Should I laugh or cry? Salary disclosure/caps for Canadian charities -Bill C-470 passes 2nd reading
Posted under News | Canadian Charity Law
Here is the Hansard transcript of comments from April 19 with respect to Bill C-470. The bill has passed second reading and will now be referred to committee. Some good points in the Hansard but unfortunately a lot of errors and misinformation. One good thing that has come out of this debate is that it has proved quite conclusively that most MPs who have spoken on this issue know little about the registered charitable sector in Canada which is the area of regulation covered by Bill C-470. I guess it only makes up 8% of the economy so why pay attention? It only employs 2.4 million people. I will try to do an annotated version of the Hansard with my comments on the most obvious errors but there are so many that I am not sure that I can do it justice. Any comments would be appreciated. I realize that some of the proposal in the Bill may be popular amongst the public - but that does not mean that it is the most important regulatory issue facing charities, that it is well thought through or a good thing for the sector.
House of Commons Debates
l NUMBER 028
l 3rd SESSION
l 40th PARLIAMENT
OFFICIAL REPORT (HANSARD)
Monday, April 19, 2010
Speaker: The Honourable Peter Milliken
The House met at 11 a.m.
PRIVATE MEMBERS’ BUSINESS
[Private Members’ Business]
* * *
Income Tax Act
The House resumed from March 15 consideration of the motion that Bill C-470, An Act to amend the Income Tax Act (revocation of registration), be read the second time and referred to a committee.
[Table of Contents]
Mr. Robert Carrier (Alfred-Pellan, BQ):
Mr. Speaker, it is a pleasure today to speak to Bill C-470, which was introduced at first reading on October 29, 2009, by the member for Mississauga East—Cooksville. The bill itself is very short. It would amend several subsections of section 149.1 of the Income Tax Act.
These amendments would enable the minister to revoke the registration of a charitable organization, public foundation or private foundation if any of its employees receive compensation in excess of $250,000. Bill C-470 clarifies that compensation includes not only salaries, but also “wages, commissions, bonuses, fees and honoraria, plus the value of taxable and non-taxable benefits”.
Lastly, Bill C-470 enables the minister to make public the names and salaries of the five highest-paid employees in each organization registered as a charity, as part of the annual listing of charities in accordance with section 149.1 of the Income Tax Act.
I would now like to describe the circumstances that led to this bill. On October 1, 2009, the SickKids Foundation made headlines when it was reported that its president collected a severance package valued at $2.7 million. A debate ensued on the huge salaries paid to charity executives, what constitutes fair compensation, and whether these salaries are in line with such organizations’ missions.
In Quebec, a series of articles was published in les affaires in 2008 calling into question the salaries of top executives at a number of charities. The title of the series was “Philanthropy: worthy causes, whopping salaries”. Naturally, the articles made a lot of people skeptical about how donations to these organizations are being used and may have a negative effect on future fundraising efforts for charities as a whole.
The author of these articles explained how surprised the average Quebecker was to learn that such a significant portion of donations and other amounts received by charitable organizations is spent on salaries, including those of the directors of these organizations. According to the figures declared to Revenue Canada in 2007, 55% of the revenues at Moisson Montréal was spent on salaries, 44% at Mira Foundation, 38% at Fondation québécoise du cancer, 35% at Sun Youth Organization, 31% at Leucan and 60% at Le Bon Dieu dans la rue.
This was also surprising to experts in the field. For example, the CEO of Bolduc, Nolet, Primeau & Associates, a philanthropic management company, stated that when salaries are as high as 30% or 40% of all revenues, there is a problem.
According to these articles, the average salary of directors of charitable organizations in Quebec was $125,000. These high salaries surprised not only the public, but also the experts, who thought they were much too high. Even more disturbing than the high salaries was the silence or reluctance of some major organizations to reveal the salaries of their directors.
This made the public even more doubtful about the legitimacy of these salaries. There is a lack of real safeguards, and there have been concerns that these salaries could get out of control and end up comparable to the salaries of American charitable organizations, which had an average salary of $410,000 in 2007. These salaries have been skyrocketing in recent years. In Canada, they increased by 17% last year alone, and there was a 44% increase between 1999 and 2008, according to the annual survey of benefits and compensation published by the Canadian Society of Association Executives.
However, the Bloc Québécois knows how essential it is for charities to be able to continue hiring qualified managers.
Bill C-470 would require that the names of the five highest-paid employees in each charity be published. The Bloc Québécois understands the underlying principle of transparency in this initiative, but it is worried about the privacy of these organizations’ administrators. Perhaps the requirement of publishing these names should be removed from the bill.
Quebec charities with executives who earn an average of $125,000 a year will have some room to manoeuvre when it comes to salary increases. By respecting a $250,000 ceiling, these organizations will be able to recruit and retain qualified applicants.
But what about the salaries of executives in larger Canadian charities? Numerous factors need to be taken into consideration: the size of the organization in terms of its revenue, expenses and staff; the complexity of the regulatory environment in which the organization works; and the number of departments and government organizations it deals with.
Of course, these factors affect each organization differently. We cannot determine a realistic salary ceiling without considering these factors and taking into account the changing needs of the organizations as well as the domestic and international market.
The heads of several Canadian charities are already being paid over $300,000, which seems reasonable, considering the size of the organizations they manage.
Also, the number of Canadian charities is quite remarkable: 161,000 in all. In Laval alone, where I am from, there are 383 registered charities, including childcare centres, community centres, volunteer associations, regional recycling depots, private schools, the Laval symphony orchestra and the Laval health and social services centre, a Government of Quebec organization. All of those organizations are registered under the Income Tax Act.
So it would be very difficult to establish a salary cap for such a diverse group of charities and organizations whose volunteer elements are not necessarily obvious.
Given that the Quebec and provincial governments have full jurisdiction over the charitable sector, we must ensure that Bill C-470, in its current form, does not infringe on Quebec’s areas of jurisdiction.
Furthermore, given that any charitable organization that wishes to register in Quebec must first be registered with the CRA, we must ensure that Bill C-470 fits in with Revenu Québec’s provisions in that regard.
In any case, the Bloc Québécois is in favour of the principle of Bill C-470, which is why we will support it at second reading, so we may examine it in committee.
The Bloc Québécois recognizes the importance of charitable organizations in Quebec society. In order for these organizations to be able to pursue their charitable missions, it is important to maintain their credibility and the public’s trust in them.
Nevertheless, the bill’s impact on all charities must be thoroughly reviewed in order to ensure that these organizations can continue recruiting qualified staff despite the limitations this bill would impose.
[Table of Contents]
Mr. Sukh Dhaliwal (Newton—North Delta, Lib.):
Mr. Speaker, I rise today to second private member’s Bill C-470 put forward by the visionary member for Mississauga East—Cooksville. I call her visionary because she brought in a bill on proportional sentences for murderers that was so good for Canadians that the government adopted it. I hope the government takes the same lead on this private member’s bill as well.
Charitable giving is part of our nature as Canadians. Charities across the country receive billions in contributions from Canadians of all income levels, of all backgrounds, and from every province and territory.
That being said, I am well aware of the challenges that charities have faced in recent years. In 2008 Canadians donated $8.19 billion, a 5.3% drop from the previous year. Although the figures for 2009 have not been released yet, the charities I have spoken to have told me how difficult 2009 was as well. The global economic downturn has had a huge impact in this regard, and like businesses, charities have felt the pinch.
There was good news however. The number of donors did rise to 5.8 million, which represented a 1.7% increase from the year before. This bill is about those 5.8 million Canadians.
The first component of this bill has to do with transparency, which is a standard that each and every charitable organization should be trying to achieve.
Those that give to a cause want to know that their gift is going to the right place. So we ask about a charitable organization’s administrative costs, and how much of a donation is actually making a direct impact.
But surprisingly, up until last year, the Canada Revenue Agency never required charities to report the salaries of their top executives.
The charitable filings for 2009 mark the first time Canadian charities have disclosed compensation information for their ten highest paid officials. Previously, charities only had to provide limited information about their five best paid staff positions.
Yet, there is still great ambiguity with this disclosure. There are no exact salary figures for these individuals. Instead, there are only categories, like the top bracket of $350,000 and over, which leaves a lot to be desired when it comes to information.
The bottom line is that if someone chooses to make a contribution, they have a right to understand exactly what the leadership within their chosen charity is being paid.
Donors are like shareholders of any public company, so disclosure needs to be a lot more specific to give donors the information they need to make informed decisions about where they choose to donate their hard-earned money.
The second aspect of this bill is about introducing a salary cap of $250,000 within the charitable sector.
As the hon. member for Alfred-Pellan mentioned, there was great confusion and even anger when last year it was revealed that one of Canada’s largest charities, the SickKids Foundation, paid its former president $2.7 million in 2008. To many this is a figure that is very hard to comprehend, particularly when considering how hard it is for a charitable organization to raise that kind of money. It is especially hard to see how someone can faithfully accept that kind of salary for doing good deeds.
The salary cap in Bill C-470 would allow charities to pay their top executives salaries comparable to federal deputy ministers who run even larger and more complicated organizations. If a charity wants to exceed the cap, it would fall to the federal minister. If he or she does not accept the justification, he of she can decide to de-list the charity.
I have an issue with those who say that the House of Commons should not be involved in the salary decision-making process.
As I mentioned previously, tax receipts were given to over 5.8 million Canadians in the year 2008. The Government of Canada encourages charitable giving through these subsidies. This is a long-standing tradition and I will go as far as to state that it is one of the essential components behind charitable giving in our country. Thus, we as members of Parliament have every right to scrutinize the salaries of executives that are, to an extent, being partially paid by way of Canadian taxpayers.
This past December, the Fraser Institute released its 2009 Generosity Index. The Generosity Index measured charitable giving for both Canada and the U.S. in the year 2007 and detailed the percentage of tax-filers who donated and the percentage of income that they gave to good causes.
For Canadian charities, the numbers were troubling. Americans donated 1.6% of their aggregate income to charities while Canadians donated less than half of that, at 0.73%. In dollar figures, Canadians donated approximately $8.5 billion to charitable causes, but if we had given at the same rate as our southern neighbours, the total would have been in excess of $17 billion.
Bill C-470 is an attempt to assist charities with this gap by instilling greater confidence in their practices among the Canadian public. The successful passage of this legislation will ensure that not only will Canadians be able to access more information, but they will also be able to have confidence in compensation packages that are equitable and fair in consideration of their charitable gifts.
As the economy recovers, the rate of charitable donations will recover. This bill would open the books of charities so that Canadians can open their wallets to charities with confidence.
Once again I thank the hon. member for Mississauga East—Cooksville for bringing in this important measure as a private member’s bill.
[Table of Contents]
Mrs. Kelly Block (Saskatoon—Rosetown—Biggar, CPC):
Mr. Speaker, I am thankful for the opportunity to speak to Bill C-470, a proposal before the House sponsored by the member for Mississauga East—Cooksville.
From the onset, I will state that our government agrees with the member on the importance of ensuring proper and appropriate regulation of the charitable sector in Canada. This includes the need to remain vigilant against undue personal benefit for individuals employed in the sector.
Our government is always open to exploring ways to strengthen current legislation. In that regard, we welcome and will support Bill C-470 for discussion in the finance committee in the coming weeks and months. Moreover, we understand that many charitable organizations, both large and small, would like to participate in the debate on Bill C-470 and potentially make some suggestions related to the proposal.
We are especially encouraged that the member noted earlier in the debate that she was ready to more fully explore this proposal at committee stage. The member for Mississauga East—Cooksville would likely agree that we need an opportunity to hear the voices of those involved in charities across Canada to make certain that occurs.
I also believe that all members of Parliament share in the member’s belief that charities are a vital part of communities right across Canada. That is why since 2006 our government has taken some notable actions to help bolster charities and allow them to keep doing the great work they do in our communities.
In budget 2010, our Conservative government announced it would move forward with a plan to reform what is referred to as a disbursement quota. This reform is intended to reduce unnecessary red tape to better allow charities to focus their time and resources on their charitable activities and helping their communities.
For the benefit of the House, I will relay a small sampling of the feedback we have received on this particular budget 2010 announcement.
Imagine Canada applauded it for providing the following:
...greater flexibility for charities as they seek to meet the increasing and changing needs of Canadians….
The [disbursement quota] added layers of red tape and reduced flexibility in responding to the needs of Canadians and communities. ...[it] will help charitable organizations, especially smaller and rural ones, to better plan their activities to meet the real needs of their communities.
The Salvation Army cheered it by saying:
The removal of the quota will provide The Salvation Army; one of Canada’s largest charities, with increased flexibility….
We are very pleased with this announcement. The proposed changes will allow us to better respond to the needs of the people we serve in 400 communities across Canada.
Finally, someone the member for Mississauga East—Cooksville may be somewhat familiar with, the Community Foundation of Mississauga’s executive director, Eileen MacKenzie, explained:
We applaud the government’s decision to reform the disbursement quota policy. ...[it] will lessen the administrative burden on our charities, direct more resources to addressing community needs and enable them to plan more effectively for the future.
This is a specific example of a helpful initiative our Conservative government has undertaken to support Canada’s charitable sector. Today’s proposal deals with the accountability of these registered charities, specifically regarding the compensation given to those employed by such organizations.
To put this debate into context, I believe it would be informative to look at how charities are regulated in Canada. First, responsibility for the regulation of registered charities is divided between the federal government and provincial and territorial governments.
Within the federal government, the Canada Revenue Agency, or CRA, regulates registered charities. The CRA is responsible for applying the provisions of the Income Tax Act relating to registered charities. Beyond income tax considerations, the regulation of charities is constitutionally under the jurisdiction of the respective provinces and territories in which they operate.
As mentioned earlier, recent reforms have given CRA more powerful compliance tools when regulating the charitable sector. The ultimate compliance tool is the ability to de-register a charity. If a charity is deregistered, it immediately loses its ability to issue tax receipts to donors. It also may become taxable on its existing assets. In addition, it must transfer its charitable resources to another charity within a specified period of time or pay a revocation tax to the government. Clearly, considering the special tax treatment that registered charities receive, excessive compensation for those employed by them is not something that donors or everyday taxpayers would approve.
That is why, currently, if the CRA comes across a situation where a registered charity is not fulfilling its charitable purposes and/or there is undue personal benefit, such as compensation clearly in excess of fair market value, CRA can take strong corrective action.
Under the present system, for the first infraction by a registered charity, CRA can impose a tax of 105% of the amount of the undue benefit. If a charity repeats such an infraction within five years, the penalty increases to 110%. In addition, CRA can immediately suspend the tax receipting privileges of the charity. Finally, if the problem is ongoing and repeated, CRA can move to deregister the charity completely.
Before concluding, I want to state that our Conservative government firmly believes that Canadians who donate their hard-earned money to charities should have the proper tools available to ensure that those organizations are accountable, and that is why we took action to improve accountability.
Up until last year, CRA had only required charities to report on the compensation for the five highest paid employees and indicate limited salary ranges, with the last threshold being $119,000 and over. Our Conservative government did not believe that to be sufficient and brought in changes. Now we require charities to report the 10 highest paid positions, double than before. What is more, we expanded the salary ranges, with the last threshold being $350,000 and over. I note that all of this information is available publicly and online for all to view at http://www.cra-arc.gc.ca.
Our new accountability rules will improve transparency, allowing those generous men and women in Canada, who donate their own hard-earned dollars, the information they need to make their charitable giving decisions with peace of mind.
Without a doubt, our Conservative government has taken action to both encourage charities to serve our communities across Canada better, while at the same time improving transparency surrounding their actions.
We are clearly committed to accountability and transparency in the charitable sector. While the tax system already has tools in place for both the regulation of compensation in the sector and to guard against undue personal benefit, we are always open to exploring other ways to strengthen it.
As Bill C-470 successfully passes second reading and advances to the finance committee, however, we again both welcome and urge a very comprehensive discussion at that stage. That discussion will provide an essential opportunity to hear directly from those in the charitable sector and explore their questions and concerns.
[Table of Contents]
Mr. Andrew Kania (Brampton West, Lib.):
Mr. Speaker, “Salaries at some charities make a mockery of the concept of charity”. That is a quote from the member for Mississauga East—Cooksville, and she is correct. That is why I wish to congratulate her on introducing this bill which seeks to protect and stand up for donors, recipients of charitable funds, and taxpayers. I am honoured to be a seconder of this bill.
The purpose of this bill is twofold: first, to limit the global compensation of employees of charities to $250,000 per year, which is a substantial sum; and second, to allow full public disclosure of the incomes of the top five employees of charities.
In terms of the analysis of the bill and the $250,000 limit, the practical effect of imposing this, if it were to be exceeded by a charity, would be to provide the minister with the discretion to revoke the charitable status. This would not be automatic. It would allow the minister to use discretion in a particular circumstance if there were some reason that this should not take place. As well, there is an effective date of 2011 for this bill to provide ample time for transition purposes.
There are multiple reasons to support this bill. First, we must protect the recipients of charity, Canadians in need. We must ensure they are not taken advantage of and that the money raised to help them actually reaches them to the greatest extent possible. Every dollar spent on an executive that is in excess of what is reasonable is a dollar taken away from a recipient, and that must end.
Second, we must protect donors. Most donors are ordinary people who dig deep into their pockets in order to help others. It is simply unfair to these ordinary donors, ordinary Canadians, to allow such executives to abuse their generosity and, frankly, to earn far in excess of what most Canadians earn.
Third, we must protect charities and the charity system itself. Every year Canadians dig deep and contribute billions to 85,000 registered charities. They will not do so if they believe the system is broken, if their trust has been violated and, frankly, if their money is being wasted on exorbitant compensation packages for executives.
The SickKids example, which has already been mentioned in the House today, is relevant. When the Toronto Star broke the story that the head of the SickKids Foundation took home $2.7 million in salary and severance in one year, people were rightly shocked and outraged.
Think about the average donor who is providing a donation of $30 or $50, whatever it may be, digging deep to help. Think about the recipients of charities who need that money to live. When they hear that somebody is making $2.7 million from moneys that should be used to help, they are outraged and they should be.
What is important in terms of the integrity of the charitable system is that once the SickKids Foundation story broke, it hurt the foundation. There was a backlash from donors. The foundation had to set up a specific hotline to take questions and address concerns. The SickKids Foundation received a 10% decrease in donations and had to lay off 38 staff members.
I ask, how is it right that that individual received $2.7 million in one year, and then the foundation itself was hurt by a decrease in contributions and 38 innocent Canadians received a pink slip, a layoff notice?
If this legislation had been in place at the time, it would have stopped this. The foundation would not have been allowed to pay $2.7 million to that executive. The SickKids Foundation would not have received a 10% reduction in contributions, and those innocent 38 people would not have been laid off.
It is instructive to reflect upon the recent changes the Conservatives did make for disclosure provisions. The disclosure provisions, although admittedly an improvement, are not enough. The $2.7 million salary was only learned of because the foundation also operates in the United States and had to file there.
The changes that have been made by the Conservatives create a continuing problem, because despite the new filing requirements introduced by them, there are no exact salary figures or names of the highest paid individuals that must be disclosed. Instead, charities must identify the number of people who earn a salary within a certain range, with a top range of “$350,000 and over”.
Using the SickKids Foundation as an example, if that foundation had not also operated in the United States where there are strict filing and disclosure requirements, and we only had the benefit of the new regime that the Conservatives introduced, the only thing we would have known is that at least one person, if not more, at the SickKids Foundation made more than $350,000. We would not have had the right to know that $2.7 million had been paid to an individual. Although the changes introduced are an improvement, they do not go far enough. This private member’s bill must be supported in order to ensure that we have full disclosure of this information.
The other reason we must support this bill is to protect taxpayers. In the most recent year, the taxpayers of Canada contributed almost $3 billion in federal tax credits. Every Canadian has the right to know the salaries of such executives and provide reasonable limits to these taxpayer-supported activities. We are supporting these executives in their positions. We have a right to know how much they are making and we have a right to set reasonable limits on what that income is.
In terms of integrity, it must be remembered that in 2007, Canadians donated a total of $10 billion and volunteered 2.1 billion hours. If that goes down because people do not believe that the system can be trusted and people are being treated unfairly, Canadians will suffer. Six years ago, in 2004, the United States recognized it had a problem regarding disclosure. The IRS announced new enforcement efforts to identify and halt such abuses. The IRS said:
We are concerned that some charities and private foundations are abusing their tax-exempt status by paying exorbitant compensation to their officers and others.
In Canada, nothing has been done to remedy the situation apart from the small change that I noted, which does not solve the problem.
This outrageous compensation is a serious problem in Canada. It is not limited to the one example of the SickKids Foundation that I noted. That perhaps is what broke the story, but it is not the only example. One reporter stated:
It seems for some of Canada’s best known charitable organizations, charity begins in the chief executive’s office.
Some of Canada’s largest and best known charities pay some of their top officials more than $300,000 per annum, which is more than deputy ministers make. Frankly, it is more than most Canadians make. Chief executives at Plan International Canada Inc., the Heart and Stroke Foundation of Ontario and York University Foundation all were paid more than $300,000 last year. The BC Children’s Hospital Foundation and Toronto General and Western Hospital Foundation paid top executives between $250,000 and $300,000 per year.
Some people will oppose this legislation, but I ask why. First, why are they afraid of transparency? What are they trying to hide? Why would they not want to disclose what the top executives actually are making on an individual basis? Taxpayers have a right to know. Donors who provide the money have a right to know. Canadians who are receiving the benefit of these dollars have a right to know.
Second, is $250,000 not enough? It is enough, but more than that, setting a limit will level the playing field in Canada. Tim Price, chairman of the York University Foundation board, said it paid CEO Paul Marcus $394,000 in salary and bonus last year and that the payment “was in the context of the competitiveness of talent to be able to get a first-class person”. The foundation would not be required to have paid $394,000 to that individual if there was a cap of $250,000.
Frankly, people would not be seeking to move around and drive up the cost of compensation packages if there was a limit. Canadians who need these funds would actually receive them.
There are very large Canadian charities that already are compliant, such as Big Brothers Big Sisters of Canada, United Way of Canada and the Red Cross. There is no reason that everybody cannot be compliant.
[Table of Contents]
Mr. Paul Szabo (Mississauga South, Lib.):
Mr. Speaker, I am pleased to speak to Bill C-470, brought forward by the member for Mississauga East—Cooksville, which has to do with charities.
I support this bill very much. I am little concerned because there has been some misinformation of which I think members should be aware. Probably the best reason this bill should go to committee is to enable the charitable institutions and foundations to provide some input. I understand there was concern in the charitable sector initially, but that actually has turned around. I believe there are some 85,000 charities.
I approach this not from the standpoint that I am looking for some charity that is doing something that it should not be doing. What is needed is greater transparency, openness and accountability. We are talking about taxpayers’ dollars. When people make a charitable donation, they claim that donation and get the appropriate tax credit on their income tax return. All Canadians, all taxpayers, are subsidizing the contribution to various charitable organizations and foundations. From that standpoint, it is very consistent that disclosure of relevant information should be made available to all Canadians about how their tax dollars are being spent.
I do not think there are many people who have not heard some conversation about exactly who is getting how much and how much of their dollars is actually hitting the ground and helping the people they want to help. The United Way is asked this question all the time, and it reports on it and it boasts about it. Campaign 2000, which helps deal with the issue of child poverty, is constantly looking at how much money is actually going toward helping people and promoting the alleviation of child poverty in Canada.
It is extremely important that we look at this from the accountability aspect.
Today I received a letter from thePrime Minister’s chief of staff, who subsequent to his appearance before the ethics committee on the subject matter, provided copies of the letters that he sent out to the ministers indicating that it is a responsibility of the government to promote accountability, transparency and openness. I think the House concurs. It is the law. It is a charter right.
I know where some of the confusion has arisen for some members who may have looked at this. It is one of those cases that if we just hear the short version, or the summary, we may get an impression which is not reflective of the full detail of the bill. The summary of this bill states, “This enactment amends the Income Tax Act to revoke the registration of a charitable organization, public foundation or private foundation if the annual compensation it pays to any single executive or employee exceeds $250,000”, period.
That is how the summary was drafted, but that is not exactly what the bill would do. The bill would not revoke the registration of a charity, or a private or a public foundation, if it pays any one person more than $250,000. The bill requires the disclosure and the minister may look at it. It is not absolute; it is optional. It is a matter that the minister may invoke if there is clear abuse. There is some ministerial discretion. This is not a black and white situation, that if a charity pays somebody over $250,000 that, all of a sudden, the registration of the charity is revoked.
I hope that members will look carefully at this. This is one question that has to be totally clarified in committee to absolutely ensure, to the assurance of all hon. members, that this bill is not an attack on charities.
The government deputy House leader had made an indication that in his view there was a royal recommendation required for the bill, and I think he made an interesting argument. However, the bill effectively only amplifies or adds further criteria under which the minister responsible for the act in question, the Income Tax Act, can have the latitude to take decisions if it is appropriate.
The Speaker ruled that in fact there was not a need for a ways and means motion for this amendment to the Income Tax Act. I think members should take some solace from that. The bill is a sound bill, it is a clean bill and it should go to committee to hear from the stakeholders who may be affected and may be concerned.
It is always good when we can have people on side. They will come before committee, they will ask their questions or make their representations and things will be clarified. Then it is not just what a half dozen people happen to say during the debate at second reading in the House based on their own information or knowledge, but it is the experts. It is those who are in the business and who can provide the details and the commentary on the legislation and its implications and make recommendations for changes to the bill if necessary. That is what the committee is for.
We cannot make amendments here on second reading. We can say that we have some concern about this aspect and we hope that the committee will do that. Those are the kinds of things that happen from time to time. The committee stage is extremely important.
I believe this is an important bill, primarily from the standpoint of the openness and transparency requirements and the accountability requirements that we expect from all matters as they relate to governing the taxpayers’ dollars.
The member in question has been here for more than 20 years. I know she does her homework. Anyone who knows the member knows that she is a member of great integrity. She has not brought many bills before this place, but when she does, look out, because she is responding to critical issues in which the public interest is to be served.
I am not going to get into this, but people may want to look at her background. The member has a reputation for bringing matters that I think are extremely important for us to consider.
This is not an inconsequential bill. It is a significant bill. It is a bill that I believe will get a thorough hearing at committee, and I believe it will pass at all stages and become law.
There was a question that came up in one meeting I was at that I want to raise as well, about whether or not this would affect universities, and people were talking about foundations.
As we know, many hospitals have a fundraising wing that is separate from the hospital operations themselves, separate and incorporated entities to raise money for hospitals. These would be maintained separately. The bill would not affect hospitals or other foundations that are set up for that purpose. It is a small detail, one question only, but it is the kind of question that has come up.
Therefore I wanted to rise in the House today to say that I have taken the time to look at it. I heard the member present her bill in debate. I heard her represent her position last week in the media. After people asked their questions and got the answers, to fully understand, it is amazing how the outlook on the bill has turned so dramatically.
I want to leave it at that, and I want to encourage all members of Parliament to please vote for the bill on second reading and to encourage the committee to do appropriate hearings to ensure that we make good laws and wise decisions.
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The Acting Speaker (Mr. Barry Devolin):
The hon. member for Mississiauga East—Cooksville, a five-minute right of reply.
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Hon. Albina Guarnieri (Mississauga East—Cooksville, Lib.):
Mr. Speaker, first let me thank members from all sides of the House who have added productively to the debate on this issue.
Bill C-470 seeks to add two ingredients to charity executive pay: reason and accountability. Salaries would have to be within reason, or the minister could take action in the interests of donors and taxpayers who often have no direct say on how their money is spent. Greater accountability will come with the disclosure of every charity’s top five income earners and their salaries.
The government did make progress last year by requiring more detailed ranges of salaries, but no corporate CEO could get away with saying he just made over $350,000. Donors are paying the bill and deserve the names, positions and amounts, like any shareholder. Arguments for continued secrecy have largely withered over the past several weeks. It is simply not tenable for charities who rely on the faith and trust of donors to say they deserve salary secrecy that is unthinkable in either the government or corporate sector.
The promise of Bill C-470 is that donor awareness may be a cure for the high salaries and costs that are shrinking every donor dollar today. Bill C-470 also aims to add a measure of reason and restraint to charitable salaries. It does not seek to impose a hard cap, but simply to provide a long-overdue mechanism for the minister to restrain excessive compensation. The minister would retain the absolute discretion to act in the interests of both the cause and the donor community.
Diversionary concerns about the potential impact on the top salaries of professors and surgeons at universities and hospitals are not well founded, as most of these institutions have separate charitable foundations. For those that do intermingle operating and fundraising activities, the minister can make the obvious distinction.
Fewer than 1% of Canadians earn $250,000 a year. Charities rely on the generosity of the other 99% and need to justify the exorbitant pay of their fundraisers. When one executive was reported to have received millions of dollars in salary incentives and severance, the excuses poured in from charities: “We have to attract fundraising talent from the U.S.”; “We cannot find competent people who would work for under a quarter million a year”. Other organizations have even argued that young people will not go into charity work if they cannot make a lot of money. I wonder if I am alone in finding this somewhat ironic.
From 2000 to 2008, the number of donors in Canada was basically stagnant, growing by less than 1% annually. So the charitable sector is not attracting more donors. Total tax receipted donations grew by an average of only 5%, little better than the rate of inflation. So Canadians are donating more, but hardly enough to justify ballooning fundraising pay.
Published information with the CRA reveals even less connection between pay and performance. Without a single person reporting making over $250,000, one charity raises twice as much money at half the cost per dollar of the highest paying Toronto medical charity. So it is possible to run a charity without investment banker salaries. But exorbitant salaries are infectious and are spreading to charities great and small and even very small.
One small foundation that pays more than $350,000 actually hiked salaries by 69% over the last five years while revenue dropped 33%. Thirty-six cents of every dollar raised is now lost to fundraising and administration, double the rate of only five years ago. Paying astronomical salaries does not always deliver astronomical results. Many sports leagues have adopted salary caps to respond to similar situations where competition was raising costs far faster than revenue.
In conclusion, Bill C-470 asks the House to take a small step in curbing a free-for-all with donor and taxpayer money. Parliament alone can take a stand to safeguard the sacrifice of donors by insisting that charities deliver more transparency and ultimately more charity.
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The Acting Speaker (Mr. Barry Devolin):
The time provided for debate has expired.
The question is on the motion. Is it the pleasure of the House to adopt the motion?
Some hon. members: Agreed.
Some hon. members: No.
The Acting Speaker (Mr. Barry Devolin): All those in favour of the motion will please say yea.
Some hon. members: Yea.
The Acting Speaker (Mr. Barry Devolin): All those opposed will please say nay.
Some hon. members: Nay.
The Acting Speaker (Mr. Barry Devolin): In my opinion the yeas have it.
And five or more members having risen:
The Acting Speaker (Mr. Barry Devolin): Pursuant to Standing Order 93, the division stands deferred until Wednesday, April 21, immediately before the time provided for private members’ business.
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Suspension of Sitting
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The Acting Speaker (Mr. Barry Devolin):
The House will suspend until 12 o’clock.
(The sitting of the House was suspended at 11:57 a.m.)
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(The House resumed at 12 noon)
The Hansard above can be found at http://www2.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Mode=1&Parl=40&Ses=3&DocId=4441422#Int-3099795