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House Hansard - 80

44th Parl. 1st Sess.
June 2, 2022 10:00AM
Context: House Hansard - 80 - Jun/2/22
Mr. Bryan May (Parliamentary Secretary to the Minister of National Defence, Lib.)
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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