In challenging economic times, many governments are either eliminating or considering the removal of the tax credit for charitable donations. Several countries such as Austria, Finland, Ireland, Italy, Sweden and Switzerland have removed the tax benefit.
In Canada, removing the tax credit would translate to more than $6 billion being available to the Federal government. Could this money be used in more effective ways by government to provide social benefits to Canadians? Is it time for a rethink of this practice which has been in effect for decades? What impact would the elimination of this tax incentive on charities and their ability to raise resources?
It is a question that could well surface in our upcoming Federal election campaign. While I am not aware of any federal political party policies that are suggesting that a change is needed, recent editorials in at least one major newspaper has raised the issue.
Many donors to charities will contribute to their favorite causes regardless of the tax deduction. Some charities aggressively use the credit as a leverage to raise funds. Most take a quieter approach and seek not to play up to the self-interest of some. To be clear, the tax credit is a positive for the charitable sector, one that would be missed if removed. Some credible charities would not survive a change in policy that removes the credit.
Altruism is a traditional virtue in many cultures and a core aspect of various religious traditions and secular worldviews. This core value is at the heart of Canada as a nation. While some countries have removed the tax credit, they are not to be emulated, rather, Canada should be lifted up as an example of a nation that places value on the role of the non-profit sector.
Charitable giving is about service to others in a world where governments are unable to do it all. By supporting specific charities, we are able to have a say in how some government tax revenues are used. Charities fill gaps that governments cannot address, without even more tax dollars. And then there are the countless volunteer hours that Canadians donate, without compensation, to the mission of charities. No tax receipts for those hours. Government could never afford to pay for those services which enhance the valuable contributions of the non-profit sector to society. I will leave it to the economists to calculate the ‘return on investment’, however, I think you will find that the $6 billion dollars is not lost and charities do in fact contribute well to our economy.
As someone who has spent most of my working life in the charitable sector, I have gained an appreciation for the partnership between government and the non-profit sector. Charities work within the framework of governmental strategies. Governments provide large grants to some agencies to implement programs that align with their broad plan. In the international development sector, agencies go where government cannot go, or does not have the capacity to reach into community level programs that serve the needs of the poor. There are many good examples of this kind of collaboration that makes a real difference in the lives of the poor and disadvantaged. Many remote villages in Ethiopia receive assistance via NGO’s, places that neither the Ethiopian Government or for that matter the Canadian government will never reach.
Most governments also subscribe to building a strong civil society. Empowering individuals and communities to address their needs in sustainable ways is in everyone’s interest. Tax credits generate more revenue for charities and awaken the needs to the general population. Again, a win-win situation for society as a whole.
Canadians are able to choose where to direct charitable giving. It is wise and astute to research which charities are the more cost-effective ones and continue to support good work that resonates with your priorities and values. However, be aware that all charities are not the same. Do your due diligence in finding those that are cost effective and that are able to produce results that are measurable.
Canada is a healthier and more vibrant country thanks to the vital role of the charitable sector. The removal of the charity tax credit would be a regressive step. Let’s build on our experience and spend energy trying to promote more collaboration between government and charities, and even the private sector. A multi-pronged approach with all sectors contributing their expertise will mutually beneficial, produce good results and go a long way to serving the vulnerable in our communities and around the world.