44th Parl. 1st Sess.
June 2, 2022 10:00AM
Mr. Speaker, as was said earlier, we are here today to debate a private member's bill, Bill C-240, that really focuses on exempting real estate and private corporation shares from capital gains tax when the proceeds are donated to charities.
I have worked in charities for a good part of my life. I really appreciate and respect the profound work that these organizations do in our communities. Whether it be helping newcomers to Canada, which was the charity I was a part of for eight years of my life, whether it be helping people who are looking for opportunities in terms of employment, or whether it be organizations that support people who are struggling in ways so profound that we cannot imagine in this place, they do profound and important work. When I look at Bill C-240, I am a little disappointed. There is so much that could be done to support charities, but the bill would do such a small portion, and it would really allow the wealthy of this country more control of where their tax dollars end up while requiring other Canadians to make up the difference of that tax bill. I think that is something we need to reflect on.
We know that, across the country, the ultrarich are not paying their fair share. The top 1% earners across the country are not paying their fair share, and everybody else is. Everyday folks such as those across my riding of North Island—Powell River are paying their fair share.
In my riding, for example, I think of the Comox Valley Ukrainian Cultural Society. Its members are working so hard, because their family members across the sea are suffering profoundly. One of the things they are doing is having regular rallies. People are donating to the cause, and they are helping out in every way they can. Not too long ago, I was at an event. One of those incredible volunteers stood up and talked about their plan to cook perogies and some traditional food that they would sell to raise funds, because they wanted to make sure that they did all that they could.
I think of the Hardy Bay Senior Citizens' Society, whose members really do a lot of work. They work with over 200 people in the community, and they have a huge membership. They also support many people, such as by serving food to the elderly, especially during COVID. These folks were out there making sure that people who had any mobility issues got the supports they needed. They took food to their homes and supported them in every way they could.
I think of the North Island Seniors Housing Foundation. This organization is one that I am profoundly proud of and am actually a member of. What I know is true is that this federal government does not support housing for seniors, and rural and remote communities across this country are really struggling to keep seniors in their communities. Seniors are coming out and saying, “We need housing that will let us stay in our community where we have our social infrastructure, and where we have all the people we know here in the community who will help us.” They do not want to be sent away, which is what is happening right now. We are seeing elderly people who, as they age, instead of staying in the warm companionship of their community, are being forced far away because that is where the accessible housing is. They lose all of those connections.
I think of the Campbellton Neighbourhood Association in my neighbourhood of Campbell River. It is doing profound work to make the community and that area more recognizable, acknowledging the history of it in our community and really showcasing the spectacular opportunities that are there. I also think of PRISMA in Port Hardy, which does amazing work in bringing international musicians to our region and really celebrating the beauty of music in our community.
When I look at the bill before us, it would not do what I would like it to. It really focuses on making sure that the ultrarich get another tax break. I do not know how many they need. I cannot believe that we are spending our time trying to find easier ways for them when we know how many people are suffering, especially with inflation. We know that people are looking for help. They are living paycheque to paycheque and are not able to get ahead. Even now, it is getting harder and harder for them. They are going to the places where there are food banks and where there are opportunities. We need to find ways to support those organizations.
The bill is a small one, and would not actually address those areas of concern across the country. Again, it would allow the very wealthy, who are able to give away a substantial amount, to decide what charities are valuable instead of really looking at what is happening across our country and making sure that the supports go where they are desperately needed. We know that half of the top 10 billionaires have foundations in their family name. That comes from Canadians for Tax Fairness.
Although charitable organizations perform valuable work, they are a poor replacement for adequately taxing the rich and can reduce tax revenues by more than they distribute. We need to look at this critically.
I will not be supporting this bill, and I hope we will have more meaningful discussions about how the people in this country and the charities that serve us so well get the supports they need to do the work they must do to support everyday Canadians.
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Mr. Speaker, I am pleased to rise today to speak to Bill C-240, an act to amend the Income Tax Act.
I would like to first commend my colleague from Charleswood—St. James—Assiniboia—Headingley for introducing this important bill in Parliament. I know my fellow Manitoban has done some tremendous work over his personal and professional life to improve his country. Bill C-240 is an addition to his great work. It is for those reasons that I am proud to call him my colleague and seatmate in the House of Commons.
Charities contribute immensely to the social, cultural and economic well-being of Canada. There are over 85,000 registered charities in Canada that collectively employ 2.4 million Canadians and contribute 8.4% of our nation’s GDP. However, the reality is that charities have experienced some of the most devastating impacts from the COVID-19 pandemic. When charities are hurting, so are Canadians.
In a previous debate, my colleague noted that Canadian charities lost $10 billion during the pandemic alone. That is $10 billion less for the community foundations that improve the towns and cities we call home. It is $10 billion less for the education charities that grow young minds and provide hope for a better future. It is $10 billion less for the wildlife charities that lead critical research and deliver habitat conservation. It is $10 billion less for the arts and cultural charities that fuel vibrant communities. It is $10 billion less for the food banks that so many Canadians now depend on.
Now with a cost-of-living crisis sweeping across our country, I fear that charities will continue to suffer from the reduced disposable income available to Canadians. It was just yesterday when the Bank of Canada significantly raised interest rates in an attempt to control record inflation. When Canadians are paying significantly more in debt payments, they cannot afford to donate to local charities at the end of the day.
Canadian charities have filled many gaps in our society that government could not fill. I think of the Community Foundation of Swan Valley, which recently contributed to early learning centres in Swan River. I think of the Touchwood Park Association in Neepawa, which contributed immensely to providing opportunities for individuals with disabilities. I also think of the Dauphin & District Community Foundation, which continues to support recreational services in the parkland region. I could speak endlessly to the thousands of projects and initiatives that charities are responsible for in my constituency alone, but now is the time for the government to step up and support Canadian charities.
Bill C-240 would significantly help Canadian charities through a simple change to the Income Tax Act. Bill C-240 would amend the Income Tax Act to waive the capital gains tax on the proceeds from the arm’s-length sale of privately owned shares or real estate when those proceeds are donated to a charity. This change would directly fuel a significant amount of new donations to Canadian charities year after year.
Imagine a local business owner, an accountant, for example. An accountant owns a practice in their local community, and after years of hard work, the accountant decides to retire and sell the business. The owner sells the business for a $100,000 in profit and chooses to donate a portion of the sale to a favourite local charity.
Under the current Canadian legislation, the accountant would be subject to a significant tax on the profit of the sale. In this case, the accountant would have to pay a capital gains tax of $25,000, assuming the absence of an exemption. This means the business owner would have $25,000 less to donate to a local charity, and the government would have $25,000 more to spend on who knows what.
Bill C-240 would eliminate this tax bill if the accountant decided to donate the proceeds to a Canadian charity. The accountant would then have a choice between sending the money to the government or donating the money to a Canadian charity. I hope we can all agree that money is better spent when it is used in our local communities, as opposed to being sucked away in the black hole of government.
The private sector can play a key role in supporting the work of charitable organizations, and Bill C-240 would enable it to do this. Too often, governments believe they have the answers to all of our problems, when in reality the citizens of our country are more than capable of addressing the needs of society.
The independent Parliamentary Budget Officer has reported that Bill C-240 would increase charitable donations by nearly $1 billion over a period of five years. That is a significant number. Members of the House have an opportunity before them to forever increase donations to Canadian charities. I see no reason why they would oppose such a piece of legislation.
Thankfully, this concept is not a new one. Previous Liberal and Conservative governments have initiated great work on this idea. The capital gains tax on gifts of publicly traded securities to Canadian charities no longer exists because of government action. Bill C-240 attempts to further this initiative with the exemption for shares of private companies. I can assure members of the House that there are many business owners who would rather give their money to charity as opposed to the government if they had the choice to do that.
This bill would not incur any new government spending. It is simply taking the tax money that was on its way to the government’s coffers and putting it into Canadian charities. As the PBO report showed, for every one dollar the government forgoes under Bill C-240, approximately $1.26 goes to charity. This is a very noteworthy benefit.
As an MP who proudly represents a rural region, I would be remiss not to mention the particular importance of charities in rural Canada. Charities are the foundation to the well-being of small and rural communities. It is very common for Canadians living in small towns to contribute to multiple charitable organizations. The limited services available in rural and remote communities emphasize the important role that charities have in supporting the people within them.
Philanthropy is alive and well in rural Canada. Rural Canadians step up to help their neighbours and communities when needed. Charities turn this mentality into results. It is for reasons like this that I have no doubt Bill C-240 would have an amplified impact in rural Canada.
In conclusion, Bill C-240 would directly support more than 85,000 registered charities in Canada at a time when they need support the most. It would incentivize more Canadians to increase support for the charities of their choice.
There is a reason that so many high-profile charities and non-profit organizations have supported Bill C-240. I encourage members of the House to speak directly with charities in their local ridings to hear what this bill means to them. If they do so, they will hear the stark realities that Canadian charities are facing and the importance of creating an environment that incentivizes more giving.
Once again, I would like to thank my colleague from Manitoba for introducing this important piece of legislation. I was proud to jointly second Bill C-240 and can assure him that I will be in voting in favour of this legislation. I encourage every other member of the House to do the same and send this bill to committee, where it can be further studied. As parliamentarians, I believe we should hear expert testimony on this legislation to better understand the positive impact it would have.
Canadian charities have supported so many of us in so many ways. It is time for us to support them. Bill C-240 would enable us to do that.
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Mr. Speaker, I appreciate the opportunity to take part in today's second reading debate on private member's bill, Bill C-240. As we know, the bill would provide an exemption from capital gains tax in respect of donations to charities resulting from certain arm's-length dispositions of real estate or private corporation shares.
At the onset, I would like to make it clear that I support the intent of the bill, which is to say that I support and encourage the making of charitable donations. However, the bill is problematic in how it aims to achieve this.
First and foremost among my concerns is that the proposed measure in the bill is regressive. This means that it would primarily benefit a particularly small class of high-income individuals rather than encouraging charitable giving by the broader public. More specifically, it would disproportionately benefit those who are holding private corporation shares or real estate other than a principal residence, which is to say, higher-income Canadians. That makes the bill unfair and puts it at odds with our government's goal of cutting taxes for the middle class while raising them on the top 1%.
For example, we have increased support for families and low-income workers through programs such as the Canada child benefit and the Canada workers benefit, which have helped lift over one million Canadians out of poverty since 2015, including 435,000 children. We have also increased the guaranteed income supplement top-up benefit for low-income single seniors and enhanced the GIS earnings exemption, and we are increasing old age security for Canadians aged 75 and older in July 2022.
We will continue to examine ways to improve the tax and benefit system to ensure that it is well targeted and fair. However, providing a tax break that disproportionately benefits the wealthy is not in keeping with this approach. What is more, the measure is poorly targeted at achieving the bill's goal of supporting charitable donations. The proposed measure could in fact result in a windfall gain to donors without actually increasing the amount of their charitable giving to charities. That is because donors could simply substitute their existing cash donations to charities with donations of private corporation shares and real estate in order to receive greater tax benefits.
Considering the significant flaws in this proposed legislation, it is important to bear in mind that the Government of Canada's tax support for charitable donations is already recognized as being among the most generous in the world. The primary mechanisms for delivering this tax support are the charitable donation tax credit for individuals and the charitable donation tax deduction for corporations.
For the 2019 tax year, individuals are estimated to have claimed over $11 billion in such donations through this provision, with federal tax assistance on these donations amounting to approximately $3 billion. At the same time, corporations are estimated to have donated $3.1 billion through this provision, with federal tax assistance of approximately $655 million.
In terms of the charitable donation tax credit for individuals, the tax assistance received through the CDTC more than offsets any paid tax on the income used to finance the donation for the vast majority of individuals who donate more than $200 a year. The CDTC provides a 15% credit on the first $200 of annual donations, and for most donors, the CDTC provides tax assistance at 29% on the portion of donations over $200. What is more, donors with incomes subject to the 33% marginal rate can also claim a 33% credit on the portion of donations exceeding $200 made from this income.
In addition to this federal tax assistance, all provinces and territories have charitable donation tax credits, with the average provincial credit being approximately 17%. In fact, total combined federal-provincial tax assistance averaged out to be around 46% on donations above $200 in 2019. For donors with taxable income in excess of the highest rate, tax assistance on donations would be around 50% in most provinces and as high as 54% in Nova Scotia and Alberta.
Moreover, the government already offers special incentives to encourage donations of important assets such as publicly listed securities, ecologically sensitive land and certified cultural property through an exemption from capital gains tax for most such donations.
When the exemption from a capital gains tax is included, the total tax relief provided on such donations can be as high as 81% when provincial incentives are added. The charitable donation tax credit can generally be claimed up to 75% of the donor's net income in a year. Unused donations can be carried forward for up to five years, or up to 10 years in the case of ecologically sensitive land.
Unfortunately, Bill C-240 may actually undermine the effectiveness of the tax incentives provided under the ecological gift program. That is because currently the only type of real estate donation that is eligible for the full capital gains exemption is ecologically sensitive land that has been certified as such by Environment Canada and donated to certain qualified recipients to ensure conservation.
Under the proposed measure, this targeting of support to donations of ecologically sensitive land would be blown wide open. That is because under this proposal, donations of the proceeds of the disposition of real estate to any charity would receive the same tax assistance, and this could introduce a perverse incentive for potential donors to simply sell their land to a third party, like a real estate developer, and donate the proceeds to any charity thus avoiding the ecogift certification and valuation process. In short, it could result in a donor getting the same tax benefit from turning ecologically sensitive land into a parking lot as they would get from donating it to an entity that would preserve and protect it.
The measure is also expected to be costly. In February 2021, the Parliamentary Budget Officer estimated that the cost of this measure to the federal government would be approximately $778 million over five years. That is a lot of money to dedicate largely to wealthy Canadians at a time when we are working to rebuild from the impact of the COVID-19 pandemic.
Supporting Bill C-240 would almost certainly increase the pressure on government to also provide special exemptions for donations of other types of property, such as virtual currency or cash gifts made after tax income.
Such tax changes would ideally be undertaken through the budget process, which enables the government to fully consider trade offs, balance priorities and undertake new fiscal commitments only to the extent that they are affordable. A private member's bill like Bill C-240 does not afford us that scope.
These serious shortcomings must be weighed against the generous and effective incentives for charitable giving that are already in place to encourage people to donate more to charities across Canada by reducing the after-tax cost of giving. Having done so, our government simply cannot lend its support to this private member's bill.
I am thankful for the opportunity to make that and my position clear on this issue.
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Mr. Speaker, it is a pleasure to be here today to speak on this important bill from my great colleague.
The COVID-19 pandemic has hit Canadian charities extremely hard. Today I am happy to stand in the House and discuss a measure that would see the potential for a new revenue stream for our struggling charities across the country. Amending the Income Tax Act to provide an exemption from capital gains tax in respect of certain arm's-length dispositions of either real estate or private corporation shares to charities is an extremely important measure to see implemented. The bill would see to it that the proceeds of any arm's-length sale would qualify for exemption if donated within 30 days of disposition. The value is, of course, determined in the market by the sale and is not determined by the seller.
Each of us in the House has a charity, or in fact several, that would be near and dear to our own hearts. About 10 years ago, I created a not-for-profit organization called The Josie Foundation. That is one that is very near and dear to my heart, along with so many others. It is important that we understand just how difficult it was for charities to raise funds as they normally would because of the pandemic and the strain that it put on charitable organizations.
The importance of charitable organizations in Canada is without question, and we want to remind all people of the importance of volunteerism. Many hard-working Canadians volunteer their time. They get on the charities that are near and dear to their hearts and whatever charity they are working on benefits our country in a great way. All members of the House and every political party in Canada inside these walls would agree that we must do anything we can to help charities. This bill would increase the amount of charitable giving by incentivizing donations through this tax measure. Again, Canadian charities need all the help they can get right now.
I will note that this measure was proposed in the 2015 budget by the Stephen Harper government, but in the 2016 budget, it was confirmed that the Liberal government did not intend to proceed with this measure. With this bill, we are trying to address the downturn in charitable giving that has been a trend for a while and was exacerbated during the pandemic. COVID-19 has had a massive impact on the charitable sector with the inability to raise funds at events, as well as donors being less likely to donate because they were personally struggling financially. When we add the concept of inflation to the mess and the problems charities are having raising funds, there is a really poor situation for the charities in this country.
With inflation running rampant, the financial struggles to Canadians are rising. In turn, this is putting more pressure on household disposable income, which is driving down available donation revenue. It should be noted that the charitable sector represents $151 billion, or 8.1% of Canada's GDP. Currently, the Income Tax Act allows for this tax treatment for the proceeds of the sale of publicly traded shares. This bill would provide similar tax treatment for the sale of private shares and real estate. The Special Senate Committee on the Charitable Sector recommended the government implement this measure as a pilot project in June 2019 in its “Catalyst for Change” report, recommendation 34.
People at home and potentially people in the chamber are wondering whether the bill seems to disproportionately favour those who are high-income earners. The answer is that it is important to note that not a single donated dollar remains in the hands of the donor. Each dollar benefits the charity that receives it. This bill would make these donations more affordable for donors, no matter what their income level is. It is very good for charitable organizations. Many small business people are not necessarily high-income earners, but would be incentivized to make donations if they did not have to pay the capital gains tax associated with the sale of their businesses.
As to whether the nature of the tax is regressive, this is something that could be ascertained through expert testimony at the finance committee if the bill were ever to pass. We know we have to pass this bill.
If this bill does not pass, the people in every charitable organization in the country are going to feel sad, but they are also going to feel ashamed. Government members and parliamentarians know that this is the type of bill that each of us can represent. It transcends partisanship. We can look at this bill and each of us can understand how important it is for us to help this sector.
Another question that people might have is how the benefit flows from the tax incentive to the charity. When business owners decide that they wish to sell shares in their businesses, under this bill, proceeds from the sale of those privately held shares would qualify for a capital gains tax exemption if donated to a charity by the donor within 30 days of the close of the transaction. It is great news for charitable organizations. For the purpose of clarity, the shares of the donor's company could not be donated, but rather the proceeds derived from the sale of those shares could be donated. This mechanism helps avoid any valuation ambiguity, as the sale must be an arm's-length sale for the purpose of value.
Some may wonder how often people gift shares and how often people gift real estate, in particular outside of a will. The bill would not incentivize gifting private company shares or real estate. Rather, it would incentivize the donation of the sale proceeds derived from the sale of private company shares or real estate. One example is important as it pertains to real estate. Someone who invested in a small apartment building or a duplex several years ago is now retiring and decides to sell the place. Currently, when they sell, they will be required to pay capital gains tax, which would be roughly the equivalent of 25% of the increase in value of the property during the period of time it was owned. Under Bill C-240, those proceeds could be donated, in their entirety or in part, to a charity of the donor's choice and the donor would receive an exemption from the tax. In the end, we would incentivize somebody to be more charitable in our country, which would benefit charitable organizations.
Some might ask about the benefit to cost that is associated with this legislation. Someone correctly pointed out that a Library of Parliament report references two different types of tax costs. The first is the tax cost related to the forgone capital gains taxes. As I mentioned earlier, this equates to roughly 25% of the actual gain. The second cost is the cost due to behavioural change, as the goal of the bill is to increase charitable giving. Additional charitable tax receipts would also be issued. This is a win-win all day for charitable organizations, for the people who benefit from the great work of charitable organizations and for our great country when we put forth legislation such as this that would actually make a real difference in our society.
The federal tax costs related to the issuance of tax receipts may vary based on the amount of the contribution and individual income, but my understanding is that the cost is roughly 25% to 30% of the contribution. This, too, could be clarified by testimony.
I want to thank you again, Mr. Speaker, for allowing me to bring forth this insightful commentary. I would be happy to meet with any members of the House, but I want to say again that Bill C-240, sponsored by my great friend from Winnipeg, is the type of bill that every political party can be proud of and that every member of the House can support. They are not supporting a political party here. They are supporting every charitable organization in this country, and we will proudly take all of their support. We need it. This is good for Canadians.
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Mr. Speaker, at the outset, I would just like to say I am sorry I cannot be there in person to speak to the bill I have introduced, but I want to thank every single member of Parliament who has spent so much time studying this bill and making arguments. I realize that there are many positive arguments and there are some questions around the bill. That is why I think it is very important that a bill that could have such a profound effect on charities across the country be studied in committee.
When I say “charities”, I want to be clear that I am talking not just about charities; I am talking about the people who these charities serve, and what I have been saying throughout this whole process is that when charities are hurting, real people are hurting. This bill can help charities get back on their feet and help Canadians get back on their feet.
The idea of the bill came from Mr. Don Johnson, who I am sure many of the members listening know has been advocating for this. He advocated the tax change that led to the exemption for publicly traded securities, and he has advocated this change. I worked with him very closely.
I have to say there is broad stakeholder support also, and I ask every member to consider what institutions in their own ridings could benefit in a great way from this change. I know Imagine Canada has endorsed the bill, as have Diabetes Canada, the Heart and Stroke Foundation and the Special Olympics. Many charities have endorsed this bill, because they are in a situation right now where they have been affected in two ways. It is kind of a double whammy, when it comes to charities. They were hurt tremendously during the pandemic, and now the cost of living crisis is making it almost unaffordable for people to make contributions to charities.
With this bill, I do not need to go through the numbers. They have been reiterated in the Parliamentary Budget Officer's report. Everybody is aware of them, but the reality is that the amount of money donated to charities would exceed the cost to the government in all cases. I disagree with a fact one of the members from the Liberal bench said: that this was just a tax break for the wealthy, or something to that effect. Most small business people are not wealthy people. Some people just own a duplex or a small apartment building. It does not make them wealthy.
This bill highly incentivizes charitable giving at a very efficient tax cost to the government. It is not a new idea. It piggybacks on the concept of the donation of publicly traded securities. It was introduced in 2015 in the budget, which passed. All I am really asking is that we not let this bill die here. I am just asking that we let it go to committee, bring expert testimony and ask all the questions that have been asked in the House.
If members who have reservations about the bill are still concerned about it when it comes back to the House, they can vote against it then, but I do not think it would be fair to the people who would benefit from this bill to essentially kill it right here, when it comes up for a vote next week. I really do not.
This bill deserves the attention of the finance committee. It was, as some of my colleagues have mentioned, a recommendation in the Senate report on charities just a few years ago. It is an idea that is worth every member's consideration in the House.
I just want to say, on the issue of regressivity, that it is also another issue that could be debated at committee. I personally do not think it is regressive, because the reality is that whoever is making these donations does not get to keep any of the money. Every single dollar would go to charity, so I do not know how someone, whether they are wealthy or not, when they are parting with every single dollar, is being benefited other than that they are being incentivized to give.
Those are my general comments. I want to again thank everybody for their serious consideration and thought on this bill. I ask members to please vote for it.
With that, I would like to ask for a recorded vote.
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