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Opinion: Ottawa's Proposal to Increase Donation Taxes Adds to the Struggles of Charities

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The Impact of Ottawa's Proposal to Increase Donation Taxes on Struggling Charities

Canadian charities are facing significant challenges as fewer Canadians make charitable donations while more individuals rely on their support. However, the federal government's response to this issue is concerning. Ottawa's proposal to introduce a new tax that will increase the cost of giving is likely to drive donations even lower. This proposal, which should be scrapped, comes at a time when the percentage of Canadians donating to charities has been declining for over 30 years.

The Struggle of Charities and Changing Donor Landscape

Despite the decline in donor participation, the total amount of donations from individual Canadians continues to grow. This is primarily due to larger annual contributions from donors aged 55 and over and those in higher income tax brackets. Charities are increasingly reliant on a smaller number of generous donors. Meanwhile, the demand for charitable services has become more critical, with inflation cited as a major factor. Rising costs and limited capacity to deliver services have put additional strain on charities.

The Negative Impact of Tax Changes

In response to concerns about taxpayers taking advantage of deductions and exemptions, the government plans to revamp the minimum tax, resulting in more adjustments and potentially higher taxes on certain large charitable donations. The changes are estimated to raise approximately $600 million annually and affect around 26,000 individuals. However, these tax changes could have a substantial impact on the tax cost of charitable donations, potentially discouraging philanthropy. In conclusion, the proposed tax changes by the federal government are unnecessary and counterproductive. Struggling charities need support, not additional taxation on donations. The structural issues faced by Canadian charities, including a declining donor base and increased demand for services, require thoughtful solutions rather than punitive tax measures.

Hot Take: The Implications of Ottawa's Proposed Donation Tax Increase on New Businesses

The federal government's proposal to increase donation taxes could have far-reaching implications for new businesses, particularly those in the charity sector. With fewer Canadians donating while the demand for charitable services continues to rise, this proposal could exacerbate the challenges facing charities.

Understanding the Changing Donor Landscape

For new businesses, understanding the changing donor landscape is crucial. Despite the decline in donor participation, the total amount of donations continues to grow due to larger contributions from older and higher-income donors. This reliance on a smaller number of donors could pose risks for new businesses in the charity sector.

Navigating the Impact of Tax Changes

Furthermore, the government's plan to revamp the minimum tax, potentially resulting in higher taxes on large charitable donations, could discourage philanthropy. This could impact new businesses that rely on charitable donations for funding. In conclusion, Ottawa's proposed tax changes could pose significant challenges for new businesses in the charity sector. Rather than imposing additional taxes on donations, the government should consider alternative solutions to support struggling charities. These could include encouraging a broader donor base and addressing the increased demand for charitable services.
Story First Published at: https://financialpost.com/opinion/charities-struggling-ottawa-tax-donations-more
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