Remittances and the 2015 Federal Budget

June 28, 2015 | By: .(JavaScript must be enabled to view this email address) Mark Blumberg
Topics: News, Global Giving, Global Affairs Canada (GAC) formerly CIDA

I was pleased to see in the Federal budget some funds allocated to study and improve the system of remittances from Canada to developing countries.  In my blog on the day of the Federal Budget entitled 2015 Federal Budget and its Impact on Canadian Charities I briefly touched on remittances.  I have been writing about remittances since 2007 and in 2013 I had made a proposal to Finance on remittances and I am glad to see that there will be greater attention paid to this important mechanism.  

In a submission to the Finance Committee about 2 years ago I had suggested:

According to information from the US Hudson Institute, remittances from Canada to developing countries amount to approximately $15 billion a year. This is many times greater than the amount of all international development and humanitarian assistance philanthropy from Canada. There are no tax preferences given to individuals in Canada who remit funds back to heir friends, family, co-workers and others in foreign countries. The Canadian government should study the impact of remittances, the obstacles to efficient remittances by people resident in Canada and consider various improvements. 

The Federal government spends almost $5 billion on official development assistance. This costs Canadian taxpayers $5 billion. Remittances which are 3 times as much don't cost taxpayers anything as there is no tax subsidy (unlike donations which are heavily subsidized). However, remittances are often inefficient- costing up to 20% of the amount remitted. If remittances were more efficient more funds could go to the developing world. It would make sense for the funds to come from the CIDA/DFAITD budget. 

There are many Canadians, especially from immigrant groups that send funds abroad as remittances. They are frustrated by what is often the high cost of remittances but they don't individually have the purchasing power to negotiate lower fees and transaction costs. There are tens of millions of people around the world who benefit from remittances and if more money actually made it to the developing world it would reduce poverty, improve education etc. To the extent that some of the beneficiaries may end up immigrating to Canada they will have better education, health etc. 

By studying remittances from Canada and improving the system for remittances it would help many people in Canada who are worried about the health, education and welfare of their relatives and friends abroad. Many people living in Canada send generous remittances that impoverish them, because although they may be poor by Canadian standards but their families abroad may be extremely poor. Working with non-profits and financial institutions to improve the efficiency of remittances make Canada a better place for immigrants and help improve the world we live in. 

The 2015 Federal Budget provided:

Ensuring That Canadians Have Access to Safe, Reliable and Lower-Cost Remittance Services Economic Action Plan 2015 proposes to provide $6 million over five years, starting in 2015–16, to introduce measures that will help ensure Canadians have access to safe, reliable and lower-cost remittance services. Remittances represent an important source of income for families in the developing world and can help pay for essential needs such as nutrition, education and health care. Economic Action Plan 2015 proposes to provide $6 million over five years, starting in 2015–16, to introduce measures that help ensure Canadians have access to safe, reliable and lower-cost remittance services when sending money to family and friends living in developing countries. This includes establishing a remittance price comparison website that will increase transparency by providing information on fees charged across service providers, allowing users to make informed decisions. In addition, through Statistics Canada and the Department of Foreign Affairs, Trade and Development, the Government will take steps to gather data on remittance flows from Canada to better understand the needs of Canadian remitters. The Government will also work with financial institutions to evaluate possible collaboration opportunities to expand access to lower-cost remittance services.

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Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.

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