Proceedings of the Standing Senate Committee on
National Finance
Issue 10 - Evidence - May 1, 2014
OTTAWA, Thursday, May 1, 2014
The Standing Senate Committee on National Finance met this day at 2 p.m. to examine the subject matter of Bill C-31, An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: Colleagues, this is Thursday afternoon. We've had a very busy week dealing with matters in the Finance Committee. Today, because we haven't completely finished — we are about to start Part 6 of Bill C-31 — the officials are off at other Senate committees and tied up there. Can you imagine that? We have them back again for next Tuesday, Wednesday and Thursday, which, hopefully, will have taken us through the bill with the officials.
Another very important part of the work that we do in understanding this legislation so that we'll be prepared to deal with it when the bill itself arrives and we have a clause-by-clause responsibility to vote for or against or make changes is to hear from those who may be impacted by the legislation. That's what we will be doing this afternoon.
I'm very pleased to direct your attention to Part 1, clause 6, the Adoption Expense Tax Credit. You'll recall we heard from the government officials on what the government is trying to achieve here. This can be found on page 2 of the bill.
I would like to welcome Laura Eggertson, President, Adoption Council of Canada. She is accompanied by policy advisor Patricia Paul-Carson.
I understand that, Ms. Paul-Carson, you may have some introductory remarks, after which I hope we can get into a bit of a discussion on clarifying some of your positions. You now have the floor.
Patricia Paul-Carson, Policy Advisor, Adoption Council of Canada: Good afternoon, Senator Day and members of the committee. I'd like to begin by thanking you for asking the Adoption Council of Canada to appear here today.
As you may know, the ACC is a charitable organization, and we're dedicated to finding a permanent family for every child in Canada. There are over 30,000 children legally available for adoption, but only 2,000 are adopted every year. We work to raise awareness of this fact.
We also work to help families at every step of their adoption journey, be it adopting a child or helping birth moms and their children find one another.
Our services include information and referral, education, support and adoption resources. Our financial support comes from memberships, donations from the general public and some support from the private sector. We are also the happy recipient of a three-year, $630,000 grant from the federal government.
The ACC is very grateful that children in the child welfare system and adoption are in the minds of the federal government. We are cognizant of the fact that adoption and child welfare is under the jurisdiction of the provinces and territories. It makes it particularly heartening to know that the federal government is taking a leadership role by implementing measures where it can.
The specific measure we're addressing today is the adoption tax credit, as outlined in this year's budget. The proposed Adoption Expense Tax Credit is a 15 per cent non-refundable tax credit that allows adoptive parents to claim eligible adoption expenses relating to the process of adopting a child, up to a maximum of $15,000 a year. Currently, the maximum is $11,774. The change is the difference between the $11,000 and the $15,000.
Eligible adoption expenses include lawyers fees, agency fees, costs for going abroad to pick up a child, and any mandatory immigration expenses with respect to the child.
We're pleased that the federal government has increased the amount in the expenses for adoptions because international adoption costs can range anywhere from $20,000 to $40,000 and sometimes even $50,000, and private adoptions of Canadian children can cost between $15,000 and $20,000. There are about 1,300 international adoptions a year. They've been dropping over the last number of years. There are a limited number of private adoptions.
We hope that, in the future, the government will implement measures to help with the ongoing post-adoption expenses. Almost all children adopted through the public child welfare system have special needs, and their parents need ongoing financial help with things like physiotherapy, speech therapy, counselling, and, if the child has a disability, then retrofitting their homes.
These children have been taken from their parents by the public officials because they have been abused or neglected, and they may suffer emotional and sometimes physical problems as a result.
Prospective parents are sometimes reluctant to adopt a child in the child welfare system because of these ongoing expenses. The irony of it is that financial supports provided by the provinces and territories to foster parents for special needs children are usually withdrawn when those children are adopted, thus creating a disincentive to adopt. But we know that any financial support that the government can provide to encourage adoption is well spent. Adopted children achieve higher educational levels. They have less contact with the criminal justice system, and they use the health care system less frequently than do children who remain in foster care.
One recent American study showed the same sorts of outcomes in terms of employment. It found that, at age 24, youth who age out of foster care do not fare well on a variety of employment outcomes. Compared to youth nationally and even youth who come from low-income families, they are less likely to be employed or employed regularly and, not surprisingly, they earn very little. Thus, adoption not only helps the individual child; it helps society as a whole.
We note that the government has estimated that the tax credit will cost about $10 million over five years. We hope that the government is going to be monitoring the uptake of this tax credit. If there happen to be any unused funds, we would appreciate that they be reallocated to other measures that would promote the adoption of children in the child welfare system.
For instance, the government could spearhead an advertising campaign, in conjunction with the provinces and territories, to promote the adoption of Canadian children. Many prospective parents still think that they can adopt an infant or a toddler when the bulk of adoptable children are older. In fact, the average age of a child waiting to be adopted is about 8 years old. Experience has taught us, through some American examples, that older children and youths are adoptable if we use the right resources to encourage their adoption.
In addition, extending EI benefits to adoptive parents is critical. Currently, adoptive parents get 35 weeks of EI benefits, whereas biological parents get the 35 weeks of parental benefits, plus the biological mom gets an additional 15 weeks to recuperate from pregnancy and childbirth. While we understand that adoptive parents don't have recuperation issues, they certainly do have their own sets of issues that they have to deal with. Particularly, they have to ensure that their adopted child bonds with them because the child has faced, usually, a quite significant amount of emotional trauma. Both the parents and the child would benefit from this extra 15 weeks to ensure that the bonding takes place.
We estimate that extending benefits by 15 weeks to adoptive parents would cost a maximum of $27 million per year. It's a mere drop in the financial bucket compared to the costs these children might incur on our social systems if they do not bond properly. We know that it costs an average of $110,000 to house one male inmate for one year in Canada.
In conclusion, we're pleased that the Government of Canada, through its grant to us, is a financial partner and is supporting our work. We are very busy using the funds that were given to us in our grant. We're improving our website. We're developing training materials for social workers to recruit families, and we will be developing a national database of adoptable children and potential adoptive parents to ensure that matches can be made more easily.
We're looking forward to continuing our work with the federal government, and the provinces and territories, to ensure that every child has a permanent family.
If anybody has any questions, Ms. Eggertson would be happy to answer them.
The Chair: You're passing the questions to your colleague.
Laura Eggertson, President, Adoption Council of Canada: Ms. Paul-Carson can answer them as well, but I've been with the organization a little longer and I'm an adoptive parent, so I can speak from a personal perspective.
The Chair: Excellent.
Senator Buth: Thank you very much to the two of you for coming here today.
Can you tell me a little bit more about the services you provide? You commented on what you're doing. I'm interested in your relationship with the provinces, too.
Ms. Eggertson: We try to support provincial organizations in their requests with the provinces in terms of education and training. For instance, in the past, when we had a previous federal government grant, we were able to do post-adoption support group trainings for parent leaders who could then go on and form support groups across the country for parents, which have been very successful.
We are really focused right now on promoting permanency for children, youth and teenagers in care before they age out of the system. What happens is the vast majority of children in foster care age out of the system without permanent families. We really would like the provinces to focus on trying to find the gap before the children end up homeless, as many of them do, when they age out of the system.
We also provide a lot of information and referrals. We answer a lot of questions from the general public and Ms. Paul-Carson does a lot of that herself. There are calls from people who want to know how to adopt, how to place a child for adoption, how to connect with birth families and just general educational social work questions as well.
Senator Buth: Are you also working with the province of Quebec? Do you work with all provinces?
Ms. Eggertson: We do. We get quite a few questions from people in the province of Quebec. When you adopt in Quebec, even if it's another child from Canada, it's considered an international adoption. That is quite complicating in some ways and a bit of a barrier in some cases. We actually have quite a few families who adopt on the Quebec side who may adopt children from other parts of Canada as well.
Senator Buth: In terms of advertising, you talked about them last year, too. It's heart-wrenching, thinking that about 2,000 are adopted every year and there are 30,000, essentially, in the system. Beyond advertising, is there something else that you think needs to be done?
Ms. Eggertson: Actually, we would really like to have a first ministers' meeting on this topic. We'd like to bring all of the provinces together, all of the ministers and as many senior officials as we can get together to try and remove some of the barriers to this so that we can both increase interprovincial adoptions, which do happen but are somewhat difficult to make happen, and so it's easier for Canadians to adopt anywhere in Canada. Right now it's almost easier to adopt internationally, because there's a system in place that is regulated, than it is to adopt interprovincially.
Yes, we think there's a lot of provinces can do, and part of it is also training. It's a culture. A lot of social workers concentrate their efforts on the youngest children in the system because those are the easiest to find families for. They don't even consider teenagers in group homes, which is where a lot of them are housed. They're not in family care, first, but they actually would really not only benefit from a family but bring a lot to a family.
We have some amazing young people who have come out of the system and who have aged out without families who work with us and speak to the public. We're hoping to get more of them up to tell their own stories. As soon as people hear them, they really understand that these are amazing young people who are very resilient and have a lot of offer. In fact there are not many efforts at all focused on trying to find them families.
Senator Buth: Thank you very much for your comments.
[Translation]
Senator Rivard: Welcome. Congratulations for your excellent work. It would probably be more relevant if I put my question to the Canada Revenue Agency, but I will nevertheless take a chance and put it to you.
I would like to come back to the French version of your speech; at the end of the paragraph on adoption fees, you say that the adoption tax credit can be claimed in the tax year in which the adoption happened.
Should we read "may," or rather "shall"? For example, some tax credits can be spread over two or three years or over several years; can you answer that?
[English]
Ms. Eggertson: The way they've changed the proceeding now is that you can only file the claim in the year that the adoption is finalized, but you can accumulate your receipts from the time that you start to deal with the provincial agency. It sometimes takes quite a while before an adoption is finalized, but you can now collect the receipts and file them all at once. It can spread back several years that you incurred the expenses.
Senator Callbeck: I think it was last year Ms. Eggertson was here and it made a big impression, I'm sure, on the whole committee. I remember giving a statement afterwards in the Senate on the priorities that you wanted. I'm glad that the government has increased the tax credit.
Does this tax credit have to be taken all in one year or can it be spread out?
Ms. Eggertson: It does have to be taken all in one year. The problem is it's not a refundable tax credit, so it is in fact income-dependent and also it's not ongoing.
What would be more helpful, and what we had actually asked and discussed, was an ongoing credit specifically aimed at families who adopt children with special needs from the foster care system. This does take place in several U.S. states. What happens is every year a family that adopts a child — and it's a fairly broad definition of special needs — from foster care gets an ongoing credit of, say, $1,000 or $2,000 a year that then they can apply to those post-adoption expenses like counselling, for example, that the children and the families need to maintain their strength.
Senator Callbeck: I think it would be very helpful if it could be spread out. Is that something you requested from the federal government?
Ms. Eggertson: We did.
Senator Callbeck: How many Canadians have claimed this adoption expense credit in the last year or so?
Ms. Eggertson: I think we'd have to ask that question of the Finance Department. I don't know. It's not that high. Again, the problem is it's not expensive to adopt through the domestic system. When I adopted, it cost me almost nothing to adopt my children, but the thing is the expenses come afterwards. It's great for people who adopt internationally and it covers a proportion, but if, for example, you claim the whole $15,000 in expenses, you're only going to get back $2,250, I think. In terms of the big picture of what it costs, it's a help and we certainly are happy about it, but it's not really going to offset that many of the costs.
Senator Callbeck: The private adoptions you said run between $15,000 and $20,000.
Ms. Eggertson: Yes, and they can be even more. That could be applied as well to private adoptions.
Again, there are probably fewer than 1,000 private adoptions, and that's across all of Canada in a year. They're usually infants, but there aren't that many. Not that many people will have claimed.
Senator Callbeck: This new credit that's going to be up to $15,000 from $11,000, roughly what percentage or proportion of the adopted-related costs will that cover?
Ms. Eggertson: If you get back $2,000 and you're spending $40,000, 5 per cent.
Senator Callbeck: If you get back what percentage?
Ms. Eggertson: If you're spending $40,000 on an international adoption, you claim 15, but because it's a 15 per cent credit, actually your bottom line is about $2,200, if I'm doing my math right, which I don't always. Is that 5 per cent?
The Chair: It's $2,250?
Ms. Eggertson: Yes, $2,250, roughly.
Senator Callbeck: Which really is not that much.
Ms. Eggertson: No. While this is a great step, and we really like the references and the fact that the federal government is actually demonstrating that they're listening, what we actually need are broader provisions that would address the domestic adoption issue and the foster care system.
The Chair: What you've told us is that the average cost for a Canadian adoption is around $15,000.
Ms. Eggertson: If it's a private adoption. What that means is that a couple will perhaps advertise, saying they're seeking to adopt an infant. If someone is seeking to place an infant, that all may happen through private channels, through lawyers. It doesn't ever actually happen through the public child welfare system. That's where the costs are incurred. They're incurred in legal fees and perhaps some coverage of expenses for the birth family.
But if you adopt through the public system, your expenses up front are much less because you may not have to pay for a home study, so it's a lot less. There are almost no expenses, or at most you may pay for a home study, which is perhaps $1,500 to $2,000 a year, or some training, which is another $1,500 to $2,000 a year, so your cost is much lower. It may not cost you anything to adopt through the public system.
So this tax credit doesn't help those families particularly, and so what we're hoping for are some measures that would actually address the backlog of children in the child welfare system domestically.
The Chair: I have a point of clarification. Are you the only — I don't want to say lobby group — advocacy group for adopting parents and the adoption process?
Ms. Eggertson: We're the only national non-profit group that represents everyone in the adoption process, yes.
The Chair: Thank you.
[Translation]
Senator Bellemare: It is clear that we cannot build an economic argument on the merit of adopting domestically, because some social costs could be avoided and which would largely exceed the private costs to a family when adopting. We need to find ways to encourage this.
I am asking this question because you said that, in Quebec, when you adopt from outside the province, it is considered to be an international adoption. Further — and this obviously surprises me — you said that, in the other provinces, it was harder to adopt children living in another province than living in another country. So I was thinking: if, in Quebec, this is considered to be an international adoption, and if it is harder for an Ontario family to adopt a child from Saskatchewan rather than from another country, then it is harder for people living outside Quebec to adopt from elsewhere in Canada. That is what I gathered from what you said. But perhaps this is not what you meant.
But what I wanted to discuss with you is the fact that it is much harder to adopt domestically than internationally, if only because the biological parents of children who are in home care or in institutional care do not want their kids to be adopted. So that entire issue has to be dealt with, since at any given time, there are families who want to take in a child and after several years, they would like to commit themselves further and adopt that child. But often it is impossible for them to do so.
So I would like to ask you, first, about what you said regarding Quebec versus the other provinces, and about what you said regarding the way it works between the other provinces. Second, what do you do in cases where there are systemic obstacles to adoption due to the fact some biological parents do not want to give up their kids?
[English]
Ms. Eggertson: Let's take those two questions. First, it's not that easy to adopt either way. International adoptions can be lengthy and complicated and full of obstacles as well. But there is a system in place, there's a process: step one, step two and step three. It's more regulated in many ways.
Quebec compared to the rest of Canada is in many ways a political decision that the Government of Quebec has taken considering that it is a sovereign province. That's when the policy arose.
[Translation]
Senator Bellemare: I would like to know what that involves for a Quebec family wishing to adopt.
[English]
Ms. Eggertson: For a Quebec family who wants to adopt internationally, they have to apply through the international system.
Ms. Paul-Carson: Basically, they would go through the Secrétariat à l'adoption internationale. That's the agency that deals with adoptions in other countries. In terms of the Quebec legislation, adoptions from other provinces and territories are in the same piece of legislation. They also have to go through the Secrétariat à l'adoption internationale.
I think it is fair to say that it is equally as difficult to adopt, let's say, from Ontario to Saskatchewan as it would be from Quebec to Saskatchewan. It's difficult across the board. I think it's just a question of how the legislation has been developed in Quebec, that's all.
Ms. Eggertson: In terms of what we're doing to lower those barriers, part of it is that we have a national photo listing. We try to profile on our website the children from various provinces who are available for adoption so that parents from anywhere can look and see if there's a child that they are interested in, and then we facilitate getting them in touch with the appropriate agency to try to make that match happen. That's one of the things that we do.
But there are a lot of barriers, as you say. For instance, in British Columbia, they're not allowed to do photo listings. So their legislation does not allow a social worker to post a photo of the child on any website. They can't refer their children, for instance, to our website.
What we know is that photo listing works. People who see a picture feel more connected to a child, but that's the legislation. So there are a lot of legislative barriers, and there are just a lot of cultural barriers within agencies that want to keep the children in their own provinces, if possible. That is understandable, but we think, after a certain period of time, if you can't find a home in your own province or city or jurisdiction for a child, why should they remain in foster care for years and years just because you don't want to look outside your area? That's a barrier, and that requires some education, I think.
[Translation]
Senator Bellemare: Are these 30,000 Canadian children all orphans?
[English]
Ms. Eggertson: Not always, no.
[Translation]
Senator Bellemare: But the biological parents have signed an agreement that their children can be adopted by another family?
[English]
Ms. Eggertson: When we say "adoptable," it means legally free for adoption, so by that point their parental rights have been terminated. It's not always voluntary. It involves a court process in every province. There are more children than that in foster care. There are roughly 70,000 children in foster care across the country, and about 30 per cent are legally free.
You're right, there's a lot of stigma, and a lot of families are concerned about adopting because they fear their children will be taken away later, but in fact once they are legally free, that will not happen. Those adoptions are not challenged. We're talking about the ones who are free, but there are still some legislative barriers in some of the provinces to freeing up those children. There are a lot of complicating factors there, you are absolutely right.
The Chair: I'll go next to the deputy chair of the committee, Senator Smith.
Senator L. Smith: Ms. Eggertson, you were talking about 70,000 children in foster care. Is that on top of the 30,000 children available for adoption?
Ms. Eggertson: That's total. Again, all these statistics are our best guesses, because we don't have good national statistics on any of this, but that was from a survey done in 2004. It's pretty old. It's 10 years old by now.
Senator L. Smith: That includes the 30,000 children?
Ms. Eggertson: Yes.
Senator L. Smith: You talked about aging out and getting too old to be adopted. Could you just walk us through? You said the average age of children to be adopted is 8 years old; is that correct?
Ms. Eggertson: The vast majority of children in foster care are 6 and older. A lot of them are clustered in the 6 to 12 range. They're all adoptable. You can be adopted at any age. There are no legal barriers to adoption, but there are a lot of cultural barriers.
Within child welfare agencies, there are a lot of workers who do not think a child older than 6 is adoptable. The teenagers, they don't even go on the adoption caseload, if you see what I mean. They're not even looking for homes for the children.
That's changing in some jurisdictions more than others, but for instance, when I adopted my daughter, who was 8 at that time, from Kenora, she was the oldest child that adoption agency had ever placed. That's not that uncommon. There is a handful in Ontario older than 10 adopted every year.
It is changing. There are people working, such as our organization, and groups working to try to increase that. I think some of the work we're doing with having young people tell their stories is helping to attract members of the public who would consider — we met a wonderful couple in Alberta who had just adopted a 14-year-old girl and were thrilled. It was a very happy occasion for them. They hadn't originally been looking for a teenager. They went in looking for a young child, but as the process took years and years for them, they eventually learned of this young woman and decided that she would make a great addition to their family.
A lot of it is communicating. Parents do not know who's available out there, and they do not know, once they kind of get a sense of a child or a young person's personality, how well that might fit into their family. Sometimes people who are raising teenagers think, "I can do that." It's not such a big deal when you've done it before, but if you're just starting the family, you might be daunted by the idea of taking on an older child.
Senator L. Smith: Of the 70,000 children out there, you said 30,000 are in this adoptable mode. Are these children all less than 6 or 7 years old?
Ms. Eggertson: No. The vast majority would be older than 8. The vast majority would be 8 and up.
Senator L. Smith: Of the 70,000 children, do you have an age breakdown?
Ms. Eggertson: We don't. We don't have a breakdown of how many are Aboriginal. We don't have a boy/girl breakdown. We don't have any of those statistics. We really lack in all of this.
We have no way of measuring our progress because, to start with, we don't know how well we're doing. Well, we know we aren't doing very well overall, but we don't have any way to compare whether we are doing better as a country nationally. We have no way of knowing.
Senator L. Smith: We talked last year about budgets and how you market yourselves. Could you update us on your budget?
Ms. Eggertson: We have done better on our budget. Thanks to the federal government, we did get a limited grant. It's a three-year grant, but we went from a budget of roughly $90,000, and for this year we're now projecting close to a $487,000 budget, which is a great improvement.
Senator L. Smith: Is that all from the federal government?
Ms. Eggertson: No. About $300,000 is from the federal government grant that we've got to work specifically with children in the adoption community and foster care who are disabled and finding homes for them.
Senator L. Smith: That's per year over three years?
Ms. Eggertson: It's $620,000 divided over three years, but we get a lot of it up front. We are doing our best to do that, as you suggested, which is great.
Senator L. Smith: In terms of marketing yourself, Ms. Paul-Carson, you talked about your website. How are you doing with that, and what else are you doing to get your word out so that you can attract people who would be potential candidates to adopt young people?
Ms. Paul-Carson: We're just about to develop a strategy concerning how we're going to go about doing that. We're certainly in touch with a whole variety of people in the adoption community.
We are, as Laura mentioned, in touch with other organizations. Each of the provinces has some organization that represents adoption. We're in constant contact with them. We have a number of advocates, and we're pursuing more of them. We hope to be able to bring them on board to help us promote the whole notion of adoption.
That's one of the things I mentioned in the talk I gave. We would really like some kind of an advertising campaign that could be put together by both the federal, provincial and territorial governments, because a lot of promotion is needed to change attitudes and to bring awareness to people about the children who are available for adoption, that these children would make lovely additions to any family.
I take telephone calls from the general public, and people phone up and say, "I'd like to adopt a baby or toddler." I say, "There really aren't any available. I know you want it to go quickly, so the wider the pool of children you're willing to take, the faster it will go." People need to learn this, because they're still in this land of 1970 when infants and toddlers were available for adoption, and they're not anymore. We have to do something to bring awareness to this issue.
Senator L. Smith: Is your website static or active at this time? Are you using some of the young people who may be foster children to build it if they're whiz kids?
Ms. Eggertson: We do, in fact. Our website is up and running. It's adoption.ca. We're hoping to add this portal on the national listings, which would be able to put parents and children in contact with each other. We're making some videos — we have one on YouTube already — of the young people themselves telling their stories about why it's important to have permanent family even at ages 18, 19 and 20.
I have some young people I'm working with right now who really still need that kind of support on a daily basis, just navigating things like how you go to post-secondary school? How do you get funding to go to post-secondary school? What do you do if the dorm room is closed over the holidays and you have nowhere to go? This was the case of one young woman we talked to recently.
There are a lot of issues, as all of you who are parents know, that continue well past the teen years, and it's trying to get their stories out there so people will be able to respond to them.
Senator L. Smith: You've had a big move up in terms of funding, so what's the next move for you to get to the million-dollar level?
Ms. Eggertson: The next move is we need ongoing corporate support. That is really what we need for capacity building. We've hired one and a half times the people, but I'm still running it off the side of my desk in a lot of ways.
That's what we need. We need that ongoing operational support to get it up to the next level and to be able to provide more programming support.
Senator L. Smith: Good luck with it.
Ms. Eggertson: Thank you. We take any suggestions.
The Chair: You seem to be doing okay.
Senator Mockler: Being from New Brunswick, I have a few things to say.
Every child needs a family. I agree 100 per cent that we should have a federal-provincial-territorial meeting on child adoption in Canada.
Second, there is corporate support out there. We need to be more aggressive with them.
I was the minister responsible that brought in the adoption program in New Brunswick.
Ms. Eggertson: Which is doing a great job, by the way.
Senator Mockler: The best in the country. Even some states in the U.S. are looking at it.
When it comes to adoption, the new family would always like to try to adopt a baby or up to 2 years old. How it was brought to my attention, it was a person that came home and said, "Percy, do you know it's easier to adopt internationally than it is to adopt in New Brunswick?"
It still exists today. It was "children of the minister" in those days. Premier Callbeck may remember the same thing in the other provinces of Atlantic Canada.
I'll share with you why this is important. We must dedicate to having an FPT national meeting on this. I will always remember, my social worker came to me and said, "I know I should go through my deputy minister, but knowing you, Percy, I want to talk to you about something." She gave me this story.
We were preparing to have a new family adopt this 4 year old, for whom they were finally doing the last interview. When they did the last interview, they chose one child out of a boy and a girl. The child not chosen went to the social worker and asked, "Was I not chosen because I was not well dressed?" I could go on, Mr. Chair, but I'll stop there.
I think we're on the right track. People don't care who we are as a country until the day we know what we care for, and if we don't care for our children and we do not help families, Canadians, to adopt — it's difficult to adopt within our own provinces, let alone an Albertan family who wants to adopt from Quebec or from Prince Edward Island. That's factual. I know you have all those statistics.
Ms. Eggertson: You've said it very well; I couldn't say it any better than that. I can tell you the same stories.
There was a young woman whose brother was adopted and she wasn't. To this day, she's been trying to find him, because she helped raise him, and can't. There are just so many heartbreaking stories like that. It leaves these young people wondering what's wrong with them. They internalize it, and it does a lot of damage. They're wonderful, amazing young people who try to put themselves through school, but the number who succeed in post-secondary education without that parental support is fewer than 20 per cent. It's very small.
We want them to tell you and to tell as many people as possible what it's like and why it's important. I think when people hear from them, it will make a huge difference.
Senator Mockler: To conclude, when I brought this to the attention of the cabinet and the premier of the day, who was Premier Bernard Lord, they didn't believe that you couldn't adopt from Quebec or from other provinces, let alone the challenges we had within our own province. We are leading Canada when it comes to the adoption program, and it's still there. Every child needs a family.
Ms. Eggertson: Yes, and that's the kind of thing we would really like to put out there on a national scale that would then direct people to their local agencies.
New Brunswick did a brilliant advertising campaign that said "Do you have room for one more?" It showed an empty seat in a car or an empty swing in the backyard. It was very powerful and it produced a lot of responses.
Then you have to get the staff involved when you get the flood of calls because people do get moved. I think we are a compassionate country, but people need to understand what exactly is involved, what the need is and how they can respond. It's not good enough to run the emotional ads and get people to call; you have to hire the additional workers and then critically you must have the post-adoption support in place. You have to support the families once they take these children into their homes; otherwise, you're setting them up for yet another disappointment. That's the critical piece.
It's a three-phase strategy. You have to attract, do the matching work and then you must support, for the lifetime sometimes, or at least certainly for the early years of that adoption. You really have to support the families, and then you will have good outcomes.
Senator Mockler: I agree with the three-pronged approach, and I would add a fourth one, which would be to share information from 10, 15 or 20 years ago of people who were adopted, such as the one who wanted to find her brother. That information is not available among provinces.
Ms. Eggertson: That's right. Some provinces do have open records, some don't. It's not consistent. Even the standards for how you do a home study and whether one province, for instance, will accept another province's home study is not consistent. That's a barrier because the parents may have to redo the home study in another province's jurisdiction. It's kind of crazy. There are ways to make it much easier, and that's what the meeting would discuss.
Senator Mockler: On this, the only other comment I have is two-fold. One is to say continue; you're on the right track.
Second, I think corporate Canada is ready to open and entertain, as long as we have programs in place such that we can share results. In New Brunswick, they're doing very well.
The Chair: Senator Mockler, maybe we should put on the record the fact that a retired senator, Senator Erminie Cohen, has been very involved in the adoption initiative in the province of New Brunswick, and that's an indication of the contribution of retired senators.
Ms. Eggertson: She has indeed. She's on the board of the adoption foundation of New Brunswick and she has been great.
Senator Chaput: Of all the children waiting to be adopted, what percentage would you say never get adopted? What happens to them?
Ms. Eggertson: In Ontario, which is the only stat I'm familiar with — again, we have this problem with stats — I think roughly 80 per cent of children in the child welfare system who are legally adoptable are never adopted. They age out of the system without any permanent legal connection to a family.
Many of them end up homeless. If you look at the homeless stats, as many as two thirds in some cities are people who have come through the foster care system. They end up dropping out of school quite often. They become teen parents and end up on social assistance. Some come in contact with the justice system. It's not a great outlook for those who are not adopted.
Senator Chaput: Would most of them, to begin with, be placed in foster homes? Then after a certain age they can't stay there any longer because the family doesn't get paid to take care of them? Is that one of the problems?
Ms. Eggertson: That is one of the problems. There are wonderful, amazing foster parents out there, but they may not be able to financially continue to support the children at a certain point.
Usually in the provinces it depends; they can age out of the system anywhere from 16 to 21. If they're not going to school, for instance, they may not qualify for any extended maintenance, and the parents generally don't qualify for any support after the child turns 18.
As Trish said in her presentation, it's a disincentive to adoption. A lot of their costs are paid for while they are in the foster care system, but as soon as they age out, they're not paid for any longer. Or if they are adopted, those parents don't get those same supports.
Senator Chaput: And they can't afford to adopt them?
Ms. Eggertson: Right. Alberta and New Brunswick have good subsidy systems for parents who are adopting in many cases, but it's not uniform across the other provinces. It's a big problem. The subsidy issue is quite a problem.
Senator Chaput: Besides being adopted, is there any other solution?
Ms. Eggertson: We think legal guardianship, kinship care, adoption and customary care are all solutions and should all be supported financially. As governments, we take these children from their parents; they don't ask to be taken away. We have a fiduciary and a moral responsibility to those children as they grow up, and that can extend well past the age of 18, as you know, as parents.
We have a responsibility, but we're not spending the money. As Senator Mockler said, as a country, what does it mean when we say we care for our children but, for instance in Ontario, only 2 per cent of the budget on child welfare is devoted to adoption? It means we don't put our money where our mouth is, and we need to.
These are valuable resources that we are squandering, and these children are not having the desired outcomes that we promise them when we take them from their birth families.
Senator Chaput: If you had sufficient data or stats, would it help?
Ms. Eggertson: It would help us a lot to have the data because then we can judge how well we're doing and what policy measures we are putting in place that work.
Senator Chaput: Have you ever thought about approaching Statistics Canada to see what would be the cost of such a study? Afterwards, maybe you could get corporate donations for that. Have you ever approached them?
Ms. Eggertson: We've discussed it with StatsCan. StatsCan, as you know, has some staffing issues, so they're not prepared to do it right now without additional funding.
We have discussed it with at least one foundation about trying to get those stats ourselves. It's not that complicated to do, so we are pursuing that.
The Chair: I'd like to focus on what we're going to be called to vote upon. Fifteen thousand dollars is the number that has been chosen to say you add all your expenses in here, and if it comes to up to $15,000, anything beyond that, we can't consider, and prior to this initiative coming in, it was $11,000. So this initiative that we're looking at and being asked to vote on is the difference between $11,750 and $15,000 that can be taken in, and then it's only 15 per cent of that that the adopting parents can ask for. They can only ask for it after the adoption is complete but not during the process. That's an additional $500, if my math is right, per adopting parent, as long as they have expended at least $15,000.
Is that sufficient to achieve what you were hoping to achieve as more adoptions and to encourage more people to go through the adoption process?
Ms. Eggertson: Frankly, no, it's not. This is not really the policy instrument we would have chosen. This is the policy instrument that was offered.
The Chair: Do you want to expand on that?
Ms. Eggertson: Without getting myself into more trouble? It's not going to encourage domestic adoptions greatly, and that's really where we think the need is greatest. We think it's a great help — it's a help for people, again, who are adopting privately or internationally. It doesn't help much for parents who are adopting domestically because for the most part they will not incur $15,000 worth of expenses.
We're not saying do not vote for it. We think you should vote for it. It's a help, but it's a small help. I think it's the tool that the finance department, which was very supportive, had available to it. I think we need to look beyond the finance department and into other departments and government-wide and look at what the federal government can do in its jurisdiction in other areas, like helping us with statistics, like the advertising campaign and like a discussion of how to remove those barriers for the interprovincial adoptions in other areas.
The Chair: Senator Mockler raised a number of those. Have you had any discussions as to how much this initiative will cost the public purse?
Ms. Eggertson: Yes, I think the federal government believes up to $10 million over five years for the tax credit.
The Chair: Yes. That's for up to $15,000. I'm just talking about what we're being called to vote for.
Ms. Eggertson: Just the additional increase? That's the additional increase. That's $10 million.
The Chair: That is, so I understood that. It's an additional $10 million.
Ms. Eggertson: It's a $10 million cost over five years, so not very much.
The Chair: That's $2 million a year. We all think $2 million is very much.
Ms. Eggertson: Yes. It is very much for your average Canadian, I totally agree with you, but as a percentage of the federal budget, it's not very large.
The Chair: You have a point. It's just the way you say it.
Ms. Eggertson: Yes. It's not in my budget.
Senator Callbeck: You say you can age out of the system at 16 to 21. Is that because of the various ages within the different provinces?
Ms. Eggertson: Yes. First of all, once you hit 16, you have some choice in the matter. As you know, there are a lot of strong, hard-headed 16 year olds who have not had a great experience in foster care and may decide at 16, "I'm done with this. This has not been fun. I may have moved five, six, seven, eight, twelve times. This isn't working for me. I'm leaving." And they can. They have the legal right to do that. So that's one problem.
Further, different provinces have different regulations on whether they will continue to support financially after age 18. Some will support up to 21 if they stay in school. Some will, I think to 23 or 25, if they stay in school, but that's rare, and I think that's just being brought in in some provinces. It varies by province.
Senator Callbeck: Is there a legal right in all provinces for them to leave at 16?
Ms. Eggertson: I believe so, yes.
Senator Callbeck: In the 30,000 you mentioned here, including children and youth, what age does that include?
Ms. Eggertson: The 30,000 includes everyone from infants up to age 18. Again, each province defines a child and a youth differently, which makes it difficult to collect those stats. Some people may define it as 19, some to 18.
Senator Callbeck: So it's not consistent?
Ms. Eggertson: No.
Senator Callbeck: Thank you very much for the great work.
[Translation]
Senator Bellemare: I would simply like the minutes to reflect that we have heard about a very important national issue which has huge social implications, but which also has real economic implications. One way or another, we have to tackle this problem, both from a social and an economic point of view.
I would therefore recommend that a committee study the issue of child adoption in Canada more in depth, perhaps from a financial point of view. So it could be the Finance Committee or the Banking and Commerce Committee, or the matter could be studied through a social lens.
I think it might also be interesting to see what the other provinces are doing. I know that in Quebec, there is a refundable tax credit for parents who adopt, whereas in other provinces, it is non-refundable. I also do not think that the federal tax credit is refundable. In any case, it might be a good idea to study this from a financial point of view, and to look at obstacles to the mobility of children.
This is a real problem. When a country cannot even look after its own children, we need to take a closer look.
So I simply would like a Senate committee, which has the power to hear from the provinces and the power to hear from federal officials, to study this issue.
The Chair: You can make your suggestion when we report to the Senate. But you can also raise the subject when we will do the clause-by-clause study of the bill. That is a good idea.
[English]
That concludes the senators who have asked to participate. It has been all of the senators, as you have seen, and there is strong support for the work you are doing and a great appreciation for what you are doing for the young people of Canada who may have been disadvantaged. We would like to thank you very much for being here and explaining your story to us.
Ms. Eggertson: Thank you very much for having us.
The Chair: Senators, we will now move to a discussion of the Search and Rescue Volunteers Tax Credit. You'll recall that discussion we've had. This is a measure discussed in quite a few different clauses, because it ties in with the firefighters, the Volunteer Firefighters Tax Credit. It is a non-refundable tax credit. Clauses 4, 7, 8, 11 to 16, 19 and 20 all deal with the Search and Rescue Volunteers Tax Credit.
I'm pleased to welcome, from the Ontario Search and Rescue Volunteer Association, Kathleen O'Brien, who sits on the Public and Media Relations Committee of that association.
I will also introduce at this time Mr. Tom King. Mr. King is here to help us understand the Mineral Exploration Tax Credit for Flow-Through Share Investors, which can be found at clause 18 on page 4 in the English version. Mr. King is an associate partner with KPMG.
I understand that each of you has a few introductory remarks, and then we'll get into a discussion period. I'll start with Ms. O'Brien, Ontario Search and Rescue Volunteer Association. You have the floor.
Kathleen O'Brien, Public and Media Relations, Ontario Search and Rescue Volunteer Association: Good afternoon, Mr. Chair and honourable senators. On behalf of the Ontario Search and Rescue Volunteer Association and my more than 900 colleagues and friends who have dedicated so much of their time and talents to ground search and rescue in Ontario, I'd like to thank you for inviting us today to witness Bill C-31, specifically, the clauses for payment for volunteer services, payment for volunteer firefighters and the Search and Rescue Volunteers Tax Credit.
As the recording secretary for OSARVA and a boots-on-the-ground searcher in both northern Ontario and more recently here in Ottawa-Gatineau, I can truly say the new Search and Rescue Volunteers Tax Credit is a welcomed benefit to the ground SAR volunteers who commit their personal time, effort and equipment to finding lost persons in their communities. The new tax credit is a recognition of the important role played by search and rescue volunteers in contributing to the security and safety of our citizens and visitors to the province.
Hope for the best and plan for the worst. As a search and rescue volunteer, we get the call when someone is in trouble. While we always hope for a positive and speedy outcome, the truth is people go lost and missing for a variety of reasons, from simple miscommunications about their expected arrival time, to serious injury, even death and suicide. It is for this reason search and rescue volunteers in Canada must continually train and be properly equipped and prepared for each and every call for assistance we receive.
Ground SAR volunteers place themselves at risk at any time that they are responding to a search for missing or lost persons. Searches often take place in rough terrain, poor weather and can happen day or night. Searchers are trained in search techniques, first aid, rescue and recovery, navigation and survival. They are self-sufficient and ready to stay out for 24 hours at any given time. We give freely of our time, talents and energies; we train hard and we train often; and we deliver public education programs on outdoor safety and survival.
Like all volunteer organizations, we have administrative duties to attend to as well. In Ontario, we are not funded for our activities, so we also need to fundraise to properly provide the necessary team gear and equipment, and to pay our insurance and licensing fees to operate our teams safely and effectively. We provide our personal gear and clothing and, for the most part, cover our own costs to attend searches, training, meetings and community events.
A search is an emergency. Unlike many other volunteer organizations, we must be ready to roll out on a moment's notice. When we get the call, we must jump to action immediately, not when it is convenient or fits our schedules. While many volunteer organizations provide a valuable resource to the community, for the most part they can be done around work and family obligations and schedules. SAR volunteers must be prepared to leave home, family, work and social engagements at any time, whether it be Tuesday afternoon, in the middle of the night or at the Christmas dinner table.
Currently, OSARVA has 20 volunteer ground SAR teams within the province providing search and rescue support services to the Ontario Provincial Police, local police services, and we provide assistance with emergency management organizations during disasters. We have over 900 volunteer searchers, team leaders and search managers who respond to an average of 50 searches annually. Combined, they volunteer for 5,000 search hours, 25,000 training hours, 5,000 prevention and 10,000 community hours.
The purpose of determining the cost savings that volunteers impart, a value of $25 per hour, has been assigned by various agencies. This means that by using skilled search volunteers, there's a huge impact on the financial burden on governments to carry out SAR missions.
OSARVA is a provincial SAR organization and a member of the Search and Rescue Volunteer Association of Canada, which is the umbrella organization for ground SAR in Canada. The Search and Rescue Volunteer Association of Canada, the Civil Air Search and Rescue Association and the Canadian Coast Guard Auxiliary are the three lead organizations for volunteer SAR in Canada. As a member organization of SARVAC, all our member teams are eligible for this new tax credit.
To be eligible to qualify for the new tax credit, a volunteer must have put in in excess of 200 hours of volunteer time. This, of course, will require proper documentation and ensure that clear records are kept and there is a division between primary hours, which includes searching, training, meetings and being on call; and secondary hours, including maintenance of equipment, provincial programs and community events. Of the minimum 200 hours required to qualify, 101 hours must be made up of the primary hours: boots on the ground, the risk, the personal sacrifice.
SARVAC is working closely with the Canada Revenue Agency to define some of the terms, such as "on call" and other terms and documentation requirements. OSARVA volunteers will adhere to the guidelines as set out by SARVAC and the CRA when making claims for the tax credit.
"So others may live": That is our motto, that is our motivation, and that is why we get out of our warm beds in the middle of the night to slog through the rain, the snow and the mosquito-infested swamps so others may live. The Search and Rescue Volunteer Tax Credit is excellent news for the 900 ground SAR volunteers in Ontario and a significant acknowledgement of the effort and commitment made by our dedicated volunteers.
On behalf of the Ontario Search and Rescue Volunteer Association and my 900 colleagues in the province, we extend our sincere appreciation to the federal government for this initiative.
The Chair: Thank you, Ms. O'Brien.
Could you explain to everyone how your volunteer search and rescue organization relates to the search and rescue that is attached to or forms part of the Armed Forces in that search and rescue activity?
Ms. O'Brien: We are a volunteer ground search and rescue organization. That's our job. We get called out by the police forces of jurisdiction in our areas or by the OPP. It's 100 per cent volunteer.
The Chair: Do you have any relationship with or do you do any training with the search and rescue of the Armed Forces?
Ms. O'Brien: Not on a regular basis. If they called us for assistance, we would definitely go out, and we're always open to joint training opportunities.
The Chair: And that does happen from time to time?
Ms. O'Brien: Maybe across Canada. I'm not sure if it has happened in this area recently.
The Chair: You're not aware of any occasion in Ontario?
Ms. O'Brien: Not off the top of my head.
The Chair: If it turns out that there is some relationship there, that would be interesting, because then we can do a comparison of the dollars saved through a volunteer organization versus the Armed Forces search and rescue, as long as the work is similar. But I think yours is ground and theirs is probably air crashes and boats and that kind of thing.
Ms. O'Brien: Yes. We just have jurisdiction for ground search and rescue.
The Chair: Thank you very much.
We'll go on to the next presentation on exploration, Mr. King.
Tom King, Associate Partner, KPMG LLP, Prospectors and Developers Association of Canada: Good afternoon, Mr. Chair and committee members. On behalf of the Prospectors and Developers Association of Canada and its members, I'd like to thank you for the invitation to appear before the committee.
The PDAC is a national association representing more than 10,000 members involved in the mineral exploration and development industry both in Canada and around the world.
The mineral industry plays a significant role in our national economy. The industry's $52.6 billion contribution to Canada's gross domestic product in 2012 included $20.5 billion in mineral extraction and over $32 billion in mineral processing and manufacturing. Recent statistics indicate that the industry employs 418,000 workers across the country in mineral extraction, smelting, fabrication and manufacturing.
The mining sector creates jobs and economic activity in many rural and remote communities throughout Canada and represents the largest private sector employer of Aboriginals.
Canada is recognized as a leader in mineral exploration, development, financing, mining and related technologies. In 2012, the last year we have statistics, we led all countries with 16 per cent of the world's mineral exploration spending, while Australia was second at 12 per cent. It should be noted that Australia is taking steps to follow Canada's leadership on exploration tax incentives and is implementing their own version of the Mineral Exploration Tax Credit to improve conditions in their sector.
This overview presents only a portion of the picture for mining. The mining sector has been negatively impacted by the global financial crisis, like other sectors. Canadian junior mining companies, who essentially rely solely on the capital markets for survival, have had tremendous difficulty raising the capital necessary to fund ongoing exploration activities. The trend for our sector is one of continued struggle in the foreseeable future.
The 2013 data indicates a 29 per cent year-over-year decrease in non-ferrous exploration expenditures worldwide. In Canada, junior companies represented only 34 per cent of overall expenditures, down from 55 per cent at its peak in 2007. Major company budget expenditures decreased by 24 per cent during the year, while expenditures for Canada tumbled by more than 40 per cent.
The long-term impact of less money being spent in Canada on exploration means a longer term interval between viable mineral discoveries. When we take a deeper dive into the situation, the data continues to tell a grim story. The number of financings in 2013 has fallen by approximately 17 per cent from 2012, while the value of financings has decreased by nearly 22 per cent over that period.
Market capitalization has dropped, along with share prices, and is now only about one quarter of its 2010 peak. Companies on the TSX have fared only marginally better than TSX venture companies. On average, a TSX-listed mining company lost 40 per cent of its market capitalization and dropped 31 per cent in price during the first three quarters of 2013. This is a sector that continues to struggle.
One of the most influential elements of Canada's exploration leadership globally is attributable in part to measures included in our tax system to assist the junior mining industry in raising equity. More specifically, provisions in respect of flow-through share financing, which assist both in funding, early-stage grassroots exploration and the significant costs incurred to bring a mine into production, coupled with the Mineral Exploration Tax Credit, which provides additional incentives for early-stage grassroots exploration in Canada, are the lifeblood of the Canadian junior mining industry.
I want to be perfectly clear: The METC is not a tax break for companies. It is an investment incentive that keeps jobs and investment in Canada.
Mr. Chairman, the METC is vitally important, as exploration companies have no production revenue. Most are small businesses that rely on investors who are willing to support the high-risk, high-reward nature of exploration. As the research and development arm of the mining sector, exploration companies do not have production revenue and rely on investors who are prepared to support their high-risk activities.
The lingering impact of the global financial crisis and the challenging capital-raising environment has had a dramatic and negative effect on the exploration sector. While precious metals and some base metals start to see some recovery in pricing, which has benefited our operating mines, the junior exploration sector continues to face a downturn.
Reduced investment leads to fewer drilling programs and negatively impacts regional employment and income, particularly in rural, northern and Aboriginal communities.
Our concern is that without sustained and effective exploration, Canadian mineral production will outstrip additions to its reserves, jeopardizing the country's smelters and refiners and placing the domestic mining industry at risk. We believe the government has a vital role to play in contributing to the ability of this sector.
The METC has consistently provided Canada with one of our competitive advantages and helps to provide Canadians with attractive domestic investment opportunities. The METC has been a success in finding mines, and some of the more recent discoveries include the Lalor Lake zinc discovery in Manitoba; the McFauld's Lake Eagle One deposit, a nickel-PGE; the Blackbird chromite discoveries in Ontario's Ring of Fire; and the Eleonore gold deposit in Quebec.
While we are appreciative of the measure in the 2014 federal budget to extend the METC for another year, our recommendation remains not only to renew the METC but to make the 15 per cent Mineral Exploration Tax Credit a permanent feature of the federal tax system.
If it's not politically feasible, we recommend that the METC be extended for a minimum of three years. This will provide our industry with the long-term certainty to plan crucial investments in exploration programs that by their very nature span a multiple of years.
Further, we believe that a vibrant mineral sector in Canada creates jobs in all regions of the country, sustains communities, fosters new business opportunities and raises tax revenues that allow governments to meet social needs.
Thank you for your time and consideration.
The Chair: Could you tell us just how this works in the marketplace? As you mentioned, some of these companies don't make any money; they're pretty small entities just getting started, putting a lot of money into operations. How can they take advantage when this is a tax credit? They would have to have had some taxable income in order to apply the tax credit.
Mr. King: That is the foundation of the whole flow-through share system. In essence, if a senior exploration company goes out and undertakes exploration activities in Canada, through a flow-through share system what would happen is it would raise the funds for that exploration program on our Canadian market; so an investor would subscribe for shares of that company and enter into a special agreement with the company which prohibits the use of those proceeds raised on that investment. They can only be used to incur qualifying exploration expenditures.
So the mining company goes out, spends the money on the exploration program, and renounces the deduction that it would otherwise be able to claim, if it ever had taxable income, back out to the individual investor. In a sense, it is a bit of fairness, because what you have is the expenditures that are being made are going out to drilling companies, various groups to basically fund the expenditures, so they're being taxed on those. The offsetting deduction would otherwise have been in this junior exploration company, and 99 per cent of them would never be able to claim the deduction.
In essence, by flowing the deduction out to the investor, it gives a balance to the system. It's only specifically for grassroots exploration. In addition to getting the income deduction, an investor is entitled to claim, from a federal perspective, a 15 per cent investment tax credit.
The tax credit — again, not to complicate things — reduces the expenditures that they would otherwise get a deduction for, so it is in fact taxed as well.
If you look in the expenditure program, you'll see that there is an outflow in year 2014 and an income inclusion in 2015. The effect is the 2015 represents when the tax credit becomes subject to tax.
The Chair: As I understand it, this is an extension for two years?
Mr. King: One year.
The Chair: It says before 2016.
Mr. King: The way the program works is that there's another special mining provision. For mining companies, a lot of the exploration activity takes place during the wintertime, when you're in the Far North. What happens is that often investments are raised during the end of the year, so there isn't enough time to be able to spend the funds raised on a qualifying exploration program. So there is a special look-back rule where you can include expenditures incurred in the subsequent year and count them as a deduction in a previous year.
Although the program ends in 2015, it effectively captures expenditures up to 2016. The current system would end as of 2015.
The Chair: The current system was an extension last year of a system that has been around for quite a while. We've extended this many times. It has come here, and we keep wondering, like you, why this isn't made permanent if it's deemed an effective mechanism for exploration.
Mr. King: Yes. We share your position.
The Chair: I'm sharing yours. From the lawmakers' point of view, we find it quite strange. This has been around for several years.
Mr. King: More than several. It probably goes back to early 2000.
[Translation]
Senator Bellemare: I have two questions. The first one is for Mr. King, since he has just spoken.
Are there similar provisions with regard to provincial taxation? I know that in the past there were provisions for holders of flow-through shares; does this still exist at the provincial level?
[English]
Mr. King: What happens is, and it's not in all provinces, most of the major mining provinces, including B.C., Ontario, Manitoba, Quebec, have similar programs where they would add on to the METC. In addition to the 15 per cent METC, Ontario has a 5 per cent rate, and different provinces have different rates and may qualify, and would only represent expenditures incurred within their respective provinces.
[Translation]
Senator Bellemare: Are these programs still in effect? Are they not supposed to end at some point? Are they very active? I am referring to provincial programs.
[English]
Mr. King: The provincial programs, one of the provinces has actually extended theirs indefinitely. One, I believe Manitoba, has done it every three years. They are each looking at their own programs and doing their best, because they understand the importance of mining within their various provinces.
[Translation]
Senator Bellemare: My second question is for Ms. O'Brien. We recently studied this part of the budget and Senator Boisvenu was there; he is very well-known in victims of crime defence circles. He asked a very interesting question about people who search for missing persons. What I took away from your observations is that people who work to find missing persons, regardless of whether those missing persons are found or not, are covered by your association and would therefore qualify for the federal tax credit. Is that correct?
[English]
Ms. O'Brien: Yes. People who are trained and certified by OSARVA, there is a minimum basic training standard we have to take every year and we certify, and that is in conjunction with the OPP. Those people pay their dues every year and they do the re-certification. Yes, they are part of our organization and those would be the ones who would benefit from this program.
[Translation]
Senator Bellemare: Associations similar to yours in other provinces?
[English]
Ms. O'Brien: Yes. There should be a provincial association in every province.
[Translation]
Senator Bellemare: They will be able to certify their hours as volunteer work, because they would have to keep track of those hours to take advantage of the tax credit. Are you saying that there are such associations in every province?
[English]
Ms. O'Brien: Yes, there should be. The B.C. association is very busy and very heavy on their stats because they are extremely busy with tourists and an extreme increase in the number of searches they've had lately. They've used that to develop some of the prevention programs that have come across the country. Every association should have stats collected. Now it will be a formalized process for the tax credit, but everyone should have stats collected and the number of hours.
If a search ever turned into a court case or went to court or legal proceedings, then lawyers would immediately say, "What are your training standards and how many hours have you put in?" These things should all be documented regardless.
Senator L. Smith: Ms. O'Brien, what's the feedback from your members on this credit?
Ms. O'Brien: It's something we've been championing for a long time, so it is a nice acknowledgment of what we do.
Senator L. Smith: There seem to be two elements in terms of volunteer services, volunteer firefighting. What happens if you do 100 hours in one and 100 hours in the other? Can you get the credit?
Ms. O'Brien: I believe you can combine your volunteer firefighter and search and rescue, as long as you have 101 primary hours. If you did 100 volunteer firefighter hours, it would have to be 101 of the primary hours, and then some of your secondary hours can count for search and rescue. But if you're training, you should be able to.
Senator L. Smith: Your 900 members, is that throughout the province of Ontario or is it in a specific geographic area?
Ms. O'Brien: We have 20 teams across Ontario.
Senator L. Smith: Do you have communications with other volunteer groups throughout the country? Is there a national umbrella that you fit into?
Ms. O'Brien: Yes. The national umbrella is the Search and Rescue Volunteer Association of Canada, SARVAC.
Senator L. Smith: How many members in Canada could qualify for this credit?
Ms. O'Brien: About 12,000 members across Canada. Not everyone would qualify. Some people have administrative duties only. I believe three of our teams are already volunteer firefighter departments. They already would have fallen under a previous credit, so it wouldn't necessarily be all 12,000 people that would be eligible.
Senator L. Smith: Where did the initiative start for this credit?
Ms. O'Brien: That I'm not sure about. I know SARVAC at the national level has played a very large role. I know they have done that. I would assume a lot of the provinces had at one time tried to push it.
Senator L. Smith: From your perspective, it's positive?
Ms. O'Brien: It's positive.
Senator L. Smith: Mr. King, you gave the chair an overview, but could you walk us through a practical example of somebody putting in, say, $5,000 for a tax credit and they have $100,000 income, just how it works?
Mr. King: To keep it simple, I'll use $1,000. We'll pretend that the expenditure is actually in Ontario. In addition to the 15 per cent federal credit, you would get an additional 5 per cent for Ontario, so a 20 per cent tax credit in total.
Senator L. Smith: Is that favoured nations clause for Ontario? The people in the other provinces would be upset about that.
Mr. King: No. Some other provinces are more beneficial. Of the thousand dollars that you would expend, and we'll keep it simple and get rid of timing, you would get a $200 credit. So on your tax return you would ultimately get to deduct $800 for your renunciation of your exploration expenditures.
To keep it simple, assuming a 50 per cent tax rate, that would give you a tax savings of $400. The $400 tax saving plus the $200 that you got as an investment tax credit means your net cost of the share would be $1,000 less the $600, or $400.
When you sell the share, you are deemed to have a zero-cost base. So any proceeds you get on the sale of the share becomes subject to capital gains tax immediately.
In a very simplified version, that's how it works. What you're doing is reducing part of the after-tax cost; you are kind of sharing the risk of the investment. Part of it is being shared by Canadians as a total and part of it is the investors' risk.
Senator L. Smith: What type of feedback have you received from asking for a permanent tax credit?
Mr. King: We have asked for a while, so I don't know whether it's a political issue or what the sensitivity is, because to some extent — I do not want to be ungracious; they have been graciously extending it on a year-after-year basis. Basically it hasn't been receptive towards —
Senator L. Smith: Is that because governments are hesitant to commit over the long term in case they're not there, and they're putting the obligation on future governments?
Mr. King: I suspect that may be part of it. You have to understand that when you do the exploration, it's a number of years of exploration to pool up what you have. Again, to give some certainty, we said, "Can you give us a minimum of three years?"
Senator L. Smith: What type of reception have you received from that?
Mr. King: So far we've been getting our annual adjustment. Again, it may be just where things are.
Senator L. Smith: The challenge of getting an annual extension — if I understand correctly — it's hard for people who are promoters to get enthusiastic commitment. Is that possible?
Mr. King: It's more so from the exploration companies themselves who say, "To look at this particular deposit, we need to have programs that will go out over a number of years," because some of these take three to five years to prove up what you have. In essence, it would be good to understand. When they go to market, that 15 per cent is still going to be there because they have no other way of funding it.
Senator Buth: Ms. O'Brien, how many hours in a year would you put in?
Ms. O'Brien: That's a good question. We had about 115 training events last year just for our team. They were not all applicable to everybody; some people are in specialized teams like K9 and first aid training. There are prevention hours; I'm heavily involved in the prevention hours.
Definitely over 200 — 250 — but not all necessarily primary. I did break my foot last year, so I switched my focus to the administrative side. It's interesting to see everyone it takes to put a team together. The people who are serious out there training will meet their hours, but the people who are just there to say they're part of a search team — it's enough hours that people aren't going to join a team to collect a tax credit.
Senator Buth: What's prevention?
Ms. O'Brien: There is something called Hug-A-Tree. It came from the States about 30 years ago when a little boy named Jimmy Beveridge went missing from his campground. Unfortunately, he died of hypothermia. Since then, the searchers on that case have put together a program called Hug-A-Tree and Survive. We take that to schools, Scout groups and Girl Guide groups and teach kids how not to get lost, and what to do if they do. Last year we taught about 500 children in the Ottawa-Gatineau area. On the last Monday of March and the first Monday of April, I did 300 kids in one school. We're trying to up that program.
B.C. took over the program, updated the video and made it less cartoony and more applicable to older children. Because of their increase in search incidents — about 1,300 per cent in the last 10 to 15 years — they've extended it under an umbrella called Adventure Smart, so there's Survive Outside program for older children and adults, and they've included a snow safety program. That is something we try to get out in the public. It's much easier to give a talk at a school for an hour and prevent someone from getting lost than to slog through a swamp for days at a time.
Where we can do prevention, we do, and that's a strong passion of mine.
Senator Buth: Do I take it you have slogged through a mosquito-infested swamps?
Ms. O'Brien: I have done that to find out the gentleman was at home in bed. We have a name we don't say for that kind of search.
Senator Buth: Mr. King, you made the comment about the R&D arm of mining. Is it always separate companies that are doing the exploration, or could it be one arm, essentially, or a division of a mining company?
Mr. King: If you look at our exploration industry, it's really made up of a number of smaller junior exploration companies. Typically they have no other source of financing other than raising capital. You also have our major companies, producing mines and things, and they would also have their own geologists and undertake exploration as well.
It has become more prevalent in the last six or so years. A number of the majors have downsized their own internal exploration departments and basically relied upon the junior exploration companies, where they take positions on boards and things of that nature to help do some fundraising and everything just to be close to the various projects, at which time they will decide whether they want to continue or not.
Senator Buth: How many junior mining companies would be involved in exploration in Canada?
Mr. King: In Canada, to give you a sense — and I was trying to get the more current numbers. Unfortunately, the last numbers I had available were the 2011. On our TSX, we had over 1,600 mining companies, which represented 43 per cent of the companies listed. I will tell you that number has gone down, and with the current capital crisis, junior exploration companies are just hanging on by their finger nails. Just to be part of a public company, you have to have finances and all those things covered. We have statistics that show close to 700 companies out there with less than $200,000 working capital left. So we need a shift in the capital markets to basically keep a number of these alive.
Senator Buth: Do you know what the cost to the government is of this credit on an annual basis?
Mr. King: To the government, they had an estimate and it would be within the estimated expenditures they had in there for the current year. In arriving at that estimate, we're not certain whether they looked at prior years and estimated X amount of expenditures.
I think the overall exploration activity is down because capital markets are down, so I suspect the actual cost is going to be less just because there will be less exploration activity itself.
The Chair: Did you give us a number?
Mr. King: Unfortunately, I do not have that right now.
The Chair: Oh, you do not have it now. I was waiting for you to say "It's less than this." Is it a significant amount of money — millions of dollars?
Mr. King: Yes, millions of dollars. It's in the table of expenditures.
Senator Callbeck: Mr. King, you said this tax credit came into existence in the year 2000. Has it always been extended for one year, or were there years when this credit was not in existence?
Mr. King: There was an actual gap one year. On the political circle, there was a minority government — it kind of lapsed before the next was renewed again, so there was a gap. It hasn't been a continuous thing, but it has always been one year. That's one of the issues you have: You are subject to the political environment when it is just a one-year renewal type of deal.
Again, if you're trying to fund a big exploration program, you need some certainty as to what's going on; you want the longer process.
Senator Callbeck: It was just the one year, then?
Mr. King: I believe so.
Senator Callbeck: Okay. In my mind it was longer than that.
This would be mainly used by Canadian start-up companies, right?
Mr. King: You should be aware that the credit itself is only available to an individual investor, and it's only available in respect of exploration expenditures in Canada that are grassroots. It's all within Canada.
Senator Callbeck: Ms. O'Brien, you said you had 900 colleagues in Ontario. Roughly what percentage do you think will be able to take advantage of that tax credit?
Ms. O'Brien: That's a good question. I would be totally guessing, but I'd say 75 per cent. We have 120 on my team specifically, and 50 I would say easily would qualify without making major adjustments to their training schedules this year.
Senator Callbeck: Because of the fact that it's non-refundable, there will be people that won't be able to take advantage of it. In the figure you gave, are you including those, or are you just looking at the 200 hours?
Ms. O'Brien: Yes, I was just looking at the 200 hours. I'm not sure how many would not be able to take part.
The Chair: A number of your colleagues who are in the volunteer search and rescue might not reach the 200 hours?
Ms. O'Brien: Yes, some of them might not reach that.
The Chair: And they wouldn't be eligible. Others might not have any taxable income, and they wouldn't get any benefit. Those who have worked over 200 hours and haven't claimed as a volunteer fire person, have some taxable income and they can get back up to $450. Is that your understanding?
Ms. O'Brien: That's my understanding.
The Chair: Is that fair compensation for all the work that you're doing? I think you're entitled to a lump sum payment from the province to help cover some of the equipment that you buy as well?
Ms. O'Brien: I'm not aware of anybody receiving a lump sum payment for their equipment, but $450 is $450 more than zero, so that's great.
The Chair: Nobody is going to turn that away.
Ms. O'Brien: Nobody will turn that down by any means.
The Chair: Would you be lobbying us next year for something a little more than that?
Ms. O'Brien: I would never say no.
The Chair: It's always nice to do the job properly the first time, you see.
Ms. O'Brien: The $450 would pay my membership fees to cover my insurance so I can continue my prevention programs, a new pair of boots and part of my gas to travel to deliver a presentation. It's a small amount of what we have invested in our volunteer activities, but it is appreciated as it is more than nothing.
The Chair: Have you had any ruling on eligible search and rescue expenses?
Ms. O'Brien: I know they're working on it right now. One of the things they're deciding is on-call hours. Technically, I'm on call 24/7, so that would give everybody 200 hours.
The Chair: You would have your 200 real fast.
Ms. O'Brien: Yes.
The Chair: What about this Hug-A-Tree that you were telling us about?
Ms. O'Brien: Hug-A-Tree would fall under secondary hours, so they would only be eligible after the 101 primary hours of searching, training and meetings, I believe.
The Chair: You mentioned that 101 primary. I don't remember seeing that here, but there are a lot of regulations that explain this that we might not have seen yet. Did you have to get a minimum of 101 hours of real, honest-to-goodness search and rescue, and then you can look at training and standby for another 99 hours to get up to the 200? Is that what you're telling us?
Ms. O'Brien: Right. That will prevent people from joining and applying for the tax credit just to do administrative duties, the people that aren't necessarily putting all the money into equipment for their own personal sacrifice. Yes, there is the minimum of 101 primary hours, which is searching and training.
The Chair: The other question I have is with respect to the crossover between volunteer firefighters and search and rescue. How common would that be? In rural areas, you would probably have a lot of individuals who do both, I would think.
Ms. O'Brien: We do, especially in northern Ontario. Our "scriber" team is actually a volunteer firefighter team. Our northern Bruce Peninsula is actually a firefighter team, and the Peterborough county specialized rescue unit is made up of a lot of volunteer firefighters as well. That's three or four teams that are primarily or heavily —
The Chair: And northern Ontario again is a typical area, but Quebec and New Brunswick are other areas where there are forest fires, and British Columbia. A lot of people are called up to fight forest fires. Would they fit into search and rescue or volunteer firefighters?
Ms. O'Brien: The people that go for forest fires?
The Chair: Yes. Any of those in your group or your organization?
Ms. O'Brien: I don't believe any ground search and rescue would be called on to fight fires unless they were specifically trained for that or did that through another organization. We do have a lot of crossover of volunteer firefighters in smaller municipalities who do both things. They're the people that help their community, so they join both.
The Chair: That takes special training as well. I think you indicated about 20 per cent of your time is actually doing the work and the other 80 per cent is training to be able to do it properly and survive yourself when you're out there helping someone else survive.
Ms. O'Brien: That's correct. You want to be trained on your equipment. You want to know how it works in an emergency. You want to be used to working with your team, first aid skills, map and compass skills, things you do not want to have to figure out in the forest in the dark when you're maybe just waking up. You want these skills ready to go at the tip of your fingers and be ready to do them.
The Chair: Thank you very much to each of you for explaining the non-refundable tax credit that exists in your industry. We have a number of others that we're not going to explore further, but we're getting to understand a bit more about the non-refundable tax credit process, because there seems to be quite a few of them. Thank you. Your testimony was very helpful.
Colleagues, that concludes our work for today. We'll be back at it again next Tuesday morning at 9:30. We will be at our normal meeting spot next Tuesday morning in the Victoria Building, and then we are in East Block in the afternoon. We'll send you a notice. We're trying to get through Part 6. We've finished Parts 1 and 5. We will be concentrating on all the divisions we have to deal with. We'll try to get through that next week, so rest up.
(The committee adjourned.)