01/15/2012 04:30 EST | Updated 03/15/2012 05:12 EDT

Prying open the Canadian wallet: Committee to examine charitable giving

OTTAWA - Whether it's the $25 donation to the local Terry Fox Run, or the $200 Christmas contribution to the homeless shelter, MPs are about to study whether this common kind of charitable giving can be stretched even further.

The Commons Finance committee will begin a study later this month on the ways individuals and corporations give, and the tax incentives for boosting that generosity. The last federal budget recommended such a review.

One of the central ideas that will be examined is something called a "stretch tax credit," a measure that directly targets the more modest kind of donor. The notion comes at the same time as the federal government is poised to slash program spending to help attack the deficit.

The stretch idea goes like this: Every dollar more given from one year over the next will be given a bigger tax credit. So, a person who donated $200 in 2010 but decided to give $250 in 2011 will see that extra $50 qualify for a 39 per cent tax credit rather than the usual 29 per cent.

Smaller donors who give less than $200 would see their tax break jump from 15 per cent to 25 per cent on any new bucks.

Imagine Canada, a group that supports and advocates for the charitable sector, has noted that Canadians have been giving less — 24 per cent claiming donations on their credits in 2007 versus 30 per cent in 1990.

President Marcel Lauziere says the tax credit has been estimated to cost the federal government between $10-and-40 million a year — a reasonable investment for helping the sector.

"It's not hiking the tax credits, it's about getting those who give to give a little bit more and get new people on board and hopefully youth starting give," said Lauziere. "It's a message that we're sending to Canadians that everyone can be a philanthropist, you don't need to be rich. Fifty dollars, $100, will make a difference."

Susan Horvath, vice-president of leadership philanthropy at the Canadian Cancer Society, says the organization gets most of its money from the smaller donations made by middle-income earners and working families.

"As people are making gifts, you do the math in your head. If there is a tax credit, that might encourage people to give who hadn't given previously, and it might encourage people who are giving to give a little bit more because they know at the end of the day it's not going to have a huge impact on their wallet," said Horvath.

The Finance committee previously examined a Liberal private member's bill that would have brought in a salary cap of $250,000 for charity executives, and would have forced the publication of the top five salary earners.

That bill died on the order paper before the last election, but committee chairman MP James Rajotte expects the issues raised will come up again.

"The issue needs to be looked at within a broader context, so this will be an opportunity to look at that," said Rajotte.

"I don't want to pre-judge what members might ask or what the issues might be, but I expect questions will be raised about transparency and accountability, and I assume the charities will also raise it."

Rajotte points to a proposal by philanthropist Donald K. Johnson that donations of real estate and private company shares be exempt from capital gains tax as another item that could land on the agenda.

There has also been speculation about a Conservative crackdown on environmental and other foundations with charitable status that also do advocacy work.

Rajotte notes that any move the committee makes to limit policy advocacy will wind up applying to all groups with charitable status, not just the ones that seem to butt heads with the government.

"It's not a focus of the committee's study, but members can obviously ask what they want to ask about."

NDP committee member Hoang Mai says his party supports the concept of a stretch tax credit. But he says he wants to ensure the Conservative government isn't simply preparing to download more responsibilities onto charities as it slashes federal spending.

He says he's seeing working families in his riding on Montreal's South Shore turning to charities for extra help at the end of the month.

"One thing that is our concern is we don't want the government to reduce and transfer all the onus on to the charitable organizations," said Mai. "We believe the government still has some responsibility for helping families.

Mai adds that he would like the committee to take a look at how to cut down on tax receipt fraud within the charitable sector.

Since forming government, the Conservatives have introduced a number of changes to the laws governing charitable donations. For example, donors who give publicly listed stocks and exchangeable shares do not have to pay capital gains on those contributions.