FILE PHOTO: Canada Revenue Agency national headquarters in Ottawa, Ontario, Canada April 19, 2023. REUTERS/Blair Gable/File PhotoBLAIR GABLE/Reuters
Bruce MacDonald is president and chief executive of Imagine Canada. Ruth MacKenzie is president and chief executive of Canadian Association of Gift Planners (CAGP).
The federal government has recently announced changes to the alternative minimum tax, or AMT, for high-income earners. The rich often have more tax-planning options for lowering their bills, and the government’s intention is to make them pay more.
The revisions proposed in Budget 2023 contain a suite of updates that affect capital gains and stock options, lifetime capital gains exemptions, donations of publicly listed securities, adjustments to deductions, and expenses and non-refundable credits.
Some of these changes lower the tax incentives for donating to charity. Imagine Canada, a charitable organization that helps to strengthen charities, non-profits and social entrepreneurs, and the CAGP, a non-profit that advocates for a tax and legislative environment that strengthens philanthropic giving, are extremely concerned that the updates to the AMT formula calculation will result in a dramatic decrease in donations.
While the overall policy goal is to ensure that the wealthiest Canadians pay their “fair share of taxes,” charities from across the country are already reporting that these changes will negatively affect donations.
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Donors are reaching out indicating that their donations in 2024 will be reduced and/or that, if they had an existing multiyear pledge, they want to renegotiate the pledge downward. For organizations responding to significant increases in demand for services and that are dealing with rising costs because of this prolonged period of inflation and the lingering effects of the COVID-19 pandemic, weakening their financial stability will result in needs not being met in communities.
That is why we are calling on the government to remove the provisions affecting charities from the revised AMT calculations.
At its core, this change will do harm to organizations in communities right across the country that are supporting the everyday health of Canadians, seeking cures for deadly diseases, contributing to our spiritual well-being, improving education and so on. In short, a reduction of donation revenues will reduce programs and services.
From our perspective, it’s bad policy. It represents a change to the decades-long covenant of incentivizing private citizens to support causes and charities they care about. It was also initiated without any discussion with the leaders of organizations that would be most affected. According to CAGP’s estimates, as much as 30 per cent of the $11.4-billion given to charities annually could be implicated by these changes.
And Canadians are struggling with this proposed change. A recent public opinion poll, conducted by Ignite Lab for Imagine Canada and supported by BMO, showed that three quarters of Canadians were supportive of tax incentives for charitable giving. This support was quite consistent across provinces and ages. Findings from the same poll showed that only 25 per cent of respondents think this change is a good idea, given its detrimental effects to charities.
Opposition to the change resonated across political parties as well. 43 per cent of people with Liberal affiliation oppose the change, while 27 per cent support it; 37 per cent of people with Conservative affiliation oppose it, compared with 26-per-cent support; and 49 per cent of people with NDP affiliation oppose it, compared with 20-per-cent support.
Canada continues to see a decades-long trend of a higher percentage of individual donations coming from older, more affluent people. This means that the risk to long-term financial viability and service provision will be dramatically increased should this proposal come to fruition.
And this is another area where Canadians care: 94 per cent of respondents said that the federal government’s support of charities is important. Nine in 10 Canadians consider charitable and non-profit organizations to be important to the country and its way of life.
Let’s ensure that tax fairness is achieved by removing the problematic areas from the AMT changes and not realize this policy goal by penalizing charities and ultimately Canadians.