Ottawa should change tax rules to encourage donations to charity

Posted on in Governance Debates

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TheStar.com – Opinion/Editorials
Feb. 20, 2019.   By

Charitable organizations make a huge difference in our lives. From hospitals and universities to arts groups and social agencies, it’s vital they get the money they need to do their good work.

Governments ought to do all they can to encourage giving, and there’s one measure the Trudeau government should adopt in its upcoming budget that would make a big difference to many charities.

It should broaden the tax exemption on capital gains for charitable donations. It can do that by giving the same tax treatment to donations of shares in private companies and real estate as is now given to gifts of publicly traded shares.

Experts who have looked at this idea estimate it would result in additional donations to charities of about $200 million a year. That’s a big chunk of change that would go to organizations like the United Way and local hospital foundations.

There’s every reason to believe it would work. In 2006, largely due to lobbying by retired financier Donald K. Johnson, the Income Tax Act was amended to exempt donations of publicly trade stock from all capital gains tax. As a result, people who gave stock to charities no longer faced a big tax bill from Ottawa.

Not surprisingly, more of them could be enticed to part with more of their wealth. That single measure has resulted in more than $1 billion a year in additional donations to charities.

Johnson has been pushing for the same measure to be adopted for donations of real estate and shares in private companies. There are some issues to overcome, such as how to value such donations. But they can be solved and an extra $200 million a year for charities is worth the effort. The cost to the government in foregone taxes would be in the range of $50 million to $65 million.

Finance Minister Bill Morneau should readily appreciate the potential benefit. Before entering politics he was deeply involved in charitable work with such organizations as St. Michael’s Hospital and Covenant House.

If that isn’t enough, he should listen to the scores of major charities that signed an open letter to the government last fall asking for this change. In the Toronto region they included the likes of the United Way, SickKids Hospital, the University Health Network, York University and CAMH.

All these groups stand to benefit by making it easier to tap into private wealth. The benefits, in turn, will flow to the whole community.

https://www.thestar.com/opinion/editorials/2019/02/20/ottawa-should-change-tax-rules-to-encourage-donations-to-charity.html

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