FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, June 10, 1998

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone here this afternoon.

As you know, the orders of the day for the finance committee are pursuant to Standing Order 108(2), and the committee resumes its pre-budget consultation process. Today we have representatives from the Canadian Association of Gift Planners; the Canadian Coalition of National Voluntary Organizations; the Canadian Centre for Philanthropy; The War Amps; United Way of Canada; and Community Foundations of Canada.

We will begin. I don't think I need to tell you how this committee works, as you've been here quite often, but you know that you should keep your comments to approximately ten minutes, and thereafter we'll engage in a question-and-answer session.

I am told that Mr. Gordon Floyd will begin, representing the Canadian Centre for Philanthropy. Welcome.

Mr. Gordon Floyd (Director, Public Affairs, Canadian Centre for Philanthropy): Thank you, Mr. Chairman and members. We appreciate the opportunity to be before this committee again, as you begin considering your recommendations for the 1999 federal budget.

I'm director of public affairs at the Canadian Centre for Philanthropy, and I'm also co-chair of the charitable incentives review task force of the voluntary sector round table, which for the past two years has been coordinating the efforts of charities to improve tax incentives for donors.

I'm going to leave it to others who are here today to comment on some of the clean-up items that are left from earlier budgets, and jump right into the first question the committee has posed to us. You've asked us this year to suggest some possible approaches to the so-called fiscal dividend that's now at hand after some years of restraint and restructuring. What I'd like to do in my few minutes this afternoon is convince you that a sizeable portion of that fiscal dividend should be invested in Canada's charities, both as direct expenditure and in the form of targeted tax reductions for Canadians who donate to charities.

At the outset I thought it would be useful to make sure that we're all on the same page as to who these charities are. There are 76,000 of them in Canada. They employ 9% of our labour force. That's about twice as many jobs as the entire construction industry. They account for about 13% of our GNP—that's more than the entire province of British Columbia, and about three and half times the size of our farm sector.

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In economic terms, hospitals and universities comprise the bulk of the charitable sector—about 60% of it—and religious charities account for about another 6%. But when most of us think about charities, we're thinking about the others—the mix of organizations involved in everything from health research, youth programs, support for seniors, arts and culture, international aid, environmental conservation, immigrant settlement, literacy, job training, and a whole lot more. This very diverse group of “other” charities includes almost every non-governmental organization that delivers the services and programs that make your constituencies liveable.

Individually, these other charities have very small budgets, so policy-makers tend to overlook them. Based on 1993 data, two-thirds of them have annual budgets of less than $ 100,000. Collectively, however, they're vital to the health of every community in Canada.

Apart from the direct payments such as welfare and EI, these charities are the social safety net in Canada. They're also the place where citizens come together to build their communities, to improve the quality of life, to create social capital, and to learn the basic skills of participatory democracy.

Although these charities are volunteer-led and separate from government, clearly the relationship is an interdependent one. The charities are contracted to deliver many government services and programs. They also fill gaps and niches that could never be reached efficiently by government bureaucracies, and their provision of community services significantly relieves pressure for more government spending.

The other side of this interdependent relationship entails mostly financial support. On average, these other charities—again excluding hospitals, universities, and religious groups—receive 10% of their revenues directly from the federal government. Provincial contracts and grants cover about a third of their budgets, and municipalities contribute another 6%, so in total about 50% of their budgets come from governments.

For the balance of their budgets, these charities earn about 30% through everything from membership fees to thrift shops, and they rely on donors to contribute the remaining 20%, of which 18% comes from individuals and only 2% comes from corporate donors.

I think it's important for this committee to be reminded that federal government actions in recent years have had a devastating impact on many of the small charities in Canada. The replacement of the Canada Assistance Plan with the Canada health and social transfer not only freed provincial governments to divert funding away from small social service charities, it also hit those charities with huge extra demands as provinces reduced income support payments and tightened eligibility requirements.

Charities have borne much of the brunt of the reduction in transfers to the provinces, which, as I've already noted, provide a third of all small charities' budgets, and an even larger share of the budgets for hospitals and universities.

Federal support for small charities was further reduced when program review hit. The Canada Council, research councils, Environment Canada—even the tiny voluntary sector support program within the Department of Canadian Heritage was hit. In HRDC, just as an example of one way in which program review played through, the department stopped funding any of the overhead costs associated with the contracts they were letting to these small charities.

Most charities, with their tiny, tiny budgets, have had no capacity to absorb these cuts, so what they've done is they've cut back their programs and services. Many of them have quietly gone out of business. Nobody knows how bad the damage has been across the country, but a municipal government study that has been done of Toronto's social service sector gives us a clue.

As Toronto's economy was starting to boom again in 1996, 33 social service agencies closed their doors entirely and forever. That was on top of 21 agencies that had closed their doors in 1995, and compares with an average of about seven agencies that had been closing in each of the ten years previous.

More than a third of the agencies remaining—35%—laid off full-time program staff. Some 28% laid off full-time administrative staff, and they were often starting with their volunteer coordinators—the people who recruit and train and manage their volunteers. So it's not surprising that on top of all of this, the number of active volunteers for these charities was also dropping in 1996 by 38%.

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The situation in the rest of the country is not as well documented as this one in Toronto, but the pattern of closures, lay-offs, and reduced capacity among Canada's smaller charities is similar from coast to coast.

While politicians in the media have focused on government cutbacks, it's small, community-based charities, from arts groups to youth serving agencies, that are at the end of the line, small charities and the communities they serve in your ridings.

When you're thinking about how to invest the fiscal dividend, I hope you'll think about these small charities, the impact recent federal actions have had on them, and how much they contribute to the lives of your constituents in the communities you represent. In particular, I hope you will think about how much you can help them by providing targeted tax incentives that encourage more Canadians to support them with more donations.

These are not the charities that typically attract big donations from wealthy donors. The 18% of their revenues that comes from individual donations comes $ 10, $ 25, or maybe $ 100 at a time. The improvements to tax incentives that were part of the 1997 budget, while welcome and important, did little to help these charities because they did nothing to encourage modest-income donors.

Let me use my remaining couple of minutes to briefly describe two specific proposals we'll be bringing back to you. The charitable incentives review task force will be developing these proposals more fully during the summer, and we'd like to submit them to you more formally in the fall.

The first proposal is designed to encourage more Canadians to give to charity and to encourage people who give small amounts to give more. This proposal is important, because tax statistics tell us that about one in ten Canadian donors stopped giving during the recent recession, so fewer than 27% of all tax filers claimed any donation at all in 1996. We need to get those lapsed donors investing in their communities again and we need to encourage others to join them.

Tax statistics also tell us that half of those who are giving donate less than $ 190 each year, and that's a median donation that's well below 1% of median taxable incomes.

The State of Arkansas, of all places, recently introduced a special tax incentive for donors who increased their giving to certain charities by up to $ 200 a year—a very targeted tax incentive. Early results are showing that even this very narrowly focused incentive has increased giving to these certain charities by half a million dollars a year in a state with 10% of Canada's population.

We're developing a proposal for a more comprehensive incentive along the same lines, which we estimate could generate as much as $ 50 million per year in additional donations for Canada's charities, including at least $ 15 million for small charities.

The second proposal we're working on would simplify the tax credit and equalize the tax benefit that's available for all donors, regardless of their income levels.

You know the federal tax credit, the credit against basic federal tax, is equal across the board currently at 17% of the first $ 200 donated and 29% of amounts over $ 200. But inequities arise when the effect of the basic tax credit plays through surtaxes and provincial taxes. The 17% tax credit against basic federal tax can be worth anywhere from 24% to 31% after the effective surtaxes and provincial taxes are calculated, and the 29% basic tax credit can be worth up to 54% of the amount donated by a high-income taxpayer living in British Columbia, but only about 40% of the amount donated by a taxpayer whose income is $ 30,000 living in let's say Alberta.

Unlike the tax credit for political donations, for example, the actual value of the credit for charitable donations differs according to both taxable income and province of residence. The equity issues I think are obvious. Perhaps less obvious is the difficulty this variation creates for taxpayers who want to figure out the after-tax cost of their donations, and for charities who want to explain the tax incentive to potential donors.

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Perhaps it is time to establish a single national tax credit rate for charitable donations, with the federal-provincial split being negotiated equitably between governments rather than distributed inequitably among donors of different income levels and places of residence. If they are giving the same amount to registered charities, why should the $ 25,000-a-year donor in Alberta not get as generous a tax credit as the $ 100,000 donor who lives in British Columbia?

If we were to both standardize and simplify the current system, we could, for instance, set a national tax credit equal to one-third of the first $ 200 donated and one-half of all amounts over $ 200. The tax system would then be providing a bit more assistance for small donations and a bit less for some large donations than it is at present.

The principle of government sharing equally with donors the cost of gifts above $ 200 is also an appropriate and symbolic expression of two important partnerships, both the joint investment partnership between governments and donors and the joint public service partnership between governments and the charitable sector.

We will be studying this idea further during the summer, hopefully with the involvement of finance department officials, and will be returning to you in the fall with a more complete proposal.

Apart from these or any other specific proposals, I will simply conclude by asking that in your pre-budget recommendations you emphasize the pressing need for and the many benefits of investing a significant part of the fiscal dividend in Canada's charitable sector, whether through direct funding, tax incentives or program support.

Thank you.

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

We will now hear from the Canadian Association of Gift Planners and Mr. David Boyd-Thomas. Welcome.

Mr. David Boyd-Thomas (Vice-Chair, Canadian Association of Gift Planners): Good afternoon. Thank you once again for inviting representatives from Canada's charitable sector to appear before the committee to express our views on the 1999 federal budget.

I have the pleasure of serving the Canadian Association of Gift Planners as vice-chair this year. We are a professional association of more than 825 individuals from across Canada who adhere to strict professional standards of ethics and practice. Our members are employed by charities or work in the private sector in the fields of law, trusts, accounting, life underwriting or financial planning.

For us, this hearing is being held somewhat earlier in the year than expected. Thus, at the outset, I would like to note that our comments from the Canadian Association of Gift Planners are preliminary in nature, and we will be further submitting to the committee—we hope in October at the very latest—more technically detailed notes.

Today, however, we are prepared to bring forward some unfinished business as well as tabling new ideas the government should consider when drafting its 1999 budget. With respect to the current composition of this committee, I should note that this is now our third appearance, so again, some of our unfinished business has to do with those first two visits we made to this committee.

In answering the question of what priorities should be set for the federal fiscal dividend, ours is almost an exact echo of that of the Canadian Centre for Philanthropy: carefully targeted tax cuts for charitable gifts will benefit millions of Canadians who are served by our charities throughout the country, in health care, education, the arts and research, to name but a few.

New strategic investments: there were many opportunities one could have put before this committee, but our organization is particularly emphasizing a few that are very simple and adhere to what we would like to believe is a very prudent philosophy, that is, one of streamlining tax administration, not only for Canadian taxpayers but also for the federal civil servants who have to administer the program—we like to be fair to them as well.

Quite simply, we're calling for the elimination of the remaining capital gains tax on charitable gifts of publicly traded shares. With the prospect of the fiscal dividend at hand, the government does now have an opportunity to introduce a very focused tax reduction that would stimulate the acceleration of gifts of shares by Canadians which we have begun to witness and which was first implemented in last year's provision cutting the capital gains tax in half. We are now calling on you to completely eliminate the capital gains tax.

For a nominal cost, however, to the federal treasury, a substantial investment of outright financial support from individual Canadians will be made in the work of the charitable sector. The cost is nominal because the donor's alternative in many instances is to hold his or her shares and do nothing rather than donate them to charities. Thus, the government would not be expected to receive the capital gains tax due until the donor's death.

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The incremental tax revenue foregone by the government is the discounted present value from the future date of the donor's death as opposed to at the present time. In typical cases this amount is nominal, especially when compared to the size of the incremental charitable donation today that can be put to work support Canadian charities.

Our second new strategic investment would be to establish the charitable remainder trust within the Income Tax Act to clarify the tax regulations currently existing for these important gifts of middle-income citizens.

Long popular in the United States, the charitable remainder trust allows donors to designate today an asset which the donor will continue to use throughout his or her lifetime and which will go to a charity at the end of the donor's lifetime. However, they are allowed to enjoy the income.... In fact, in many cases it's not necessarily to “enjoy” it; it's that they need to receive the income from these assets. And yet, they are still charitably disposed and wish to make a significant contribution to charities that they believe in.

These have tremendous potential here in Canada to increase philanthropy, especially among middle-income Canadians who, as I said, are charitably disposed but have the need for income at the same time. Currently, these vehicles are rarely used in Canada because there's no statutory provision in the Income Tax Act and regulatory rules are far from clear. In our submitted paper which you've received this afternoon, we've outlined some preliminary technical details pertaining to this new incentive we are suggesting, and in the early fall, as I said, we will be forwarding to the committee much more detailed information developed over the summer.

Changes to the tax system? Ensuring that gifts of private shares and debt are treated equitably, whether given to public charities and foundations or to private charitable foundations. At our last two hearings before this committee, the Canadian Association of Gift Planners warned of the dangers of establishing a two-tiered system for the treatment of charitable gifts in Canada. Once again, we wish to stress to the committee the dangerous path that this leads us down.

Streamlining the administration of gifts: a very simple and straightforward change would be to balance the claim threshold for all charitable gifts at 100% of income across the board for gifts that are given by a bequest in the will or made during the donor's lifetime.

Each year, charitable middle-income Canadians who have made gifts large in size relative to their income—gifts that are typically assets such as the cottage no longer used by the family—run into the claim threshold or “ceiling”, if you will, for charitable gifts.

While a carry-forward provision is available, it has become an administrative nuisance to have the difference between lifetime gifts, which is presently set at 75% of net income, and gifts through the will or through an estate or a bequest, if you will, which is now set at 100%. The difference is just 25%. One uniform claim threshold is administratively simpler and effectively cost-free, as the tax credits would be burned in any event.

As I mentioned in my introductory remarks, we do indeed have some unfinished business with respect to resolution 21. Although this committee recommended in its 1998 report to the Minister of Finance—that was pre-budget for 1998—that the government examine resolution 21 and develop appropriate measures to prevent perceived abuses without introducing disincentives to charitable giving, the call has gone unheeded by the Department of Finance.

Therefore, today we are bringing forward to this committee our recommendations of February 12, 1998, which would significantly ease the administrative burden contained in the present legislation, which I believe has now passed through the Senate, is awaiting royal assent and is known now as Bill C-28.

Briefly, our recommendations to clean up the provisions that have come to be known as “the grandson of resolution 21” are the most crucial calls for the removal of the very strict arm's-length requirement that donors of private shares not be directors or trustees or other officials of the public charity or foundation they are making the donation to. Strict self-dealing rules already exist in section 189 of the Income Tax Act, which clearly outline guidances to prevent these perceived abuses. There is no need for Bill C-28 to contain such an onerous provision on public and private charities and foundations and donors.

In closing, we commend both the members of the finance committee and the officials of the Department of Finance for their willingness to work with Canada's charitable sector. Much has been accomplished in the past two years. The government now has the opportunity to make a wise strategic investment to help the millions of Canadians who are helped each day by our charities.

I look forward to answering your questions later this afternoon.

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The Chairman: Thank you very much, Mr. Boyd-Thomas.

We will now hear from the representative of the Coalition of National Voluntary Organizations, Mr. Al Hatton. Welcome.

Mr. Al Hatton (Executive Director, Coalition of National Voluntary Organizations): Thank you very much.

Like several of us here, the Coalition of National Voluntary Organizations has appeared for many years in front of this committee, sometimes wearing a hat focusing on children, sometimes talking about the impact of government cuts, sometimes about tax incentives to encourage giving, and this year to look at priorities for the fiscal dividend.

We are a national coalition of 130 charities, of which organizations such as the Boys and Girls Clubs, the United Way, the Consumers' Association, the National Association of Friendship Centres, the National Anti-Poverty Organization, Family Service Centres, and a variety of others are members.

We, like my colleagues, were not prepared to go into a whole series of tax measures in great detail, but rather to have the committee reflect a little bit on what we've been through over the last five years.

The Standing Committee on Finance has a unique opportunity to give leadership in support of national charities and social development.

If we look back primarily at program review as a rather seminal event, it had two big objectives. One was to tackle the deficit and the second was to look at sorting out the role of government in the future and revitalizing the public service. The vast majority of our organizations would support the government living within its means and getting to zero and looking ahead. We've been waiting now for four or five years for that to occur. Probably like many others, we didn't think it was possible, so the government and the committee deserve a lot of credit for that objective.

The other side of the coin, though—revitalizing the public service and getting government right—we don't believe has really been accomplished. While the first has been accomplished, our sense is that for the second, the government's bogged down in really looking at what its future role will be. During this period, the private sector has become very strong and the economy is improving. The public sector is in the process of sorting out with the provinces what its future role is going to be.

We also observe an increasing awareness that the three pillars of society—the private sector, the public sector, and the voluntary sector—have to be re-balanced. In terms of the voluntary sector and the charitable sector, we have, a little bit with government, borne the brunt of the cuts. Not a lot of attention has been given to the evolving role of our sector in relation to the public sector.

I don't want to zero in on the impact of the individual cuts. Gordon talked about that and there's a lot in the press about that. What really is more sinister, from our point of view, is that there's been a major impact on the infrastructure of the voluntary sector at the national level and at the local level, and that's what I want to focus on.

Much of the work of voluntary organizations in building skills, in offering services at the local level, in giving leadership, and in advocating for people and causes that enrich communities and make them more humane and healthy we really believe is at risk.

There was an interesting story. One of my colleagues is holding a series of hearings with the panel on accountability that's circulating the country, and there was an example of a woman who runs a hospice program. She was out at a golf tournament trying to raise money for her hospice just to meet payroll. In addition to what Gordon was saying, what we're finding is that a lot of the focus now in local organizations and at the national level is on fund-raising and alternate fund-raising, not on the things we do best. We need the support of the federal government and the provinces to ensure that very delicate infrastructure is maintained.

The public demanded leadership from the federal Liberals, and before that the Conservatives, to attack the deficit and arrest the expanding role of government in the 1980s and 1990s. This has been accomplished. Now the public is demanding that the scales be re-balanced in favour of health, education, and quality social services, and that those programs be supported by government with clear results and measurable impacts. We are for that. We are not for simply going back to what was before.

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We think, though, the federal government's response has been slow. We also have a growing concern that it's targeted at individuals. The federal government is in some sense using the tax system to go around organizations and directly to supporting individuals. We're not against this, but again, it's a bit out of balance.

It's ironic that this has been taking place at the same time as the public feels more and more alienated and doesn't feel as though they're having a say in what is going on at the federal level. They're cynical about whether government is really defending their interests and they feel alienated from the political process.

Unwittingly, both levels of government are undermining intermediary organizations working on behalf of citizens, defending citizens, and providing services. The time-honoured role of the voluntary sector as a neutral ground where citizens can come together, serve each other, and build healthy communities is little understood and inadequately supported.

Why do I focus on this kind of discussion today at this committee? It's because we believe you are very influential. The Department of Finance and the federal budget are two of the key instruments in influencing the public and the media in terms of the direction of many of the front-line departments that have traditionally served as partners and in support of our sector.

You have a unique leadership role to give clear direction to front-line departments, such as Health, Human Resources Development, and Environment. Their reinstatement of operational funding for national organizations in particular ought to be reconsidered.

We went through a really tough period where we were challenged as being unrepresentative of the groups we supposedly serve and being too much into advocacy. That was a very small slice of our sector. The vast majority of organizations at the national level in fact are involved in serving their customers and trying to represent their needs, both in the public and to federal departments.

So any signals that come out of your report, any paragraphs and tax measures in the budget that look at strengthening the capacity of the voluntary sector, start to get a lot of the bureaucracy and ministers in the front-line departments working in closer partnership with us. If there are not those signals, then we are less and less in their screen and more and more out fending for ourselves.

We have three recommendations.

The first recommendation is really about restoring operational funding, in particular to national voluntary organizations, as strategic investments to build and strengthen the capacity of our organizations in a variety of human service areas, the environment, and those working at the international level. These have been dramatically cut over the last three or four years.

There's also been a subtle shift away from core funding, or operational funding, to project funding, or the removal of all support. That has hurt us in terms of research, training, national conferences, networking, and participation in public affairs and the development of public policy. These are the very things that citizens are asking the federal government to do.

In the Speech from the Throne in the last two budgets, the issue of creating a knowledge-based economy and a knowledge-based society were front and centre. The federal government recognizes this need and in fact is going through a process of revitalizing itself, and it's also spent a lot of time and attention ensuring that the private sector has those same advantages. That has not necessarily, though, been the centrepiece of investments in the voluntary sector.

We believe you would be showing leadership by looking at this, and we'll be back to you also later in the fall with a series of more detailed recommendations on this.

The second recommendation is that we want to support the voluntary sector roundtable's recommendations, in particular around tax measures that encourage giving for more modest donors and donors of moderate means. As Gordon said, any local organizations and the vast array of national organizations haven't benefited from some of the pioneering work you've done over the three or four last budgets, which helped very large donors and large donations.

The third recommendation is providing support for more integrated cross-sectoral approaches to training and job creation in local communities, of which there are a variety across the country. Normally they're in rural communities and they're focused on marginalized populations. A whole series of these organizations and movements are going on in the country, but they're not highlighted and they're not supported now, as we've gone through the period we've been through. Some of these are featured under the social economy in Quebec, and we have a number of other specific examples that we can cite later.

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Our belief is, in a sense, that the Balkanization, the regionalization, the growing gap between rich and poor and between the skilled and the unskilled is one of the direct results of the federal government not paying quite enough attention to investing in the voluntary sector. If we're to be, in a sense, the third pillar or the first pillar in this three-pillared approach to ensuring we have a healthy society, then our belief is that more attention has to go towards the voluntary sector.

Thank you.

The Chairman: Thank you very much, Mr. Hatton.

We'll now go to the representative from the War Amps, Mr. Clifford Chadderton. Welcome.

Mr. Clifford Chadderton (Chief Executive Officer, The War Amputations): Thank you, Mr. Chairman and ladies and gentlemen.

This is the second year we have been invited to appear before this committee, and you may find that my presentation is somewhat different.

I agree, of course, with what my colleagues have been saying, but I want to deal specifically with the four questions that were posed. In doing that, I think one way the committee could understand the fiscal dividend being used would be to look at at least one of the smaller areas, one particular issue for Canada and this government and a segment of Canadians, namely war veterans. I refer to a claim before the United Nations for compensation for prisoners of war of the Japanese.

The main reason I bring this forward was that on two occasions I was at two different meetings and I heard the Minister of Veterans Affairs, the Honourable Fred Mifflin, say he was very much in favour of some compensation for these former prisoners of war. I won't get into the reasons, necessarily, but he was very much for it. But he stated he had no funds in his budget. I think the Standing Committee on Finance would perhaps be a committee to take a second look at that.

So under the question of the priorities for fiscal dividend, I want to bring to your attention one specific issue. The Standing Committee on Foreign Affairs and International Trade, which has been seized with this issue for more than a year, has made a recommendation to the House, and that recommendation was that the Canadian government should pay this claim under the Geneva Convention and then should proceed against Japan to collect it, the reason being, of course, that the potential beneficiaries are all dying off very quickly.

For more than ten years, we've been before the United Nations Human Rights Commission. They told us to repatriate it and bring it home. So we've been two years before the Standing Committee on Foreign Affairs and International Trade. We got the recommendation we had hope for, which was tabled in the House about two weeks ago.

We don't really know what is going on behind the scenes, but obviously the Department of Finance has to be involved in this, whether the federal government is going to accept the recommendation from the foreign affairs committee.

I want to interject, Mr. Chairman and ladies and gentlemen, that there are two reasons in my brief, and now a third reason why the Canadian government should be looking at a claim under the Geneva Convention. The first one is that the Canadian government signed a peace treaty with Japan in 1951. There is a well-documented provision that no government can waive the rights of its own citizens under the Geneva Convention. But in signing the peace treaty, Canada did. Therefore I think we have to fault Canada.

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There is also what's known as the Optional Protocol to the International Covenant on Civil and Political Rights. That's a long, long name for something Canadians understand, and that is, if a Canadian has a complaint against a foreign government, if it's a legitimate complaint, the Canadian government has the responsibility to support that claim. And of course in the ten years we've been dealing with this, the Canadian government has not supported that claim.

Since sending this submission to your committee, there was reference in the House to now a third reason why the Canadian government should be looking at this. That is, in 1955 the British government found there was a loophole in the peace treaty, but there's now documentation in the hands of the Minister of Foreign Affairs that officials of the Canadian government specifically put their signature to a document saying we will not reveal this information to the former prisoners of war for two reasons: one, it would embarrass the Japanese; and two, it would cause the former prisoners of war to apply for more benefits.

So we have a situation here that is not strictly a matter of law, but where I believe the Canadian government has ample reason to take a serious look at this claim and pay it.

The fiscal dividend is very large. We're talking about $ 17 million. On the other hand, if you look at that as one way in which the fiscal dividend could be used, if you like, we certainly suggest that there are other ways and there are other claims, which I don't have a mandate to get into. But I certainly want to bring that to the attention of this committee as one specific recommendation following out what I was required or requested to do, which was do we know any way in which the fiscal dividend could be used.

The second question was on changes to the tax system, and in this respect I'm wearing another hat. I am the honorary president, for example, of the Association of War Blinded. I have many connections with disability groups, and we believe another way to use the fiscal dividend, if we can call it that, is that incentive could be offered to small businesses, particularly where there is competition from producers of goods and services that has created financial impediments.

The bottom line, and there could be two, is that the Canadian government believes in supporting the efforts of small businesses, particularly where trade negotiations with other countries have hurt them. There's a second reason I want to tie it to, and that's why I can wear this hat and why I can say it; that is, one of the incentives could specifically say “provided you will make some arrangements to provide work for the disabled”—seriously disabled, if you like.

On your third question, my response is exactly the same as changes to the tax system.

On the fourth question, I believe a wide range of job opportunities might be increased for the disabled. Here, I know we are priming an old pump, but if the disabled remain as they are in Canada, largely unemployable, and largely have the opportunity, through computers, to become equal with the non-disabled, but most of them are at an age now where they will require special courses.... That is now becoming a very large area the disabled can take advantage of.

The problem is, it takes money. Consequently, I think there's a wide range of job opportunities for the disabled if financial incentives could be made available to employers and to the disabled to bring their training up.

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Most of the disabled I'm speaking about are in this range of somewhere, I would say, from 30 to 50. The younger ones will already have their computer training, but for that range of 30 to 50, unless there is some incentive to assist them to take the computer training, and some incentive to employers to employ them once they have taken the training, I don't think they have much of a future. On the other hand, we all know that it's much better to do that than allow them to continue to rely on the public purse.

I just wanted to say that I'm a grassroots fellow. In our organization, we employ about 150 disabled people. We have seen the benefits of what I am putting before this committee. But there's no question that it does take money, and the only source I know of outside of our own organization, where we do provide training for youngsters in what we call our CHAMP program.... Outside of that there's a vast number of disabled out there, who if a proper program could be arranged for them.... I know what's available at the moment through the employment services and what not, but there isn't very much that is targeted specifically to the disabled with a job opportunity at the end.

It's a two-pronged thing: first you train, then you provide an incentive for the employer to take on the newly trained person. And I would suggest that changes to the tax system would be one half of that. That would provide the incentive for the employer to take on the person. The other would not necessarily be a change to the tax system, but it would be a much more highly developed system of permitting the disabled to take what I call completely modern training.

I don't want to quote a specific example, because there are so many of them. But what happens now is many of the disabled are told, “Go out to Ottawa and go to Algonquin College and learn a trade”. It's a very tedious, long sort of situation, with perhaps no job at the end of it. On the other hand, with highly developed computer training, the disabled don't have to suffer. They don't need legs; they don't even need arms. All they need is a brain and an opportunity to take this training.

So with those few thoughts, sir, I thank the committee, and if you have any questions on what I'm saying, I would be glad to have them.

The Chairman: Thank you very much, Mr. Chadderton.

Now we'll go to the representative from the United Way of Canada, Mr. David Armour. Welcome.

Mr. David Armour (United Way of Canada): Thank you very much.

Members of the committee, it's a pleasure to be back here this year to speak with you again about the really important work you're doing.

I speak to you today as a member of the senior staff of the United Way of Canada, Centraide Canada, but also as a member of the voluntary sector roundtable, a group that's brought a lot of content to this room over the last few years. And as you've heard from the other presenters, we'll be back with some more specific recommendations later on in your proceedings.

You must sit through a lot of meetings and you must hear a lot of presentations. It's a huge job you have of assembling all of this. You've just had very eloquently presented a strong range of views from the voluntary sector. I sit here wondering what I can bring that's different and new.

Perhaps I can tell you a bit of what we're seeing across the country from United Way's perspective since we last met. Perhaps I can tell you a bit about what you'd see if you looked through the windows, or through the doors, of what United Way sees, what goes on in their meetings and what they see with the arms and the hearts of volunteers and staff who work across the country. As you know, United Way is in 125 communities. We are a place where government, business, organized labour, and the voluntary sector can get together and ask what the health and social service issues are that need to be grappled with that aren't being funded by government.

Our role in community-building is about five major pieces. And I do this not as a United Way commercial, but as way of saying this is the way I'm going to walk through what we're seeing in our role in assessing needs in health and social services, our role in pooling the resources, raising funds and volunteer time, in allocating funds, in strengthening the voluntary sector and in telling society and the communities about health and social service issues. So I'd like to walk through those few things and just give you the context of what we've seen in the scope of United Ways across the country.

• 1625

In our looking at needs in every community, you know, because you read the papers and you listen to the media, that the needs are far outstripping available funds. Some of the stats have already been given to you, but the needs are far outstripping the available funds. Society is, sadly enough, becoming polarized more and more between the haves and the have-nots. As John Macfarlane, editor of Toronto Life, said a year ago, who would have thought ten years ago we'd have a lot of homeless in our major cities? But worse than that, who would have thought that we wouldn't have been outraged when Canadians went to work and saw homeless people in Canada in their cities, in the health and social services system that we together have built up over decades? Who would have thought that we would have become complacent to think that some of the issues we see in society are okay? There's a lot going on that isn't okay. We're seeing increasing needs everywhere.

In our fund distribution activities we distributed the results of the $ 266 million worth of campaigns to 4,300 agencies. What are we seeing? We're seeing health and social service agencies being stretched to their current limits by giving more essential services to Canadians while undergoing more severe funding cuts from all levels. We're seeing agencies not having the time or the strategic energy to restructure at times of massive change without significant difficulties and tensions in their organizations. We're seeing the lines between the voluntary services and privatized services being increasingly blurred and voluntary organizations coming under criticism for being in competition now with private sector organizations. We're seeing the complexity and the diversity of the social service delivery system increasing, becoming somewhat staggering as we try to respond to the diversity of Canada.

On the fund-raising side what are we seeing? Every organization is being asked to increase dollars year to year, providing more funding for more essential human services, maintaining low costs, maintaining transparency to the donors, diversifying their fund-raising, demonstrating program outcomes to donors and volunteers and aligning donations with goals and objectives of donors. We're also seeing, as you know, greatly increasing competition in fund-raising as more and more organizations are fund-raising.

Don't think there's not an impact of government activity in campaigns across the country. When the government a number of years ago did their first pull-back from hospitals and universities they created the biggest campaigns in Canadian history. Now we're in the middle of a second pull-back from funding of all kinds of other services and we're seeing an incredible amount of fund-raising going on. You've heard about the results of some of that.

In our activities in strengthening the voluntary sector we train about 10,000 board members a year, volunteers in volunteer organizations all across Canada, organizations we may or may not fund in all kinds of communities. What are we seeing volunteers on boards dealing with? We're seeing them dealing with the stresses of reduced funding, of strategic planning of work that they never had to do in focusing on high-quality services with less money and focusing on restructuring their organizations, focusing on moving to what they're able to find funds for.

I think Al's story was a wonderful example of how an executive director of a hospice dealing with the quality of life in the last days and moments of life is late for a meeting because she has to be at a golf tournament in order to raise money to meet next week's payroll. That's a pretty indicative story that Al brought for us.

So what do we ask of the committee from our perspective? As you know, for us government is a co-funder, not a funder, for the United Way system. We remind ourselves that every citizen is in fact the voter, is in fact the taxpayer, is in fact the volunteer and the donor. We work for shared responsibility of the voluntary sector and government for one Canadian public, for one series of Canadian communities. We'd first ask that the federal government ensure that in times of a fiscal dividend everything possible is being done to ensure a quality of life in our unique society and the quality of our attention to social justice, equality of opportunity, and keeping the best of what it is to be a Canadian, and that we look after our future and we respect our heritage by providing the best we can for our children and for our seniors. We ask that we invest in the health care system and in services for those that have been marginalized.

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We must never, as a society, lose the most precious of all Canadian assets of our citizens, which is the hope of every citizen for a reasonable quality of life in Canada. Following massive cuts, we ask that government make strategic investments in health and social services to ensure that, as a society, we're truly doing all we can to build caring communities.

I know you need to have specific proposals—you'll get more around the taxes later—but if there's one specific proposal I'd make, I would say that every time the federal government invests in improving Canadian society, the voluntary sector should be at the table and included in the plans. It only makes sense. If, as Gordon said, the voluntary sector is 9% of the workforce, why wouldn't the voluntary sector be involved in a major way when we're grappling with this government's number one priority: jobs and job creation? Make sure that the voluntary sector is at the table when we're talking about education, health care, and services. It's a vital part of society. That's a key process recommendation.

The final technical point is, as you've heard before, ensuring that we approach the issue of enhanced charitable tax credit from the perspective of capacity. We're not asking for more funds from government, we're asking for the federal government to do everything possible to allow generous Canadians to support the organizations that are important to them and the work and the causes that they believe in.

For us, the main point will be enriched provisions for charitable gifts by middle-income and modest-income Canadians over the next few years.

As for the more technical aspects, we'll provide them later. I think David commented on those very well in terms of some of the more technical aspects around capital gains, stock options, shares, and biases against private foundations that should be changed. There are a number of things we'll speak about later.

But the real key is using the fiscal dividend to ensure the quality of the Canadian society that together government and voluntary sector have invested in and ensuring that the voluntary sector is part of your deliberations and every action plan that you're funding with this year's budget.

Thank you.

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

Now we'll hear from the representative of the Community Foundations of Canada. Ms. Monica Patten, welcome.

Ms. Monica Patten (President and Chief Executive Officer, Community Foundations of Canada): Thank you very much. It's a pleasure to be here again.

I guess the disadvantage of being the last speaker is that of course all my brilliant insights have already been proclaimed. But the advantage is that I will be brief. In fact, to some extent I will abandon my notes, because I think it would repetitious for you, and quite frankly, for me and for my colleagues, many of whom have said exactly the sorts of things that I want to say.

In saying that, I hope that you understand that I am in complete concurrence with what my colleagues at the table have said this afternoon.

I want to take a few moments, however, to talk with you a little bit about the community foundation movement as one example, if you will, of the kind of organization that is functioning throughout this country and that, much like David described United Way, is on the front line of services to Canadians.

I also thought it might be useful for me to step back for just a moment because a number of people have referred to the voluntary sector roundtable, or VSR. Just to remind you, I know that you are familiar with it, but I thought I would just take two minutes to remind you of the overall work that the round table is engaged in. Then I'll make a couple of comments about some tax suggestions, again in support of some of the things my colleagues have mentioned.

The community foundation movement and its 81 members is very rapidly growing. Probably there will be another eight or ten formed throughout this year and early into next year. It has made enormous gains in the last couple of years. We announced quite recently that we collectively hold a billion dollars in investments. Much of that is in the western part of the country, although the movement is growing very rapidly throughout Canada.

It isn't so important to think about the billion dollars, although that's a very impressive kind of number for an organization like ours, but what's really important is that the billion dollars translates into grants in the local community.

• 1635

I need to say to you that we really are in the business of making grants much as the United Way is in the business of making allocations and as others raise funds for the vitality of community life. Community Foundations of Canada does this too. So our real preoccupation is with making grants to support the very broad range of interests that go to make up a rich community life.

Having said that, I want to concur absolutely with what David, my colleague from United Way, has just said: no matter how large our pool from which we can make grants grows, it isn't enough, and it never will be enough. Part of that, as others have said, is because of the extraordinary experiences that the voluntary and charitable sectors have found themselves in during recent years.

I'm not going to repeat what they said other than to tell you that it is a very hurting sector. The grant applications that our local community foundations receive reflect that. They are there seeking money from local community foundations that make their grants off the earnings of their investments to do the very basic kinds of things, such as paying the rent in some instances, keeping salaries going, maintaining volunteer coordination, and doing some kinds of basic things. This means that the new, urgent, and emerging priorities in every community don't often get addressed. They are just trying to stay alive. They're really struggling to do that.

One of the very important messages that we want to bring to you—again, I absolutely concur with my colleagues around the table—is that the fiscal dividend must be used strategically to restore some of the funding and resources that have been taken away from organizations doing front-line work all across this country. That needs to happen in consultation with the voluntary sector. I know some of it is happening already, but frankly it's too little and too fragmented. So strategically, engage the rest of this sector in your deliberations and the deliberations of your colleagues working in other parts of the Government of Canada, but we absolutely need to restore the funding.

I want to say that this isn't about restoring funding so that organizations can thrive. In my view, that's not what it's all about, it's about making sure that communities thrive. So the organizations are the vehicles, if you will. They are the ways, in some instances, in which those good things, those important things happen in communities, but it really is about making sure that those moneys reach people who live in your community and mine.

Community foundations are deeply committed to grant-making. They need to do that in partnership with the corporate world and with you. We do this, in fact, with numerous other players in our community.

That's a little bit about Community Foundations of Canada. Let me just back up and tell you this. Again, I know you know what this mysterious thing is that you sometimes read about called VSR, or voluntary sector roundtable, but this is a very quick reminder for you.

We are a group of 12 national organizations or coalitions. We came together in 1995, which I think was the beginning of the formal existence of the voluntary sector roundtable. We came together to primarily look at ways, with the federal government, by which we could strengthen that relationship. There was the ongoing dialogue and the ongoing relationship. This was so we could raise the visibility and credibility of the voluntary sector, again, not for the sake of the organizations, but for the sake of children and youth and men and women all across this country.

Because we knew we needed to be focused and we had a particular period of time in which we wanted to do our work, we identified four areas to address or to focus our energy. One of them has been and continues to be around the definition of “charitable activity” and “charity” in Canada. We are in the process of working with a number of people in a number of conversations and various venues, including the Department of National Revenue, around that particular matter.

The other area is the ongoing mechanisms for dialogue. How are we going to in fact build and keep on having regular dialogue and exchanges with the federal government?

Another one—I believe and hope you have all heard about this recently, and I think Al referenced it in his remarks—is the panel on accountability, which is chaired by Mr. Ed Broadbent and peopled, if I can say that, by a number of distinguished Canadians who have gathered information, talked with Canadians, and talked with members of the voluntary sector across the country and are continuing to talk about matters of accountability and transparency. We believe absolutely that an accountable and a transparent voluntary and charitable sector is what Canadians want, and that will allow us to be more effective, more efficient, and broader in the work we do all across this country.

• 1640

The final piece of work the round table has undertaken, and continues to undertake and has of course been referenced more than once, is around tax incentives. A number of us at the table actively participate in that particular file. So that's a little about the round table, and we'd be happy to chat more with you about it if it would be of help to you.

That brings me to a couple of specifics for your consideration around tax incentives. I've mentioned community foundations and the fact that we're in the business of making grants. It goes absolutely without saying that our movement has benefited, with great appreciation, from the capital gains provisions that were recently introduced into the budget.

We can cite stories of very major and significant gifts that have been given to community foundations. But once again the value in those gifts is not that they make a pool of money bigger; the value in those gifts is that they get flowed through to the community in their grant-making activities.

So one of the very important requests we have of you is that you recommend and do everything you can to advance the idea that the remaining capital gain on charitable gifts of shares is completely eliminated. There are many gifts that would come in and be flowed through to the community. We in our movement are tracking them. We know they are doing good things in the community, and we will be able to tell that story with greater clarity within the next couple of years. But to completely eliminate that capital gains tax would make quite a considerable difference to us.

In addition, and for the same reasons my colleagues have articulated here, we want very much to support the case for tax incentives for moderate-income Canadians. All Canadians want to give; we know that. All Canadians want to support their communities and be engaged in the very fabric of their community lives. You know that as well as if not better than any of us do. So we want very much to encourage you to make that possible, to recommend that it become possible that those tax incentives be introduced as quickly as possible.

Let me close by making a few comments on the process in which we are engaged this afternoon. You've heard this before, but I want to echo it. Frankly, we were really caught off guard by this early invitation to come to be with you this afternoon. We don't say that with a lack of appreciation, but we want you to know we'll be back, because we have some more work to do, and that has been described to you by a number of people around the table. We expect we will have another opportunity in the fall to present, and indeed perhaps work with some of you—the staff at the Department of National Revenue and the Department of Finance—between now and then.

I also can't help but note, perhaps somewhat boldly, that the faces we see at this end of the table are the same faces we see year after year. To a certain extent, we are all repeating what each has said, and there may be some value in that. But I think at some point it would also be helpful for us, and we'd be happy to think about that, to perhaps look at a way to engage some other voices around this table and be clearer with you about what matters you might be looking for.

Thank you for the invitation.

The Chairman: Thank you, Ms. Patten. As always, we enjoy hearing what you have to say. Sometimes in life messages must be repeated.

Before we proceed into our question and answer session, I just want to tell everybody here that the bells will ring at approximately 5 o'clock. Ignore the bells. We will continue with the question and answer session right up to 5.13, because we're very close to the chamber.

Mr. Solberg.

Mr. Monte Solberg (Medicine Hat, Ref.): Thank you very much, Mr. Chairman.

Welcome to all of you today. I hope you know how much parliamentarians value the work of charities, not just from the point of view of recipients but also from donors. The work you do really contributes to the enrichment of civil society in the country, and I appreciate that.

• 1645

I want to ask a fairly specific question, and I hope you can answer it. With the government's battle to deal with the deficit, they cut social spending fairly deeply—by about $ 6 billion. Obviously that had an impact on funding for charities of various kinds. On the other hand, we've also seen growth in employment and the economy has become stronger, so to some degree that offsets it. I'm wondering if someone could give me a ballpark percentage of the impact those cuts have had on operational revenues for charities. I know it's tough, but in the aggregate I wonder if you could give us an idea just what kind of impact that has had on charities overall.

Mr. Gordon Floyd: I don't think there is anything like a reliable estimate. A big part of the difficulty here is that so much of the impact of the cuts that happened at the federal level actually played out at the provincial level. So it really is hard to tell. I can give you an example that might be indicative. Looking at some 200 social service agencies funded by United Way in Toronto, in a single year, 1996, they lost 15% of their budgets solely due to government funding cuts. When you bear in mind that, on average, those agencies are only covering about 20% of their budgets through donations, you're talking about losing an amount of funding that's equivalent to 75% of what they raise.

We hear about replacing lost government funding with increased fund-raising revenues, which is blather, and I think it's important to underline that. Although we have talked mostly here today about the importance of providing targeted tax incentives that will encourage donors to give more, none of us are under the illusion, and we hope you won't be either, that there is any way donations are going to replace the lost government funding.

The only other point I would like to underline in responding to your question is one I made in my presentation: that the budgets of these charities were tiny to begin with. They don't have the capacity to absorb any of these cuts. There weren't administrative savings to be made, and all of the cuts have resulted in reduced programs, reduced service in the communities where those charities operate.

The Chairman: Thank you.

Mr. Hatton.

Mr. Al Hatton: Our organization started consulting with the leadership of national organizations, and the general rule of thumb we're getting back is that over the last three or four years they've cut their staff by 30% to 50%. That's a significant amount of infrastructure that's gone. If it were a business environment, it would be ludicrous if you didn't invest in research and development or training and just made sure you had your product and got it out to more people. It wouldn't be long before that product and that organization were in severe trouble. Yet we make the assumption that will somehow work in the voluntary sector.

The Chairman: Thank you.

Monsieur Perron.

[Translation]

Mr. Gilles-A. Perron (Saint-Eustache—Sainte-Thérèse, BQ): This is not a question, but more of a comment.

• 1650

Mr. Floyd, you said in your presentation, that the average donation was $ 186.

Mr. Gordon Floyd: No.

Mr. Gilles Perron: The average donated is not $ 186, then?

[English]

Mr. Gordon Floyd: No; $ 190.

[Translation]

Mr. Gilles Perron: Fine. There is not much difference.

[English]

It's a four-dollar difference.

Mr. Gordon Floyd: It's actually, technically, the median donation. Half give more; half give less.

[Translation]

Mr. Gilles Perron: In that case, why do you not call upon the government to have your donors treated the same way as those who donate to political parties? People get a credit of $ 31.62 for $ 190, while when it is a political party, they get 75% on the first $ 100, so it is $ 75.

[English]

Mr. Gordon Floyd: I would love to have something equivalent to the political donation at the low end. The problem with the political tax credit is that it becomes worth less and less as the amounts given.... The objective with the political donations tax credit is to have a broad base of donors, none of whom are giving big amounts of money. The reality for charitable fund-raising is that a relatively small number of the donors give very large amounts of money. We like the idea of a tax credit system that becomes more valuable as the donations increase, because that's very attractive to those big donors who make those huge gifts to David's organization at the University of Toronto.

The Chairman: Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC): I too would like to thank you for your thoughtful interventions. As a federal Progressive Conservative, I can understand the challenges of fund-raising at this juncture. And that's with the local donation tax treatment. You need a sense of humour in this business.

I feel your proposals relative to gifts of shares are very realistic, given the current realities in terms of individual Canadians' asset bases. Canadians arguably are much more inclined today to invest in shares or in equities than they are to save money in fixed income securities, so I think it's a very reasonable plan. It's one I have discussed with some people from the Princess Margaret Hospital fund-raising organization. I think you're absolutely correct in that.

I enjoyed the intervention from Mr. Chadderton on the compensation for the Hong Kong veterans. That is something our party has been consistent on, and something particularly our veterans affairs critic and more recently our leader, Elsie Wayne, has been adamant about.

My question relates to comparative statistics between the U.S. and Canadians in terms of philanthropy—the degree to which Americans donate to charities compared to Canadians. If there is a difference, what particular areas in our tax codes in Canada should be changed to reflect the difference?

There's a great article in last week's Economist on philanthropy in the U.S. I think it was asserting that people are more parsimonious today than they have been, or certainly less creative.

Also, have there been any studies on the efficiencies of government versus charities in terms of providing essential services and strategic social investment? It is perhaps arguable that charitable organizations can more efficiently target social needs than government bureaucracies. Thus your arguments relative to making it more advantageous to contribute to charities are very realistic and reasonable, and should be pursued with more vigour by this government.

The Chairman: Mr. Boyd-Thomas.

Mr. David Boyd-Thomas: We'll sort of have a group response to Mr. Brison this afternoon.

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I'd just like to underline that in our presentation we did highlight the fact of two items, one of which directly, and one indirectly. The direct one of course was the fact that we see the potential for charitable remainder trusts as a particular vehicle, which is the third most widely-used charitable gift mechanism in the United States—the first being cash, if you will; the second being gifts made through the bequest, through the will; and the third being the charitable remainder trust. So it's used to wide advantage.

We didn't include the full details—again, we do need the summer to go and craft a little more detail—but again, we were modelling very closely on the U.S. model. In fact we've learned from some of their mistakes. They even admit they would like some fine tuning, so we'll take advantage of that.

The second point of course is the fact that in calling for the complete elimination of capital gains tax on gifts of appreciated property, we are effectively asking for a complete equalization with the United States, where there is complete exemption from capital gains on gifts of appreciated property to charities.

I should also point out that that goes beyond publicly listed shares as well. It goes to other forms of property.

Mr. Gordon Floyd: Also on the issue of comparisons with the United States, the data indicate that Americans give on average 2% of their incomes to charity each year. Canadians give on average .7% of their incomes to charity each year. The gap is huge.

Much of that gap is at the upper end, and the sorts of initiatives David has talked about would address that upper end. But I think that when we have a median giving level of only $ 190 in Canada, we have to be worried as well about the gifts at the lower end.

Mr. Scott Brison: If I can just at this juncture ask a question, is it that Americans are three times more likely to contribute than Canadians, or that they contribute three times as much as a percentage of their income?

Mr. Gordon Floyd: Three times as much of their income.

Mr. Scott Brison: Do you think the marginal tax rate difference plays a role in that? We see it acting, for instance, with this whole brain-drain issue, and the loss of some of our best and brightest to the U.S. Are there cases—for instance we have difficulties in Canada with our health care system, and many Canadians are investing in a private health care system in the U.S. by choosing to go to clinics and have treatments in the U.S. Is there in fact a loss of Canadian dollars to the U.S. in that sense?

Mr. Gordon Floyd: There may be.

I think that the difference is very much accounted for by the very different philanthropic tradition in the United States, particularly among wealthy Americans. If you want to really focus in on one area of huge difference, it would be in the way that private foundations in the United States play a role in supporting the charitable sector, and wealthy Americans creating private foundations to flow funding through to the charitable sector.

American charities get 7.3% of their funding from private foundations. In Canada our charities get 0.4% of their funding from private foundations. This is the philanthropy of wealthy individuals in one country as compared to the other.

In the American situation, though, philanthropy by wealthy individuals is very much encouraged by their tax code. It's very much encouraged by the kinds of tax measures that David has referred to, where capital gains treatment is much more generous, where charitable remainder trusts are a standard part of the giving arsenal, and the tax code there.

Mr. Scott Brison:

[Editor's Note: Inaudible].

Mr. Gordon Floyd: I wouldn't say that on the whole, but certainly in that one particular area.

The Chairman: Mr. Armour.

• 1700

Mr. David Armour: To add a finer point to that—and Gordon knows the statistics better than any of us—the difference between the 2% and the 0.7% is really skewed by the large gifts. The piece of research that the voluntary sector group of us collectively did in the Voluntary Sector Roundtable showed that the average person in Canada was giving about the same as the average person was giving in the U.S.

So it shouldn't be characterized that the average Canadian citizen is giving less than the average American and they're not as generous. They in fact are. The numbers are really skewed by what we call the mega-gifts—the big gifts of the highly wealthy, as Gordon was saying, who often participate through the private foundations.

As for the other part of your question on the efficiency of charitable organizations in responding to social needs versus government, the question we ought to be asking as a Canadian society is what is the delicate social contract with government and what are the pieces missing that need to be done by the voluntary sector?

There was a delicate social contract in Canada where we believed we had a social safety net that covered the basic needs of food, shelter, and clothing. Now in our larger cities, rent is so high that the money and the food run out before the month does, and we have people going to all different food banks and different systems that in Canada we had hoped, 10 or 20 years ago, when we created the social safety net, would not be needed at all.

Part of the question we ought to be asking as a society is what's the role of government in basic needs versus the role of government in social services versus the role of the voluntary sector in additional social services? Because if people are giving a third to a half of their income to government in taxes, plus sales tax, and if they're giving to the voluntary sector an average of $ 190, it's pretty clear how much you can pile onto one pile versus how much you can pile onto the other pile.

So there's a huge issue here of capacity—the amount of dollars in each—and we ought to be talking about what the safety net ought to be in Canada for the next couple of decades. What should everybody have a right to, no matter where they live? And then what are the additional things that should be picked up by the voluntary sector?

Mr. Gordon Floyd: What the voluntary sector is good at is filling niches, dealing with isolated needs, and dealing with the needs of minority groups. The voluntary sector is not able to deliver universal programs.

The cutbacks that have happened to universality, the erosion of universality that's happened consistently over the last few years, has created a situation that the voluntary sector cannot help with.

Mr. Al Hatton: I have one other little answer to the last one. We're not aware of any evidence-based research that would say which is best and which is not, but I think two things.

One, the unleashing of volunteers that the voluntary sector promotes is in the order of 5 million or 6 million individuals per year. That is as of 10 years ago. A major survey has just been done, and the results of that will be available in August. Our sense is that those numbers will be much larger. That's one part of the answer.

Another is that Ekos Research, through the reinventing government process, has been now tracking the public opinion of the voluntary sector vis-à-vis the private sector and government in delivering health and social services. The public is open, has a much richer appetite, for the voluntary sector delivering services now with government—it doesn't matter what level of government—in a more dynamic way than maybe in the past. I think that's based on their frustration with what has gone on over the last period of time.

Those are some indicators that we're ahead in looking at this. We have to do more research. Our sense is that however you invest in our sector, it will be value-added with the public.

The Chairman: We'll now move to Ms. Redman.

Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chairman. I have several questions, and I'll try to ask them as quickly as I can.

I want to preface my comments by saying I have a great deal of respect and value, as does my community, for the voluntary sector, but I heard some of the comments initially made by Mr. Floyd, and I sit here.... I've heard some studies talk about the tracking. Since this government has been in office, it's done several things to foster charitable giving, and I've heard some presenters acknowledge those, such as the reduction of the inclusionary rate for capital gains, the increase to 75% of income limits, and other things.

• 1705

I look to my own community, which is Kitchener, and I look at Klaus Woerner, who donated in the neighbourhood of $ 2 million to an arts centre with no strings attached. I scratch my head a little bit and just wonder, are there valid statistics?

I would like to clarify the $ 190 that you keep referring to as an average. Just to reiterate, half of the people give above that and half below. Is that correct?

A voice: It's a median.

Mr. Gordon Floyd: Yes.

A voice: That's of the 27% of people who give?

Mr. Gordon Floyd: Those are Revenue Canada and Statistics Canada data. That's median, not average.

Mrs. Karen Redman: I hear you asking about resolution 21, and that's something we heard about last year as well, but has enough tracking been done to check the impact on the charitable giving to ask for changes now and not wait to see how it unfolds?

Mr. Gordon Floyd: Two changes were introduced in the 1997 budget where tracking needs to be done.

The first is the measure that reduced capital gains tax—effectively cut the capital gains tax in half—on gifts of securities. We have only had a year of experience with that measure now. We only have anecdotal data. Even Finance doesn't have the 1997 tax statistics yet for a more thorough study.

Anecdotally, what we're seeing are some significant new gifts being made primarily to large charities—universities, hospitals, and large arts organizations. In addition, some large gifts are being made to those United Ways that have endowment funds and to community foundations, and some of those dollars are flowing through to smaller charities. But we won't know for a least another year what the comprehensive numbers are on that and how the dollars are being distributed.

We know that was a move in the right direction, though. We have every reason to believe that the data, once it is available, will show that that measure should be extended and expanded. There's probably enough anecdotal evidence out there now to support that.

The other area you raise is resolution 21, and these are the restrictions that were put on gifts of shares in privately held companies. What we have is a measure that is only now coming into effect, and what we know about that measure is it's been changed three times over the last year. From the time it was announced in the first budget, three sets of amendments have come forward. Nobody was doing anything at all in the way of giving shares while that whole process was dragging on.

The finance department frankly botched that one from the beginning. It was a very ill-conceived proposal that was included in the budget. They recognized that, to their credit, and they've backed off it significantly. I think the only reason there's any remnant, any vestige, of it left is to save face, and that's not a very good reason for it to be there still.

The most offensive provision of that measure, which I don't think anybody can defend and on which we don't need to have any tracking to say it should be scrapped, is that as of today, if you sit on a board of a charity and you hold your assets in a personal holding company, or if you are an entrepreneur and you have your assets in the family business, you cannot donate those shares to the charity, because you sit on the board. This is crazy. You were probably recruited to the board because somebody thought you were going to be a really big donor.

Voices: Oh, oh!

Mrs. Karen Redman: And you're in very bad health, right?

Mr. Hatton, you made a statement that I'd like clarified. It sounded to me—and I wrote it down after the fact—as if government is supporting individuals by going around charities. If I've taken that out of context, I apologize, but I didn't quite understand what you meant by that statement.

Mr. Al Hatton: It's very close. What I was saying is that a lot of the current activity in departments—I think the finance department in particular.... Partly because of the unclear roles between provinces and federal government in terms of social programs, health and social services, and support for social development, a lot of the tax measures go directly to help individuals, so we're putting more money in individuals' pockets. That's fine. That has replaced, though, in a lot of front-line departments, support for organizations.

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The idea is we give money directly to people and they'll solve their own problems, as though individuals, whether they're disabled, whether they come from poor families, alone can deal with the challenges of finding employment, finding child care or whatever.

A lot of those services have been undermined. So it hasn't been that they've done one against the other, it's that the focus has shifted from support for organizations and infrastructure and, as Monica says, not just to keep organizations going, but to actually serve both individuals in need and groups that don't have a voice.

Is that clearer?

Mrs. Karen Redman: Yes, that is a clarification.

One of the things I've been very supportive of in my community, and I see it worked really well and gave us federal presence in the community, is the structure of CAPC, which probably all of you are familiar with. It tends to go to more of the grassroots initiative. I also look to my community, and there's a Rotary community centre, which has been set up by one of the local Rotary clubs, which is housing a lot of the little agencies that really, when they looked at the tough stuff and the 15% cutback that one of you mentioned earlier, couldn't go it on their own, and at the end of the day probably didn't need to own their own photocopier and didn't need to have an executive director.

I think it was you who made comments about being more accountable and more transparent, and I would say that those are all very good things. And those are things that needed to happen in the voluntary sector, because very often what you got in the community were people who had a vested interest in an unmet need, got on the bandwagon and created their own little entity, and the community and government, I guess through its cutbacks, pointed out that the community is not either able or willing to support that structure in this way. I see that as a very positive thing happening in our communities to still sustain the kind of voluntary giving that people were interested in doing but cutting down on some of their demands financially to keep that going.

Mr. Al Hatton: I think that's valid and fair. A number of the organizations here and a number of national organizations are also trying to re-rationalize their core mission and the way they deliver services, but I guess it's a problem of things went a little too far a little too fast without being really strategic and thought out. In the community process you're describing where there's time to really refit and retool, it's more like the money ends, now what are you going to do? There have been some positive features of that and a lot of negative.

Mrs. Karen Redman: Mr. Armour, I wondered if you could comment again and whether you have looked at it. I know in my community it's very supported through the corporate sector. I'm sure the round table did look at it.

I know one of the large insurance companies allows two of their employees to be seconded on an annual basis to help with the United Way fund-raising. I've also heard in my community a real backlash from the grassroots community organizations, which say that the government gives far too much money to the United Way and the large agencies and isn't dealing enough with the grassroots kinds of community initiatives. I wonder if you could comment on that.

Mr. David Armour: Sure.

The government doesn't in fact give money to the United Way, other than for a few small special projects that occur from time to time. The United Way is a co-funder with government. So I'm not sure why people would be concerned about government giving too much money to the United Way, because it really doesn't exist anywhere.

Mrs. Karen Redman: Some of the agencies you give money to would also get government funding, right?

Mr. David Armour: That's right. Absolutely. Many of the agencies we fund would be funded by government. We would act as a core funder. Many of them would be carrying out mandated programs of child protection, of health services, of child services mandated at the provincial or municipal level and carrying out programs funded by the federal level.

The core question for the United Way is what are the health and social service needs in this community that aren't being funded by government, and how can we best use charitable dollars to do what needs to be done—and it will often be done in agencies that are funded by government.

If you have a great Canadian mental health organization that's funded municipally and provincially, and they do really good work that's mandated by the government, what better place to put a public education programming that's really needed, rather than setting up a new agency?

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So just on the comment you made earlier about efficiency and effectiveness, we will often, where there are programs that are needed, place those in agencies that already exist or say that here are agencies that need to carry out programs that aren't under the mandate of government in each community.

In the area of corporate support, corporations have been outstandingly supportive of United Way and a whole range of other charities. In total, as an aggregate, about 21% to 22% of our total revenue across the country is from corporate giving. In addition to the financial gifts, there are in-kind supports that they give to the United Way and and all ranges of other organizations.

So certainly what you heard in terms of loaned representatives and executives, that's a very successful program that works across the country. Again, if you have a huge campaign to run, you could hire a whole lot of staff to do it or you could go to the community and ask how they want to run this campaign. That's really where the idea of the loaned representatives came from. Instead of hiring a whole group of staff, let's get people from corporations, government, and the voluntary sector to roll up their sleeves for 16 and 17 weeks to learn a lot about their community and help out. That's where that program came from.

Mrs. Karen Redman: Thank you.

The Chairman: Ms. Torsney, do you have a question?

Ms. Paddy Torsney (Burlington, Lib.): Can I just clarify something? The mean donation is $ 190. This is of the 27% of the people who actually file their taxes and say that they gave a donation.

Mr. Gordon Floyd: Yes. So 73% of tax filers are not claiming any donations at all.

Ms. Paddy Torsney: In a large pool of 27% of Canadian taxpayers—if my statistics experience at university reminds me of anything—this is probably the mean or the average or something very similar at that point because it's a fairly large pool, and the mean and the average aren't very far off in big pools. It's probably an average for those donations too, because generally, if I remember correctly, if you have a large number of people in the pool from which you are gathering the statistics, the mean and the average are similar.

Mr. Gordon Floyd: Actually the average is a fair bit higher—

Ms. Paddy Torsney: Oh, is it?

Mr. Gordon Floyd: —because of this pattern of having a small number of donors who give very large amounts, which we also have in Canada, but not to the same extent or anywhere near it as in the United States. The average amount donated in Canada by those who claim donations is more in the order of $ 700.

Ms. Paddy Torsney: A while back, there was the IMAGINE campaign. I think it goes along still, but clearly, with only 27% of tax filers claiming a donation, it suggests that we still lack a culture of contributing financially to our communities. There could be a lot more work done in saying that this is an important part of community life and everyone should think about this, whether it's $ 5 or $ 10. I guess part of the problem is that some people do give the $ 5 and $ 10 and never get a receipt, and some people give time instead of money, and they clearly don't get a tax deduction for that. But it does seem that we could do more. Perhaps that's something we can also do through our capacity in communities: help foster that culture.

Mr. Gordon Floyd: The IMAGINE campaign is a program of the Canadian Centre for Philanthropy. The campaign has been operating at a much lower level for the last four years than previously because some of our major funders pulled out. In fact, they cancelled agreements without notice. The major one of these was this government.

Ms. Paddy Torsney: I'm glad we're not televised.

Voices: Hear, hear.

Ms. Paddy Torsney: We'll get that message through. Thank you.

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The Chairman: On behalf of the committee, I'd like to thank you very much. This is always a very interesting panel. What these pre-budget consultation hearings really allow us, as members of the committee, to do is really view the challenges that we face in Canadian society through various lenses. Your sector always reminds us of some of the challenges that indeed happen, particularly at the community level. It's a constant reminder for us as we set priorities and make recommendations for the 1999 budget. As always, we appreciate your comments, and we look forward to further participation. Thank you.

The meeting is adjourned.