Several recent events have highlighted the importance of charitable organizations. We spontaneously think of the COVID-19 pandemic, the homelessness crisis that has recently made headlines, or the arrival of immigrants.
The recent cries from the heart of these organizations about their financing lead us to reflect on their sources of financing, namely companies and individuals on the one hand, and on the other hand the State which finances them directly and indirectly through deductions for charitable donations.
Donations from a good number of large companies amount to 1% of pre-tax profits, the standard for “generous companies” conveyed by Imagine Canada, an organization that supports charities in their role in the communities they serve.
Regarding donations from individuals, there is no definition of a generous person. The most relevant data from Statistics Canada and the Institute of Statistics of Quebec, although dating from several years ago, are clearly food for thought.
The first data concerns the proportion of household income that a Canadian donor gives to charities: 2.1% for households with the lowest income (lowest quintile) and 0.8% for households with the highest income (top quintile).
The second data indicates that 22.8% of Canadian donors come from Quebec, but that this percentage drops to 9.1% if we only consider the 10% of the most generous Canadian donors.
The most generous Quebec donors are extremely important since donations of $80,000 and more in 2021 are responsible for 65% of the $1.2 billion in donations made by individuals.
But the figures indicate that we do not have as many generous donors as in Canada given our population and that our generous donors are less generous than in the rest of the country.
We can therefore remember two things: households in the bottom quintile of income give a lesson in generosity considering their little room for maneuver for discretionary spending, and the best-off in Canada give a second lesson to their Quebec counterparts.
These observations concern me. Indeed, if the bottom quintile of household income pays 2.1% of its income to charities, shouldn’t the other quintiles aim for 3%, or even 5% for the top quintile?
The contribution of governments is made indirectly through the taxation put in place, among other things by granting a tax credit to all those who make a charitable donation.
Starting in 2024, Ottawa plans to change the calculation of the alternative minimum tax with, among other impacts, reducing the ability of the 10% most generous Canadians to make large donations.
Why reduce the charitable donation tax credit when the need is enormous and, in my opinion, charities play a major role in our society and compare favorably to the private and government sectors in terms of efficiency, accountability and commitment of their employees? Will the government have no choice but to directly inject the dollars that charities will miss?