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Recommendations of the Chief Electoral Officer of Canada to the House of Commons Standing Committee on Procedure and House Affairs Respecting Specific Issues of Political Financing

5. Exclusion of Certain Services as Contributions

Summary of Section

This section:

It recommends:

Current Law

Non-Monetary Contribution: Provision of Services Without Charge

A person or entity may sell services to a registered party, a registered association, a candidate, nomination contestant or leadership contestant at the commercial value of those services (or more). That sale will not constitute a contribution. However, subject to a significant exception respecting volunteer labour, the provision of services to those political entities at less than commercial value (or for free) will constitute a non-monetary contribution (valued at the difference between the amount the person actually charges the political entity for the services and the commercial value of those services) and be subject to the contribution rules of the Canada Elections Act respecting eligibility, caps and disclosure.Footnote 21

The Act provides two exceptions to the above – one for volunteer labour and one for services of minimal value.Footnote 22

Volunteer Labour

The first exception is for services provided free of charge by volunteers other than services provided by self-employed persons that they normally provide for a fee. Such volunteer labour is not a contribution under the Act.Footnote 23 As it is not a contribution, it is not subject to the eligibilityFootnote 24 and disclosure rules of the Act. Nor is it included in the calculation of a contributor's contribution cap.

The service provided by the volunteer must be provided free of charge. This means that the volunteer cannot be paid for it – either by the recipient or by any other person. Thus, an employer that:

itself makes a non-monetary contribution to the political entity under the Canada Elections Act.Footnote 26

The exception for volunteer labour does not apply to the provision of services by a self-employed person respecting the services for which that person usually charges.Footnote 27 Self-employed persons can provide volunteer services – those services simply cannot be services for which the self-employed person usually charges.

Accountants, lawyers and other persons who are employed can take advantage of the volunteer labour exception to provide the type of services they provide in their employment. But this work must continue to meet the general requirement for all volunteer labour in that they are not being paid to provide those specific services by either the recipient political entity or some other person – including their employer.

Services of Minimal Value

The Act also provides that in determining the commercial value of property or services, which are provided by a person who is not in the business of providing that property or those services, the commercial value will be deemed to be nil where the lowest amount charged in the open market for similar property or services at that time is $200 or less.Footnote 28 The most common operation of this provision is to exclude from the concept of non-monetary contribution gifts of goods with a market value of less than $200 (such as small gifts of refreshments). With respect to services, it would permit workers who are not strictly volunteers, because they are agreeing to work for a minimal amount of money, from being treated as if they were making a non-monetary contribution for the difference between what they are being paid and the market value of those services – provided the value of similar services on the market is $200 or less (and provided the worker is not in the business of providing that service).

Recommendations

It is not recommended that additional exemptions to the contributions rules in the Canada Elections Act be created for specific services beyond those that currently exist. The treatment accorded volunteer labour under the Canada Elections Act is structured to take into account both the societal value of encouraging individuals to participate in their democratic processes and the values served by disclosure and contribution caps. Expanding the existing exceptions to those disclosure and contribution rules would unduly affect that balance.

Aside from the exercise of the vote itself, the provision of personal services to political entities is likely the most direct and closest involvement that a citizen can enjoy in the democratic process. Through such involvement, the citizen contributes to his or her community by playing a role in the shaping of his or her government; secures the potential to directly influence political policy and direction; and gains a unique insight based on personal experience and appreciation.

Such involvement should be encouraged and should not be restricted by unreasonable barriers.

The electorate, however, also has a right to know who contributes significantly to the political resources of the political entities that vie for its support. The disclosure rules of the Canada Elections Act are intended to provide such disclosure. Limits on contributions operate to limit the ability of individuals to purchase political influence and ensure that wealth alone does not grant the ability to shape or control political decisions. Creating exceptions to those rules that will allow commercial enterprises to donate their services without limit and without disclosure will undermine those controls, including the restrictions imposed on corporate contributions. This will be particularly so if exceptions are made for those services that command a higher commercial price – such as legal services.

The current exception for volunteer services is a delicate balance of these values. It permits and encourages the direct personal involvement of individuals in their political processes but, by restricting the exemption to personal services by those who are not in the business of providing those services, avoids the undue potential for the secret purchase of influence.

To expand the current statutory exemptions for services to include specialized personal services provided by self-employed lawyers and accountants would create a two-tiered contribution system and permit those persons to provide services with significant commercial value to political entities without limit and without disclosure.



Footnote 21 The following definition of "non-monetary contribution" is set out in section 2 of the Act:

"non-monetary contribution" means the commercial value of a service, other than volunteer labour, or of property or of the use of property or money to the extent that they are provided without charge or at less than their commercial value.

In general terms, the commercial value of a service is the cost that a person in similar circumstances would have to pay on the open market for similar services in that area without regard for any political consideration. The specific detailed definition of the phrase is set out in section 2 of the Act and provides that:

"commercial value," in relation to property or a service, means the lowest amount charged at the time that it was provided for the same kind and quantity of property or service or for the same usage of property or money, by

(a) the person who provided it, if the person is in the business of providing that property or service; or

(b) another person who provides that property or service on a commercial basis in the area where it was provided, if the person who provided the property or service is not in that business.

Footnote 22 A related exception in the Canada Elections Act also permits an employer to grant an employee with a paid leave of absence during an election for that employee to be a nomination contestant or a candidate. Such a leave of absence will not constitute a contribution by the employer under the Act.

404.2(5) The provision, by an employer, of a paid leave of absence during an election period to an employee for the purpose of allowing the employee to be a nomination contestant or candidate is not a contribution.

Footnote 23 As provided by the definitions of "non-monetary contribution" and "volunteer labour" in section 2 of the Act.

"non-monetary contribution" means the commercial value of a service, other than volunteer labour, or of property or of the use of property or money to the extent that they are provided without charge or at less than their commercial value.

"volunteer labour" means any service provided free of charge by a person outside their working hours, but does not include such a service provided by a person who is self-employed if the service is one that is normally charged for by that person.

Footnote 24 Corporations, trade unions and unincorporated associations cannot take advantage of the volunteer labour exception as the services in question must be provided by the volunteer himself or herself. As corporations, trade unions and unincorporated associations are incorporeal entities that cannot act themselves, they are incapable of providing volunteer services.

Footnote 25 A worker who takes leave that the worker has earned or to which the worker is otherwise entitled, such as paid vacation, does not make a contribution himself or herself. Nor is the employer considered to have made a contribution as the employer is not providing the leave to provide services to the political entity. The leave is provided because it was previously earned by the employee, who is free to do with it as he or she pleases.

An employer's granting of a leave of absence without pay is not considered to be a contribution as the employer does not pay any salary to an employee during this leave. The commercial value of any payments the employer may make to continue an employee's pension and other benefits during a leave of absence without pay would be considered to be a contribution unless that cost was $200 or less (see deemed value of property or services with a commercial value of less than $200 in subsection 2(2) of the Act).

Footnote 26 Such payments could also constitute a breach of the anti-avoidance provisions of the Act in section 405.2 if entered into to circumvent the eligibility, caps and disclosure provisions of the Act respecting contributions.

Footnote 27 See definition of "volunteer labour." It is also implicit in Parliament's use of the term "volunteer labour" that the service must be provided at the free discretion of the volunteer. Thus, an employer who, while not paying an employee for services rendered to a political party, orders the employee to provide such services or otherwise implies that the employee must provide such services or face negative consequences will be found to be making a contribution to the political entity at the commercial value of those services. Such activities on the part of an employer or other person may also constitute an avoidance contrary to section 405.2 of the Act.

Footnote 28 Subsection 2(2) of the Act.

2(2) For the purposes of this Act, the commercial value of property or a service is deemed to be nil if

(a) it is provided by a person who is not in the business of providing that property or those services; and

(b) the amount charged for it is $200 or less.