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Imagine Canada

Strong Charities. Strong Communities.

A tax environment to motivate and encourage Canadian donors

Wednesday, April 27, 2016
Notes from the CEO
Taxes, Laws & Regulations
Sector News
Government Relations

In his April 12, 2016, special to the Financial Post, respected tax specialist Jack Mintz poses some pointed questions about the obligation of and cost to government related to sustaining a tax environment that supports charitable giving in Canada. Mintz focuses his thoughts on the recent cancellation of charitable tax credits in the Federal Budget, a move that surprised the charitable community. 

It would be fair to say that many leaders in the charitable sector were dismayed by the cancellation of the capital gains exemption for donated private company shares and land, a measure which had been announced by the previous government but not yet implemented. Many in the sector will continue to champion these interventions, as the sector seeks new mechanisms that will kick-start a stagnant donation climate.

For Imagine Canada, an organization that works with and on behalf of the nation’s charities and nonprofits, Mintz opens the door for a conversation about the priority placed on the economic well-being of Canada’s charitable sector and how government can use the tools at its disposal to ensure the sector’s long term health. Employing 2 million people, engaging over 13 million volunteers each year and representing 8% of GDP, Canada’s charities and nonprofits not only contribute to the fabric of healthy communities, but are a vibrant part of the economy. 

In Canada we have a two TRILLION dollar economy. Is $5 billion in tax relief too much to pay for a dynamic social sector which meets the needs of Canadians and also supports jobs and growth?  

If, as Mintz points out, it is more costly for government to fund organizations directly than support tax incentives, then it stands to reason that government should create an environment that strongly encourages Canadians to make financial contributions. Frustration from sector leaders comes from an environment where they are squeezed at both ends - reductions in core and program funding from government combined with the elimination of an incentive to giving to which many had looked forward. 

Mintz writes, “Oddly, this (covering the lion’s share of donation costs) has been exacerbated by the recent ill-advised hikes to federal and provincial top rates that have made it cheaper for donors to plaster their names on buildings, hospitals and university faculties.”  With respect, what is wrong with more donors making significant contributions to charitable programs and institutions? Government is not providing full funding and communities need services. An enabling tax environment can work to bridge the revenue gap.

Finally, Mintz comments, “But for that system to work best, donors should have significant skin in the game, without lavish public support distorting their giving decisions.” In our view, there is no distortion; public support is quite appropriately being used to help people build strong communities. In the absence of an intentional, full cost funding strategy, government needs to create a tax environment that is motivating and encouraging for Canadian donors.

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