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(February 25, 2005) This week’s federal budget was billed as having something for everyone, but charities were left out in the cold. Still, Ottawa’s failure to act on charitable giving is no crisis, one expert says.
Sector pundits had been hoping the budget could propose the outright elimination of capital gains tax on gifts of securities. In December of last year the Senate Standing Committee on banking, trade and commerce issued an interim report with that recommendation at the top of the list. Nevertheless many aren’t surprised by the oversight.
“There’s not a political downside to slighting the charitable sector,” observed Walter Sczudlo, executive vice-president, public policy for the Association of Fundraising Professionals. He attributes this to governments which often don’t view stakeholders in charities as “potent voting blocks,” and as a result, he says politicians don’t feel they need to provide much more than lip service to that segment.
And overlooking the charitable sector in the fiscal agenda is not a scenario unique to Canada, adds Sczudlo.
“It’s a universal problem,” he says. “Part of it is that charities for too long have assumed that politicians would recognize the good work that charities do and protect that work and also help provide new incentives that encourage ordinary citizens to support the work of charities. And that just simply isn’t true.”
But he suggests the federal government might want to reconsider its charitable rationale since, while it costs money for the government to provide tax incentives for charitable or other giving, “the charities do work that the government would otherwise have to pay for.”
Sczudlo says the budget also ignored the sector’s recent lobbying efforts for the creation of a government-sponsored National Philanthropy Day: “to recognize the importance of the voluntary sector and to increase public awareness of the importance of giving both time and other resources.” And he opines the charitable sector is “too often the silent sector,” in the eyes of government.
Malcolm Burrows, financial consultant, charities and gift planning at the Scotia Private Client Group in Toronto, agrees the feds could provide a more in-depth analysis of its position on charitable gifting incentives. “They think they’re paying too much benefit to get the gift, and they don’t see that there’s going to be enough of an increase in gifts for the extra foregone tax revenue. This is a position they’ve held for a very long time and there’s a need for a lot of advocacy on the charitable sector side.”
However, Burrows says Canadians should not lose perspective, as government incentives for charitable giving have demonstrated significant improvement since 1997, when the feds cut in half the accrued capital gains tax on securities gifts to 25%. Furthermore, he says the measure was a significant propellant for driving Canada’s philanthropy efforts to an all-time high. “That had a big effect,” Burrows notes. “Securities gifts were almost non-existent before that. And now they’re exceptionally common and are drivers of some of the biggest gifts in Canada. We’ve seen an increase in giving from that time to 2003 by 66% which is twice the GDP.”
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“They’re doing ongoing work to make sure that the system is rationalized and that there are new incentives,” says Burrows. “We have been given a tremendous, tremendous amount, and I think sometimes we lose sight of that. We think we’re missing something but we’re not. It can always be better but we’re not actually missing anything. I mean [charitable giving] went up 11% last year. This is not a system in crisis.”
Filed by Heidi Staseson, Advisor’s Edgeheidi.staseson@advisor.rogers.com
(02/25/05)