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The Globe and Mail

How charities can and can’t pick up the slack from government cuts

Canada's Human Resources Minister Diane Finley speaks during Question Period in the House of Commons on Parliament Hill in Ottawa, Dec. 4, 2012.


It only took the Finance committee two sentences to get to the point.

Reporting this week after more than a year of studying the federal approach to charities, the Conservative-dominated House of Commons committee issued its report this week.

"To at least some extent, a number of Canadians rely on charities to deliver services previously delivered by the various levels of government," the report states on its first page.

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It was a candid assessment, given that Finance Minister Jim Flaherty has maintained that his government's spending cuts are only affecting "back office stuff."

Inspired by the David Cameron government in the United Kingdom, federal Conservatives in Ottawa are very interested in the idea of charities picking up the slack as part of an overall push toward smaller government.

Human Resources Minister Diane Finley is leading the charge, having visited the United Kingdom for ideas around the concept of "social finance," a wide-ranging and emerging field that can involve allowing charities to run private businesses in order to raise revenue for their social cause. She is currently testing a few projects in Canada and her latest report on the topic is expected in the spring.

The finance committee study touched on social finance as part of a much broader look at the federal rules for charities – particularly when it comes to tax breaks. What the MPs heard back is that boosting incentives for charities could be quite costly to Ottawa's bottom line. Existing tax credits already cost Ottawa $2.9-billion a year in lost revenue.

That's why all of the committee's recommendations begin with the caveat: "Subject to the government's stated intention to balance the budget in the medium term…"

By that measure, most of these recommendations are more likely to feature in the Conservative government's next election platform rather than its next federal budget, which is expected within weeks.

Specifically, the committee endorses several ways of increasing tax incentives, including a closer look at eliminating or lowering the capital gains tax on charitable donations of property or the shares of private corporations to charities; studying the often-recommended idea of Canadian charities for a "stretch tax credit" in which the credit increases when a Canadian gives more than they did last year; and looking at a higher charitable contribution limit for corporations.

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The committee chose not to endorse a common recommendation from witnesses, which was to have a single tax rate on donations. Currently the tax credit is 15 per cent for donations of up to $200 and 29 per cent on donations over $200.

Further, the committee heard there is no guarantee that boosting tax credits will boost giving. A representative of the Bank of Nova Scotia pointed out to the committee that Alberta saw no spike in donations after it raised its tax credit rate for charitable giving.

The finance committee study came about because of a motion from Conservative MP Peter Braid, who has argued that it is "good conservative philosophy" to help charities do more.

"It's not the role of government necessarily to solve all of society's challenges on its own," he told the Globe when the study was launched.

James Rajotte, the Conservative chairman of the committee, said the main focus of the study was to hear about ways to get Canadians to give more, because statistics show donations are stagnating.

"You do want to encourage as much giving as possible and obviously you have to balance that against any forgone revenue that the government's going to have," he said.

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The opposition NDP said it "generally" agreed with the report's recommendations, but expressed concern that the recommendations could "drastically" reduce federal tax revenues.

"At a time when the government swears by deficit reduction – while blindly slashing services to Canadians – it is important to take into account this potential loss of revenue," said the NDP in a supplemental report.

Marcel Lauzière, the President and CEO of Imagine Canada, which is a national umbrella group for charities and non-profits in Canada, said he was pleased the committee supported Imagine's call for a stretch tax credit.

Mr. Lauzière said the credit could cost between $10-million and $40-million, but the cost would only occur if the incentive succeeded at getting Canadians to give more. While Mr. Lauzière said he realizes the government is sensitive to the bottom line, he argues the credit should be in this budget to compensate charities for the fact that they are receiving fewer government grants as Ottawa and the provinces cut back.

"I'm certainly hoping that it's going to be there [in the 2013 budget]," he said. "And I can certainly say that we will be very disappointed if it is not because we really think it is both affordable and it's the time to do it."

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