Recently, Andrew Coyne penned this column in the National Post focused on the policing of political activities of charities. Coyne concluded that the best means of addressing the situation is to “take away the charitable tax designation—not selectively, based on their ability to dance on the head of a CRA pin, but across the board, outright.”
The Association of Fundraising Professionals (AFP) finds this conclusion fundamentally flawed. The charitable tax designation and the tax credit represent a gesture of confidence on the part of the people by way of their elected representatives, an acknowledgement of the effectiveness of nonprofit and community action and a commitment to the longstanding tradition of philanthropy in Canada.
The charitable tax designation and the tax credit bind together the interests and concerns of all of us in the betterment of our society. Although donors give out of generosity, the tax credit encourages them to give more often and give larger gifts. Those gifts fuel the philanthropic missions of charities across the country and have a direct impact on Canada’s communities. The charitable tax designation and the tax credit are a commitment of the people and government to philanthropy and our communities. To drastically change those symbols—to eliminate charitable tax status and giving incentives—is to end that commitment.
The charitable sector is a vital element of Canada’s economy. The sector employs two million Canadians, contributing 10.5% of our labour force and 8.1% of GDP, according to the National Survey of Nonprofit and Voluntary Organizations, with more than $100 billion in annual revenue and more than that amount in net assets.
For the second time in three years, the AFP Foundation for Philanthropy – Canada and Ipsos-Reed surveyed a wide range of Canadians about their views about philanthropy, giving, volunteerism and charity in the What Canadian Donors Want Survey. There were many positive findings.
More than three quarters (77%) of Canadians agree that that charities play an important role in society to address needs not being met by the government or the private sector, and confidence in the charitable sector is significantly higher than that for the private and public sector (75% versus 63% and 49%, respectively).
In addition, Canadians are very supportive of charity, with 70% having made a financial donation to a charity over the past 12 months. Most donors are very generous: 44% support 2-3 causes, 21% give to 4-5 causes and 16% support 6 or more causes. Just 20% support only one charity.
But there are signs for concern. The main reason that respondents cite for not making a gift to a charity is not being able to afford it. In addition, almost 10% said they simply do not donate to charity. Furthermore, while the number of donors giving larger gifts increased, the percentage of donors who gave small amounts decreased. This is a trend that Statistics Canada is seeing as well—giving increasing overall but only because of larger gifts made by fewer people.
None of these trends indicate a huge shift in giving—yet. But, referencing one of Coyne’s analogies, they indicate that our country’s charitable giving is teetering atop a pinhead with little margin for error. To recommend eliminating the tax credit entirely is untenable, even more so now when nonprofits are still rebuilding following the recession at a time when we have not seen any sustained increase in giving levels over the past few years.
The charitable tax designation and the tax credit do not define the nonproft sector. The defining characteristic of the sector is what we achieve—impact in communities. The tax credit enhances that impact by encouraging and sustaining the culture of giving in our country. We should be investing more in the tax credit and encouraging additional philanthropy, not eliminating it.
AFP recommends that the government increase tax incentives for charitable giving. In our 2014 Prebudget Consultations Brief, AFP has urged the government to implement a stretch credit that would apply to donated amounts above $200 that exceed a donor’s previous highest giving level and an exemption from capital gains tax to charitable gifts of private company shares, appreciated land and real estate.
The charitable tax designation and the tax credit are effective and proven to work. But most importantly, they are vital symbols of the tradition of philanthropy in Canada. They are part of our culture. They are a rare example of government coming together with the people to invest in a better future for all. And we firmly believe that you cannot eliminate the charitable tax designation and the tax credit without losing something very vital in this country.