I recently read a press release from a Canadian think tank that said “Charitable giving in Canada hits 10-year low”. They proposed “In total, Canadians claimed $9 billion in charitable donations in 2014. But had Canadians donated in 2014 at the same rate as in 2006, Canada's charities would have received an additional $3.6 billion, for a potential total of $12.6 billion." They also noted that Americans gave 1.42 per cent of their income to charity in 2014 -- more than two-and-a-half times what Canadians gave.” I guess their main points were that Canadians are becoming less generous and Canadians are not as generous as Americans. I have issues with the arguments and the methodology.
Here are a few concerns with their analysis:
1) 2006 was the height of charity scamming in Canada with “donors” claiming $1.3 billion in receipts that never should have been issued. The CRA has cracked down on that scamming such that it is now only about $100 million per year! In other words, you cannot use 2006 as a year to show Canadians were generous and less so now when 2006 was the height of charity scamming! If someone next year comes up with a $9 billion charity scam would we say that Canadians are twice as generous?!
2) They conflate “generosity” and amounts claimed on a tax return. This may seem to make some sense but if you know anything about our tax system and charity transparency it is very deceptive. If we look at the 2014 T3010 data from the CRA, Canadian charities issued $15.7 billion in receipts but people in Canada only claimed about $9 billion on their tax returns. Therefore, about $6 or 7 billion of real donations that were receipted were not claimed on returns – partly because many average people don’t claim their donations on the return.
Furthermore, on the T3010 charities indicated receiving non-tax receipted fundraising revenue of $2.9 billion and gifts that were not receipted of $2.7 billion. Therefore, in addition to the receipted donations that were not claimed another $5 billion was not receipted at all and therefore cannot be claimed.
There are many other elements to generosity that are not included in their analysis. For example, there are 80-100,000 non-profits that do not issue tax receipts and many people donate to these non-charities (eg. amateur sports).
Another important indicator of generosity is volunteering and that is certainly not included in their analysis.
Furthermore, what is generosity? Is paying for your children’s religious school fees generosity? Is paying dues to a religious institution that you belong to "generosity"? Is moving money from your investment account to a donor advised fund and getting 60% or so tax benefit generosity? There are things that you get an "official donation receipt" for that can hardly be equated with generosity.
For example, if you have 6 children and you want all of them to go private religious schools. Are the parents generous when they get significant tax receipts for the religious part of their tuition or is it taxpayers who are generous in subsidizing the cost of religious education? When there is an analysis of giving using tax data it is not surprising that the biggest donors are people who have 6-8 children in private religious schools. It is expensive and a big part of the donation is receiptable.
It is interesting how a Canadian think tank finds it difficult to find generosity in Canada but the New York Times has no problem finding it. If you measure generosity by the willingness of a society to help others who have nothing and you were only to use one measure ie. for example the willing acceptance of Syrian refugees then Canada is a pretty generous country today. Furthermore, the US (and Canada under a previous government) is as embarrassing today as Canada and the US were when they turned their backs on Jew and others trying to escape Europe in the 30s and 40s.
I am not saying that Canadians could not be more generous. Certainly if one looks at the treatment of First Nations in Canada there is a huge amount that could have and should be done. Perhaps the very positive example of citizen action with the Syrian refugee crisis will be a further impetus for Canadians to get actively engaged in helping others.
3) Another point is the focus on the number of tax filers who claimed charitable donations. They note “The general trend in recent years is that a declining percentage of Canadian tax filers are donating to charity and they are donating less as a percentage of income.” People lament that this has gone down for years. However, is it because of less generosity? In many cases people have learned that it is more tax efficient to pool all the receipts on one tax return when you are married. That eliminates a lot of tax filers claiming any donations. Also if someone gives $1000 is it more “generous” to not claim it or to claim it on your tax return. An argument can be made that not claiming the amount and the associated tax benefit is more generous not less generous.
4) Having a strong social safety net will help a lot more people than charities by themselves can help. Instead of arguing for lower taxes, more income inequality and less government involvement in solving problems if you really want "to improve the quality of life of those most in need" they should advocate for higher taxes and more social programs to help the most vulnerable. If we want to talk about generosity - generous people support the provision of health care to everyone. If a wealthy country does not have universal healthcare, then that says something about the "generosity" of the voters/politicians in that country. Again if we decided to just use one indicator, albeit a far more important indicator than tax donation data, like access to health care, then Canada is more generous than the US.
5) How does one situate the issue of charitable donations. The authors note “Put simply, the decline in generosity in Canada is worrisome because it limits the ability of Canadian charities to improve the quality of life of those most in need, in their communities and beyond.” It seems to me that if you want to understand the "the ability of Canadian charities to improve the quality of life of those most in need, in their communities and beyond" it would be better to look at total revenue of registered charities and not just donations which make up about 6% of the revenue of the charity sector. Canadians are very generous - they pay taxes and about 68% of the revenue of registered charities comes through funds from the Federal, provincial and municipal governments. If we want a good and just society we are going to need a lot more than charity but also the charity sector is going to need a lot more resources than some “generous” donations.
Finally I encourage people to give to charities but do your research if you are giving large amounts of money to ensure that the charity is legitimate. You might find a new tool we prepared helpful in that research www.charitydata.ca Also let us not forget that without significant government funding of the charity sector and important related business activities of charities, the charitable sector would not have the resources to be able to do what it does.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.