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Finance Minister Jim Flaherty tables the federal budget in the House of Commons on Parliament Hill in Ottawa on March 21, 2013.
Finance Minister Jim Flaherty tables the federal budget in the House of Commons on Parliament Hill in Ottawa on March 21, 2013.

Giving

New 'super credit' will encourage younger donors, survey says Add to ...

Measures in the federal budget to boost charitable giving will encourage younger people and first-time donors to start giving, says an online survey conducted by Bank of Montreal.

Last week’s budget introduced a temporary “super credit” on gifts up to $1,000. The extra credit is worth 25 percentage points, but it can only be claimed once over the next five years. For example, under the budget proposal, a $500 donation will receive a total tax credit, including federal and provincial credits, of $286. That’s $125 higher than the current credit.

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The bank surveyed 1,000 people about the proposal, and roughly half of those between the ages of 18 and 34 said they will contribute more to charities because of the special tax break. Overall, 70 per cent of those in the survey supported the idea, the bank said.

“I’m kind of surprised that 50 per cent of young people feel that they would contribute under these circumstances. I find that very gratifying,” said Marvi Ricker, BMO’s director of philanthropic services.

Increasing the number of donors has been an ongoing concern for charities across Canada. While Canadians donate about $8-billion in total annually, the number of donors has been falling. Today, about 22 per cent of tax filers claim a charitable donation; that compares to more than 30 per cent in the 1990s. The median gift has been increasing steadily and is now around $260, meaning fewer people are giving more money.

Imagine Canada, an umbrella group for charities, has been advocating a “stretch tax credit” to encourage donors to give more. Under that plan, donors would receive an extra tax break on every additional dollar they donated up to a maximum of $10,000. For example, if a donor increased his or her annual giving to $1,500 from $1,000, the donor would receive an extra credit on the additional $500. And if the donor gave $2,000 the following year, the extra credit would apply to the added $500. The recent budget is a variation on Imagine Canada’s idea, but there are no indications the government will go further and adopt the “stretch tax credit.” Nonetheless, Marcel Lauzière, chief executive of Imagine Canada welcomed the budget plan as a significant step.

Ms. Ricker said one reason the donor base has fallen is partly because younger people tend to make small donations, often online, and likely don’t contribute enough to warrant filing for tax credits. And she said the middle class also got smaller during the recession. “The very wealthy are giving very large amounts, but our middle class has shrunk, and that’s the people who would give the average amounts,” she said. “If I were a charity, I would say to all my very small donors: ‘Look, [the special tax credit] is a chance for you to really make an impact.’”

Others have questioned the effectiveness of the budget proposal. Malcolm Burrows, head of philanthropic advisory services at the Bank of Nova Scotia, said the budget measure watered down the stretch credit too much. He added that while the extra credit in the budget will encourage some additional giving, it is limited because it’s a one-time measure that won’t likely change donor behaviour. “And I don’t think it will have a significant effect on charities,” Mr. Burrows said in an interview last week. “So why do it?”

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