sufficient to keep on carrying out what we have done in the past.... We have not relied on direct government grants in the past for our existence, and we don't expect to have to do that in the future. Nevertheless, the ability to continue the full range of what we do is dependent on the capacity to raise funds. A number of people have talked about removing the barriers to raise those funds. I think they go squarely in the direction of what we would like to see as well.

The Chair: Thanks, Mr. Friedman.

Do I take it there is consensus that...?

Would Mr. Marsland or Ms Brickman like to comment on anything they've heard before we take our break?

Ms Lucie Brickman (Senior Tax Policy Officer, Tax Legislation, Tax Policy Branch, Department of Finance): I would like to perhaps tie together something both Mr. Floyd and Mr. Johnson raised with regard to capital gains and their exemption.

Mr. Floyd said quite rightly that a lot of us make donations out of income. When we make donations out of income, we make them out of after-tax income. When we make a cash donation, for example, if we're a wage earner, that income has been taxed. We make our donation afterwards.

There is some concern in terms of parity between different types of gifts, that we shouldn't favour an individual who happens to have appreciated property by telling him or her that they needn't pay the tax on the appreciated income but we will give them tax assistance when they donate it - as though they had.

I guess there is a feeling, at least in tax policy terms, that gifts of cash and gifts of property should basically get you the same result. That is a consideration for us.

In that respect as well, Mr. Johnson pointed out that there may be a large tax bill to be paid when one makes a donation of appreciated property. I'm sure he's aware that in our system there is an election available whereby if you make a donation of appreciated property, you may donate it at its cost to you. If you do so, there are no capital gains. The tax assistance you get in regard to the donation reflects what you paid for the property. It's just to say that although it may not stack up as favourably as some aspects of the U.S. system, it won't put you out of pocket at the end of the day.

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The Chair: Thank you, Ms Brickman. Mr. Johnson.

Mr. Johnson: I understand the points you're making, but the reality is that governments are cutting back, and we support that. We are moving towards a balanced budget. We support that. That means all sectors of government spending are suffering and experiencing these cutbacks.

We have these charitable organizations deteriorating in quality. For example, the National Ballet, just two or three weeks ago, was informed by the Ontario Arts Council that it has a 25% cutback in its operating budget grant. That's $425,000 to the National Ballet. It's one of the top five ballet companies in the world. How do we offset those cutbacks in government support? That's just the Ontario government. We don't know about the federal government. We don't know about the municipal government. Those are areas of uncertainty. How do we offset that? In our view, if we're going to maintain these organizations, there has to be a reason that the private sector can step in and take over when the government is pulling back.

We can talk about equity in terms of the tax treatment. The fact is that it's the wealthy people who have the money to give, and we've got to remove this impediment to giving. We have to learn, I think, from that U.S. experience. Unless we make material changes - and we're talking about two significant changes that we learned from the U.S. experience - and learn from that, the end result will just be a gradual deterioration of the standards of these organizations that currently and historically have relied upon the government, and we understand that the government can't continue to provide that support. So that's the reality.

The Chair: Thanks, Mr. Johnson. Mr. Drache.

Mr. Drache: Mr. Chairman, I'd just like to comment on the last thing Ms Brickman said, which is that the person is not out of pocket. That is exactly the fallacy with which I started my comments. This person gave away assets. The fact that he makes the election and therefore doesn't pay tax does not mean he's not out of pocket. That individual has a choice. He can sell on the open market, pay the tax, and walk away with not one penny going to any public use. He can blow it on gambling. He can do whatever he wants with it; there's no benefit to the public. He can also make the decision to give it away, and when he does, he is giving away the difference between whatever the tax bite might have been and the fair market value. So it's just ludicrous to say that he's not out of pocket. The best you can say is that he didn't pay any taxes, but he is giving away valuable assets, and that of course is the fundamental issue.

The issue is whether you want to create an environment in which a person with capital - this particular article does not deal with people with capital - has a choice between paying his tax and doing whatever he wants with it or devoting those assets to the public good. What has happened is that the great foundations of the United States and the great institutions of the United States have been funded because people made the decision to devote the money, not simply to their families or to selfish ends, but to the public.

What we've got is an atmosphere - and I see it in that kind of context - in which you simply say, it's not very important, pay your tax and do what you want with the money, rather than encourage people with wealth and assets to devote those assets to the public good. That's really the fundamental issue here. When you talk about the gift of appreciated assets, you talk only about technique here. It's just a technique to get people to devote those assets ultimately to the public good.

The Chair: Thanks, Mr. Drache. Lastly, Mr. Floyd.

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Mr. Floyd: Briefly, Mr. Chairman, and also responding to Ms Brickman's point, it seems to me that there are four choices here. The services provided by voluntary organizations are going to be funded by government revenues, are going to be funded by donations, are not going to exist, or are going to be funded by some kind of internally generated business income, which is really restricted now by Revenue Canada provisions.

We know these services are not going to be funded by government to the same extent they have been. We want many of these services to continue to exist. There is the restriction on business income. That leaves private donations.

The principle expressed by Ms Brickman, I think, is a valid one. It unfortunately doesn't gibe and doesn't fit very well with the reality right now, and the reality right now is that over 85% of the donated revenues that come to charities come from wealthy individuals - 5% of the donors. That's the pattern in this country, that's the pattern in the United States, and that's the pattern through Europe.

If we are going to fill the revenue gap, we are going to have to tap into the assets of those wealthy donors, and that means we are going to have to develop tax policies that provide a special incentive to people who have wealth to use that wealth, as Mr. Drache and others have said, for public purposes.

The Chair: Thank you, Mr. Floyd.

Would you like the last word, Ms Brickman, before we break?

Ms Brickman: I will say that if I said no one needs to be out of pocket, I misspoke. It sometimes bothers me that there may be a perception that when you make a gift of appreciated property, the tax department's going to say you owe at the end of the day. I was just making the point that this doesn't have to be the case.

The Chair: Thank you very much.

Could we take a five-minute break, please.

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The Chair: We will now resume the meeting.

[Translation]

We will now move on to questions from members, following which I will give each of our participants a maximum of one minute to respond. Thank you. Mr. Loubier.

Mr. Loubier (Saint-Hyacinthe - Bagot): Ladies and gentlemen, I welcome you to the Standing Committee on Finance. We are discussing an important issue, that is charitable organizations. I would like to ask one question and highlight a situation which I consider of some urgency under the circumstances.

As you know, the federal government invests a great deal in charitable organizations through direct transfers, tax deductions, and what is simply referred to as tax receipts. I'm thinking in particular about the United Way.

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I have two questions for the Revenue Canada officials. Perhaps they could shed some light on a rather unique situation for the benefit of participants.

Firstly, when was the last time organizations that are allowed to issue tax receipts and to represent themselves as charitable organizations were audited?

Secondly, don't you think it's time that the operations of these organizations were more carefully monitored and regulated? It is well known that certain organizations do not comply with the federal Income Tax Act. For example, a politically minded organization such as the Council for Canadian Unity devotes virtually all of its time to political activities subsidized by the federal government and is allowed to claim tax deductions, whereas the legislation stipulates that an organization established for charitable purposes may not allocate more than 10% of its resources to non-partisan political activities. The Council for Canadian Unity spends virtually all of its time on political activities which, for the most part, are partisan in nature because they are often under the direct control of the Privy Council and the Liberal Prime Minister.

So, first of all, when was the last time anyone took a close look at this situation? Secondly, don't you think it's time that we put a stop to this outrageous influence-peddling by charitable organizations that are skirting the rules of democracy? After all, Canadians are viewed the world over as unparalleled defenders of democracy.

The Chair: As you can see, we can't avoid politics.

Mr. Loubier: Politics and reality go hand in hand, Mr. Chairman.

Mr. Lefebvre: I believe charitable organizations were registered for the first time in 1967. Previously, they were allowed to claim deductions without having to be registered.

Initially, I believe that 22,000 organizations were registered. Their records and activities were reviewed at the time. Since then, we have been selecting at random certain organizations to be the subject of our yearly audit. However, many of these organizations are audited as the result of complaints or some other information received by Revenue Canada.

We follow up on every complaint and on all the information we receive. When we determine that these complaints are well-founded, we conduct an audit and where appropriate, we revoke the organization's status as a registered charity. Each year, we revoke the registration of approximately 2,000 charitable organizations.

During 1992, 1993 and 1994, Consulting and Audit Canada conducted approximately 2,000 audits. We sent out several hundred letters in which we brought to the charities' attention minor instances of non-compliance. They were asked to rectify the situation, but the problem was not serious enough to warrant their losing their status as a registered charity.

After conducting these 2,000 audits, we decided to revoke the registration of 14 charities. We took this action and some of these cases are still before the courts.

Mr. Loubier: Mr. Lefebvre, I will repeat my second question. The Council for Canadian Unity engages in partisan political activities, even during referendum campaigns, receives federal subsidies in the order of $3.5 million, receives $1 million from the private sector, and can claim tax deductions the exact amount of which is still a mystery, even though we requested this information under the Access to Information Act. All we received in the way of an answer was a document with portions whited out.

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Is it normal that the Council for Canadian Unity is allowed to maintain its charitable status, whereas, with the support of the federal government and the Liberal party of Canada, it skirted the rules of democracy during the referendum campaign by totally disregarding Quebec's Referendum Act which limits spending? Is it normal, Mr. Lefebvre, that a wholly political organization maintain this status?

Mr. Lefebvre: I can venture an answer. I can't talk about any one organization in particular, as you well know, and I can't comment on the facts that you have stated. However, when a charitable organization engages in political activities and this is brought to our attention, or we discover it on our own, we conduct the necessary audits and, if appropriate, the organization's charitable status is revoked.

The Chair: Thank you, Mr. Lefebvre. Thank you, Mr. Loubier.

[English]

Mr. Grubel (Capilano - Howe Sound): I have a couple of quick comments and then a question for Revenue Canada.

The great tragedy of the last 15 or 20 years is that we have accumulated this unbelievably large deficit. Much of it is held by foreigners and it has really reduced our wealth. In order to come to grips with this, as much as we dislike all of it, we will have to accept that even the charitable sector will have to shrink somewhat, because we simply cannot, in our current fiscal crisis, afford as many museums, orchestras, ballets and everything else we have that is supported by the charitable sector.

This is totally divorced from ideology. Whether or not we're going to shrink the government sector altogether and have more functions carried out by the charitable sector comes on top of all of those considerations.

A second comment I'd like to make is I think Ms Brickman's definition of equity was very much Canadian. The treatment we have of capital gains and paying out of cash rests on the definition of equity, that the rich should not be allowed to have more of the kinds of charities they favour than do the poor. That is why we have this particular treatment. I totally disagree with it, but it is also very much consistent with what I know is a left-wing definition of equity in this country.

I have a quick question concerning the issue of capital gains. Is it true there is empirical evidence that the higher the capital gains tax rate is, the less turnover there is? Some of my constituents are in the situation where they have a piece of land with property on it, and they have said if they sell it and pay the capital gains taxes on it, they still need to rent space for their company, so they will be way worse off. Therefore they don't do it, even though the building where the capital gains is embodied is much too large for them.

Therefore we have misallocation of resources and a very unfortunate thing. That's why in the United States evidence is clear that the lower the tax rate, the higher will be the turnover of accumulated capital gains and therefore even tax revenues.

I would suggest that if we applied the tax treatment being demanded by the charitable sector, we would probably have a much higher turnover and increased efficiency, and we would have gains in the charitable sector, which would be without cost to the treasury, but simply as a result of increased efficiency. That would be a powerful argument that I think the charitable sector should advance in its next negotiations with Revenue Canada.

The Chair: Thanks, Mr. Grubel.

Who would like to respond to that lock-in effect of capital gains taxes?

Mr. Johnson: I agree with that. The exemption from capital gains tax of gifts of appreciated property would encourage the wealthy to give their passive assets to these charitable organizations where that money will be used by those charitable organizations for employment, cultural activity, and other things such as education, health and so on. It does turn passive capital into active capital, and I do believe it provides the opportunity for the government to cut back its direct spending support for these organizations.

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The Chair: Mr. Campbell.

Mr. Campbell (St. Paul's): Thank you, Mr. Chairman.

In the interest of time, I'll ask one quick question, and instead of a second question I'll issue an invitation to our guests today to answer in due course.

The question really concerns the motivation for giving. Mr. Drache and others spoke about the incentive that the tax credit provides for charitable giving and yet - and I'm sorry Mr. Floyd had to leave - Mr. Floyd points out in the work that the centre has done that a great many people give without regard to the credit; they don't seek a tax receipt. I am wondering if anyone would like to comment on why that is.

Mr. Drache: The point was raised by one of the witnesses a little earlier. I think it is true that the vast majority of people who do give would give. The question really is the level at which they would give. Despite what Ms Brickman said about giving out of after-tax dollars, the credit really allows you to give out of pre-tax dollars effectively, because the credit is at least equal to a deduction. For some people it's worth more than a deduction.

I think probably every fund-raiser at this table would agree that the credit and the tax incentives really go not to the question of whether a gift is going to be made but as to the size of a gift.

The Chair: Mr. Hallett, you had a comment?

Mr. Hallett: The number one reason people donate is their involvement, their passion, or the influence an agency has. For example, if a person is dying of a major disease, chances are they may give a donation - especially if they recover - to that organization. It's the long, volunteer-driven involvement in a lot of ways that leads to the large gifts.

The tax incentives, though, as Mr. Drache has said, are just an added bonus and enhance the giving. Actually, where a person may give a $10,000 gift, they may instead give a $100,000 gift.

Mr. Campbell: Thank you.

The other question, which I turn into an invitation, is as follows. In a sense, while I'm very impressed with the arguments that have been advanced, things that have been said by the representatives from the sector here, I'm a little disappointed.

I had a little cheat-sheet or list I drew up of what the likely things you would ask for or changes you would suggest be made were, and you've hit every one of them. What you haven't discussed, and maybe only Gordon Floyd spoke about it, was what else? If we take money off the list and we say, enhanced credit is not achievable in these times, neither is the capital gains treatment you ask for and the level playing field. If those three are off the table, surely there are other ways in which we can respond, ways in which we, as government, can get out of the way so you can get on with doing your job better.

For instance, I heard the comments Gordon Floyd raised about community economic development, and there are other areas that are not recognized charitable purposes. There are issues such as the time it takes to obtain charitable status, although some of you comment that there are too many charities competing already for too few dollars. Maybe you don't want to see it speeded up. Other issues involve dollars between charities, the split between work the charities must do themselves as opposed to what they can contract out, and a whole host of other issues that no one has raised.

By way of invitation, because I don't think we have time for people to perhaps comment on all of that and more, I'd urge you, for the benefit of this committee, to tell us about those other items that are on your list after the top three or four that you each expressed to us.

Thank you, Mr. Chairman.

The Chair: That's like taking us into the candy store but not letting us buy. Thanks very much, Mr. Campbell.

I am sure you'll accept that invitation to get back to us.

Mrs. Stewart.

Mrs. Stewart (Brant): There are four areas I would like to get on the table, and perhaps at a future time individuals can follow up, unless we have time for some response.

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First of all, as I look at this and I hear some of the commentary...someone said we have to look at the whole system. I'm wondering how really true that is, because perhaps as we make our comparisons between the Canadian structures and those in the U.S., we should have an understanding of the role of government in the two countries, which is quite different. We in Canada have come to expect our governments to play a very active role in the transitioning of wealth, as it were.

When Mr. Hallett said we don't put a value on philanthropy, maybe it's because people do believe that their tax dollars do go to philanthropic purposes. So we have a mind-set here that may be quite different from that in the United States. Therefore, for purposes of public policy we have to be aware of that.

I would ask you whether you think the Canadian public is ready for us to have the government play a passive role, to give the responsibilities to a self-regulated sector and have you do the job of redistribution of wealth. That's one area that is on my mind.

Secondly, I commend and thank Mr. Johnson and Mr. Armour for appreciating the position that we're in as a government and that we do have to manage our deficit and debt problem. I'm just a little concerned that as you applaud us and view changes that we would make to the tax structure to allow for the charitable sector to do more in terms of filling a void in our communities and doing that work.... We are aware that there are two sides to this. Certainly there is the tax expenditure side, but there is also the revenue side. We have to look at both of those things in understanding the implications of the changes that we may or may not make to the balance sheet of the government. That's something that was drawn to my attention.

When we talk about perhaps supporting your position about changing the capital gains structure for appreciated property, I'm wondering and thinking back to the comments made by the officials about the balance between tax structures for after-tax income and property. I wonder, if we made those changes, if in fact you would see a heck of a lot more property coming your way, more than you're able to deal with, and that the $7 million to $8 million that Hudson's Bay gave to us, to use those things.... I need to understand that balance, and I go to Mr. Friedman and his word on balance. I'm making sure we don't make changes in the interest of public policy that aren't going to be supported by the community.

Finally, I want to recognize Mr. Johnson's and Mr. Floyd's comments about the importance of gifts of wealth. In regard to the statistics, I think even Mr. Floyd said that when we compare donations of income between ourselves here in Canada and in the United States, we're by and large on balance. Are you saying that probably our tax credit is okay then and it really is only these large gifts of wealth that we really want to tap into and do something different for?

Those are four areas that come to my mind as we discuss these very good presentations. I want to make it clear that I'm totally supportive and I believe we can do this job a lot better, but finding the right strategies is going to be a real challenge.

The Chair: Who would like to pick up the challenge? Mr. Drache.

Mr. Drache: I would like to talk about just one point in particular. You're talking about the difference in, shall we say, the Canadian and the American view of government. It goes beyond that. You picked up on one of the key international differences.

Israel, for example, when it was established, had no tax incentives at all for charitable donations because it was accepted in the socialist country, which it was at inception, that schools should be paid for by the government, as should universities and hospitals. You go through the whole list and the only thing that was not primarily funded, though it was substantially funded, was religion. Therefore, there were no incentives at all for charitable giving. Charitable giving was considered to be a personal religious obligation aside from the state. But the state had the other obligation.

Israel, as it has moved from its socialist roots to a more capitalist basis, which has happened over the past ten years, has now introduced tax incentives because the government is no longer seen as the dominant force in funding these and they're looking to the public. If you look at the European systems, France in particular, they are always highly structured and you do not have the great tradition of private philanthropy in Europe, the great foundations, because the state always took care of it. The same is true in Britain.

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In the United States, the state was always behind the push west - lagging behind, I mean. People moved west. If you wanted a school, you built it yourself and you hired a teacher. There was no school board. There was no nothing. Because you were not dependent on the state, what you wanted was encouragement and the private sector to fund. That's why you had these great pools of wealth devoted to the charitable sector.

I think what Mrs. Stewart is saying is that if you come to grips with the fiscal and economic changes that we're seeing in Canada today, if you look at what happened in other countries.... What has been in place for the last forty or fifty years was satisfactory as long as these traditional institutions were taken care of by the state, but as the state backs off, you have to put the tools in place. So you're absolutely right. If you take an international historical perspective, we need more now in the private sector because the state is backing off.

Mr. Friedman: I want to continue with what Arthur was talking about, that these differences exist even within Canada in terms of the rates at which people will give from one province to another. When one looks at the reasons for those different rates, they're often linked to the role the provincial government has played in that particular region. So we have the evidence all around us that there is some kind of connection between the balance of what the state does directly and what kind of incentives work or don't work for charitable giving.

The Chair: Thanks, Mr. Friedman. Mr. Silye.

Mr. Silye (Calgary Centre): I'm glad to participate and listen in on this round table on charitable contributions and donations. I'm also glad to hear that some of the members or representatives here support the move toward a balanced budget. I certainly believe that is a worthwhile pursuit. Some members and representatives have also said that people don't give just because of the fact that they have a tax deduction or get a tax credit for the most part. I also concur with that point of view and am glad to have heard it.

This is a huge field. There are from 61,000 to 77,000 charitable organizations, a lot of them in the same field and competing against each other for funds. We also know - this was prepared for us by somebody in the Library of Parliament - that the donations given in 1993 totalled $10.5 billion. Half of the receipted claims go unclaimed, and if you add the unclaimed to the unreceipted, a total of $6 billion is given by people. That's after-tax giving, which confirms the point made by Mr. Hallett. So the statistics bear that out.

In conjunction with that, according to the Canadian Centre for Philanthrophy, the federal government also contributes $5.3 billion in direct payments to registered charities, plus tax credits, although it now has to withdraw a bit because we have to work toward a balanced budget.

Everybody is here to give ideas, and they've put forward two suggestions on how to do that. I'd like to put forward one comment and one suggestion that will lead to a question, and we'll see what everybody thinks.

I think one of the problems with the current system is that we're tapping the same source twice. If we give as individuals and as corporations and we get a tax treatment for that, and then we go to the government that gave us that tax treatment and ask them to give some more, it's like double collection. I think we can do one but not both. So I would make this suggestion in evaluating this whole field, and I'd like to see your response.

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I'm interested in helping charities and people who need help, just like everybody else in this room, but I think one of the ways to get there is through tax reform. I think the continued use of income tax for social and economic engineering is continually taking us further down the road of complication, convolution and confusion, so if we go back to square one and simplify our taxation system so that we could broaden.... If we use taxes to raise money only for what we want to spend it on, and if we broaden that base as much as possible, eliminating all exemptions and deductions, we could have the lowest possible rate on individual and corporate incomes - the same rate - and tax that income once.

Would this impact negatively or positively on giving? Would this restore people's sense of participation in their particular field of interest? Because the government is not taking as much from them, or if they do take a lot from them because of our debt, the fact that they understand it, that they know why they're giving it and where it is going - would this not be a solution to the problem of charities, private donations and giving?

The Chair: Who wants to talk about the flat-tax alternative?

Mr. Silye: I said a simplified system of taxation. I was not pushing a particular....

Ms Palmer: Unfortunately, because of the short notice, many of us were unable to bring together a lot of information to bring to the table today.

One of the groups we've contacted to provide consultative advice to the Calgary Regional Health Authority is the University of California, which is a public institution. They are currently reviewing their situation with regard to the U.S. flat-tax proposal and the impact that may have on their major gifts, which is why they are able to raise so much money per year. When we get that information, I can forward it to your office. I think that might be a helpful tool.

The Chair: Thank you, Ms Palmer.

Mr. St. Denis (Algoma): Thank you for being here.

I'll begin my remarks by reminding committee members about something Rose Potvin said at our last round table after the disaster in Japan - the earthquake and big wave that went with it. You got calls from Japan on how to deal with that disaster. It brought home the point that Canada has evolved a tremendous voluntary and charitable infrastructure, which I think is easy to take for granted. So I think there is a sense that we have to build on it and strengthen it, rather than do anything to take away from it.

I would like to focus on the distinction between income-giving and wealth-giving. Generally, there are two different constituencies. Typically, the income-giving are average, middle-income Canadians, and we have a whole set of policies and rules for that constituency. On the wealth side, an upper-income constituency....

First, which is more important? Of those two, which is the more important if government can only look at one thing at a time? Which should we focus on first?

Second, on the wealth side of giving, on the issue of taxation of the capital gains on gifts, are there other ways that we can handle it? We've had the example of the U.S. system, but putting that aside, are there other ways to handle it?

I raised this with Mr. Drache during the break. Maybe it's a naive question, but is there a way to somehow defer the tax on the gain until such time as the charity unloads the gift - its shares, for example? I wonder if there are some other ways to handle the tax liability in that situation.

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The Chair: Mr. Hallett, please.

Mr. Hallett: To the first question, the answer is that all the giving is important. But if you listen to the statement we fund-raisers use a lot, that the top 5% in a campaign makes a campaign and this kind of thing, then you could jump to the conclusion that it's the wealthy segment that's the most important.

But giving and philanthropy is not something you do if you haven't learned it early in life. When a charity begins a program, you have to create within that organization a culture of giving that ultimately could lead to large gifts. Therefore, when people start giving their $25 or $100 gifts at a fairly young age, before they've accumulated any wealth, they learn that as they go on and that can indeed lead to the bigger gift.

Therefore in fund-raising we use the term ``cultivating a gift''. For a charity, for example, to think that they'll get a large bequest from a wealthy individual who has never been involved in that organization, who has never had a giving pattern with that organization, that happens very rarely.

So giving starts usually at a young age and usually with small gifts. But we do know, for example - and then I'll stop - that if an individual gives three to five years in succession, regardless of the size of the gift, the chances of them making a large gift in the future, if they're successful, is extremely high.

The Chair: Thanks, Mr. St. Denis.

Yes, Mr. Armour.

Mr. Armour: I have noticed that a few of the members leave after they ask a question. I hope after we answer we don't have to leave.

Some hon. members: Oh, oh!

Mr. Armour: That's a critical values question, and I think that strikes at the heart of the Canadian society we've built. I think we've built a Canadian society in this country where people are empowered to create organizations in church basements and in living rooms to deal with people suffering from certain diseases, to deal with spouse abuse. We've empowered organizations at the grassroots level to be created. That's how we've created 72,000 registered charities in Canada, because of a pretty strong fundamental Canadian view in the ability of communities to help themselves.

I think the simple answer to your question is we need to do both. We need to empower all people who have an opportunity to give a charitable gift, whether it's youth, whether it's seniors with very limited income who want to make a difference and do something in their society, or whether it's people of high net worth.

Obviously, as a finance committee, you know how the pyramid is shaped in Canadian wealth and you know the percentage of wealth in what percentage of hands. You know that in terms of having a large impact, you're going to look at the issue of high net worth and how that can be assisted to organizations that approach those. But I think equally important is the whole baseline of giving in Canadian society to many organizations that receive giving from millions of people.

If I could, I would also respond to a point that Jim made. He talked about the problem we have. I'd say we don't have a problem, but we have incredible opportunities as a society.

We've built a very caring Canadian society. We've defined the role of the federal government in mandated programs. We've defined the kind of health care that we need to give. We've defined at the provincial level the kind of care we need to give children, care and protection for children, for people suffering from all kinds of things. We've built a very significant system, in any world scale, in which the government has a role and the charitable sector has a role.

Certainly in our organization we raise close to a quarter of a billion dollars annually, essentially to fund where government isn't, to look at what are the important programs that are not mandated. In our organization, for example, we fund more non-mandated programs than all of the municipalities put together in Ontario, because there's an important role.

The challenge we have here is government is changing its role - what it's funding. You're backing out of certain areas, and we have an opportunity to engage local communities in defining what services need to be funded. That's a fundamental responsibility to the charitable sector. If government's role is changing, then how is our role changing, and what is our capacity to respond in that changing time?

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We all have the same numbers. We cannot support and sustain the delivery system that we developed in the boom years of the 1960s, 1970s and 1980s. Government can't and the charitable sector can't. The issue is really one of capacity, of working together, so I wouldn't talk about 72,000 charities competing with one another. I'd talk about 72,000 charities working in Canada, each with their own specific mandate and purpose, each democratically formed by the citizens of this country to respond to an important need.

The Chair: Mrs. Brushett, please.

Mrs. Brushett (Cumberland - Colchester): This has been an extraordinary and interesting round table discussion.

I have two points. As we have noticed here from different groups, particularly a new charity that's come on stream, we see the growth, almost topsy-turvy, of new charities in this country. At the community level there aren't enough days in the calendar any more to keep celebrating all the different days for this and that and to attend the activities. Really, everybody's coming after the same dollar.

I really think we're doing ourselves a disservice. We've had a wonderful sector here, but now it's going beyond the point of where it's sustainable. I ask you to comment on that because I don't think we can continue to allow more and more organizations that are overlapping and duplicating. It's time to restructure, just as we are doing in government.

The second point I would like to make is that in terms of cultural property, I think we're rather generous with the taxation in this country in the sense that you can buy something at a very discounted price and then have the deduction at 100% of appreciated value for tax purposes. This is perceived by a lot of the public as being extremely generous and beneficial to those who might own cultural property or be of a wealthier class in our society.

So it is perceived to be a very generous benefit at this time, and I'm thinking maybe we're getting too much cultural property. We don't have enough warehouses to store it any more. Does somebody have a comment on that?

Mr. Drache: With regard only to the question of cultural property, I think we should draw a distinction between some of the cases we have seen of abuses, most of which had to do with fraudulent valuations. Fraud is fraud is fraud and there's no getting around that, but that has nothing to do with the sector. If you get somebody who puts in a fraudulent appraisal, that's a criminal act and it doesn't flow from the cultural property issue.

On the other hand, you do get occasional great opportunities, such as the famous Friedberg case, which was decided by the Federal Court of Appeal. At the behest of the Royal Ontario Museum, somebody was buying some works at a very low price. They were sold from the United States, and the only reason they were sold to this person was that the other person wanted the stuff in the ROM. The ROM came away with a tremendous collection of Islamic textiles, which they simply wouldn't have had otherwise.

I happened to be involved in drafting all that legislation some twenty-odd years ago. I know what we had in mind, which was to protect the quality of Canadian culture. It seemed to me that the correct question to put would be to ask the members of the Cultural Property Review Board whether the board has dropped its standards so that their test of what is in fact culturally significant property is different. The basic premise that we should keep great things in our country and that we should have a tax incentive doing it remains unchanged.

The question of how it's done and whether it's been done properly or whether the correct tests are applied is something different. I feel strongly that the original idea to keep great works of art that are related to Canada and other items of cultural property here is still fundamentally right.

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The Chair: Thank you, Mrs. Brushett.

We've come to the end. Maybe I could ask if any of our participants want to summarize, taking no more than a minute, in order to wrap up. Mr. Marsland, do you wish to say anything?

Mr. Marsland: It has been good to hear the different viewpoints. You've certainly given us a good idea of where the areas of concern are in this sector. It's food for thought. Thank you.

Ms Brickman: It has been nice to have this opportunity to see so many of you, because, frankly, on a day-to-day basis we don't see or hear from a lot of you very often and we'd like to do that more. Thank you.

Mr. Johnson: We support the government's objective of deficit reduction through spending cuts. We recognize that all areas of our society will experience those cuts. Cultural organizations are facing a funding crisis.

I think we can deal with both these dilemmas of the government and the charitable organizations by doing two things. We can exempt gifts of appreciated property from capital gains taxes and raise the annual limit from 20% to 50%. This will turn passive capital into active capital for the community, immediately. This will be good for the government in terms of its objectives of deficit reduction. It will be good for the charitable organizations and good for the people of Canada. We urge you to consider these recommendations for introduction into the next budget. Thank you.

Ms Iley: I just want to echo the sentiments of Mr. Johnson and also add that I think we are dealing with a fundamental shift in philosophy here. We are already experiencing in the charitable sector the fact of government shrinking, but I think the government has to get its head around the fact that if it is going to shrink, it has to allow the private sector's role to grow.

The suggestions we have put forward today are examples of how the sector can become more self-sufficient. I want to comment to Mrs. Brushett that the sector is doing a lot of restructuring. It is certainly not immune from the restructuring everyone else is going through.

Ms Palmer: On behalf of the membership of CAGP, we strongly urge the federal government to look at this issue of the capital gains exemption. We would certainly like to be able to provide any sort of assistance or information to the committee if it is willing to accept it, with respect to the impact of that kind of change. We would like to be involved in that process.

I would like to reiterate the comment about the restructuring. I think Revenue Canada would be happy to know we are now collapsing many charities within the health sector in the city of Calgary as a result of the restructuring there.

Mr. Drache: I think I speak for all of us when I say we appreciate the opportunity. We would have liked a little more time to prepare than we had.

I am very supportive of the idea alluded to by Ms Stewart and some others that this committee or some government group look at the whole charity sector in a broader range, not simply within the context of tax credits or deductions. The time may very well have come to take a much more in-depth look at the whole situation of charities in this country. Thank you very much.

Mr. Armour: Our millions of volunteers and donors are the Canadian citizens, and they are the same taxpayers and voters who put governments in place. We work for the same Canadian public, and my only comment is about the process. I applaud your move to bring all of us together to share a range of views, and I applaud your effort to have us grapple together with what's really best for the Canadian public, not what's best for organization A or B, or policy X or Y.

If any opportunity comes up, at either the department level or the committee level, for us to assist you in grappling with what's best for the Canadian public from the perspective of the voluntary sector, we'll be there at a moment's notice. Thank you.

Ms Mowat: Mr. Chairman, I just want to thank you once again for the opportunity to participate. I think you've heard a fairly strong message from most of us here about the support for enrichment or enhancement of the charitable tax credits.

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Also, I hope that in the time you've been able to come to know us, you've developed an appreciation for the kinds of things we do and the kinds of things we need in the environment to enable our work to continue.

Ms Potvin: I've been very good today, have I not, Mr. Chairman? I haven't said a word except opening remarks.

The Chair: That's most unusual, Ms Potvin, but please feel free.

Ms Potvin: The closing will be under sixty seconds, I promise you.

I just want to speak to Mr. Campbell's suggestion that we should have spoken to other things besides the enhancement of the tax credit. After we'd been around the table, without any planning, we obviously were all speaking with one voice. I was very pleased with this, because it's a very good negotiating strategy to come into any meeting and discussion with unison.

Had we had 10 or 15 points, we'd have run the risk that you would give us 14 and 15 and not talk about 1 and 2, which are the expensive ones. So please let him know that's why we stuck to these two points.

Thank you very much for allowing us to be here.

Mr. Hallett: Thank you very much for inviting us.

I echo Arthur Drache's comments about preparation time. I think there's much more to say on this issue.

I also echo Mr. Armour's comments about the Canadian fabric and mosaic. The terms ``collaboration'' and ``partnership'' are being used in the third sector right now. They may be overused, but if there's collaboration and partnership amongst the sector and amongst government, then I think we'll serve the community good and the Canadian good much better.

Thank you very much.

Ms Patten: Being last means all the good things have already been said, so let me just confirm my agreement with what my colleagues around the table have said.

I particularly wanted to comment on Mr. Campbell's questions and say we will be taking them under consideration, as well as many of the other ideas and thoughts that have been presented. We'll be looking for an opportunity to respond.

Thank you.

The Chair: Witnesses, you have presented us today with a very clear message. It's called the triple whammy, as Gordon Floyd referred to it. The government is cutting its donations to the charitable and voluntary sector at all four levels of government, the cutbacks we've made to other programs have increased your scope for activity and your responsibility, and you're finding it difficult in tough economic times as more and more charities are competing for the same money that is there.

All of you have made a very compelling case for the activities you carry on - activities government is not involved in, activities that are essential to us as a nation. You've made a compelling case that as we cut back, we have to assist you in finding new ways to do more of what you are doing. I think we have no alternative as politicians but to find ways to work with you and give you the means to do what you do so well.

A number of alternatives have been presented to us today, tax measures in particular. One suggestion agreed to by many people around this table is that we bring the level of tax credits and deductions and non-taxation of gains up to the level they have in the United States in order to encourage huge endowments. We've heard some other suggestions.

While we want to give you what you've asked for, we have to look at all these within the context of, first of all, whether it would be sound tax policy, but even more importantly, what the cost would be. This is why I think all of us at this table accept your invitation to look in greater depth at the issues that have been brought out today, in time for us to report prior to the budget.

I'm not saying we will have total consensus before that time, but we should try to shoot for that, so I urge you to bring your views forward, and maybe we can arrange another meeting or at least a working group to work with officials from Finance and from Revenue as well so that all concerns are on the table from the start.

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I must say we did not give you much time. This is the first hearing we have had since Canada's referendum. The fact that you were the first group invited to us must indicate to you the importance we give you and will continue to give you. We look forward to working with you. Thank you very much on behalf of all members.

We adjourn.