Impact of budget move to boost charitable donations questioned

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A plan in the federal budget to boost charitable donations is drawing mixed reviews, with some in the sector saying it could boost overall giving by $100-million and others saying the move means little.

While Canadians donate roughly $8-billion in total annually, according to Statistics Canada, the number of donors has been falling steadily. 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 gone up and is now around $260, meaning fewer people are giving more money.

To help broaden the donor base, Imagine Canada, an umbrella organization for Canadian charities, has been urging the government to adopt a "stretch tax credit." 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.

In Thursday's budget, the government adopted a modified version of the idea that will run for five years. Under the budget plan, anyone who has not claimed a charitable donation since 2007 will receive a special "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.

"Of course we would have liked to have the full stretch but I think this is a sizable movement," said Marcel Lauzière, chief executive of Imagine Canada. "We're quite happy with it."

Mr. Lauzière said the organization's goal has always been to encourage existing donors to give a little more and build the donor base by "getting people who have not been giving to start giving." The new tax credit addresses that second goal, he said, adding that charities will have to make sure those first-time donors keep giving.

He said the Department of Finance has estimated the measure could increase total donations by $100-million. "Charities will have to use this and get to their potential donors and say this is a great opportunity to start giving," he added.

But Malcolm Burrows, head of philanthropic advisory services at the Bank of Nova Scotia, doubted the measure will have much impact. He said the government has marginalized the stretch credit idea so much as to make it almost insignificant.

"It's extraordinary that after the [House of Commons] finance committee went through a review of incentives, the government would take the stretch credit and water it down and make it an ineffective tool," he said. "I don't think it will significantly change donor behaviour because it's a one-shot deal. And I don't think it will have a significant effect on charities. So why do it?"