Charities feel the pinch on many fronts and need some help to attract donations
December 3rd, 2010 - 3:00am
Our recent tough economic times have increased public need across Canada. While various levels of government have responsibilities to address this, it is a simple fact that there are a lot of people who fall through the cracks. For these people the last option available is often charities.
In good times and in bad, charities do work that can compliment government programs. They provide an organized way for people who to share their good fortune with those who are not as well off. For the people donating to officially registered, not-for-profit charities, the government provides a tax credit as a way to acknowledge the public benefit of the donation.
This tax credit is not overly large. It is currently a two-tier credit that sees the rate increase at a defined threshold. For any donation of $200 or less, it is 15%. That is to say, if you donate a $100 to an appropriate charity, your taxable income will be reduced by $15. For a donation over $200 the rate is set at 29%.
This formula has served Canada well over the years. Recently, there has been a number of trends that present a challenge to Canadian charities and their ability to sustain themselves. As mentioned at the outset, we are experiencing tough economic times and there has been a corresponding drop in the amount of money donated to charity during this period. More troubling are the drop in the overall participation rate of people donating and the increase in the average age of donors. The combination of these three phenomenons can be seen in the drop of almost a billion dollars in the amount Canadians donate over the last two years.
With that in mind, I was pleased to second an NDP Private Member’s Bill this week that will provide even more incentive for those who can donate to charities. The legislation introduces a stretch tax credit that will raise the non-refundable tax credit rate from 29 to 39 per cent for every new donation above $200 that exceeds the donation given in 2009. That is to say, if a person donated $500 in 2009 and then donated $1000 in 2010 the $500 increase in total donation would now be eligible for a tax credit at the rate of 39%. In that example there would be three tax-credit rates being used to define the amount.
It is a plan that has received thumbs-up from Imagine Canada (a national charitable organization whose cause is Canada’s charities and nonprofits) as they feel it would help those who can donate, give a bit more. While revenue would be lost from the tax base under this format, it would not be so large – the Parliamentary Budget Officer estimates the amount of foregone revenue would be less than $40 million a year – and would be offset by the economic activity generated by the charities and services delivered in the communities.
It is clear that Canada’s charities are feeling the pinch on many fronts and something has to be done to help reverse this trend and stabilize these key elements of our communities. This piece of legislation offers a way to address the problem and also to highlight the troublesome trends that make it necessary.