Thank you very much for the opportunity to talk to you today.
I think this is a very opportune time for the committee to be thinking about tax incentives for charitable giving. The simple reality is that demand on charities has been increasing in recent years but the financial capacity has not. Make no mistake, the Canadian economy has performed remarkably well through the recent financial crisis, recession, and recovery—better than most nations—supported by a very sensible monetary and fiscal policy. But at the end of the day, the recovery hasn't lifted all boats equally. The national unemployment rate today stands at 7.6%. It was 5.9% before the recession. There are 367,000 more unemployed than before the recession, and that makes a total of 1.4 million Canadians.
Labour force participation has dropped by a full percentage point, signalling that there are many Canadians who have given up looking for gainful employment. The average duration of unemployment has increased significantly. The number of people unemployed for more than 27 weeks has gone from 130,000 to 270,000. If you don't like economic numbers, which are stale and dry, you can look at the more salient social numbers that will show that provincial social assistance numbers are way up. Use of food banks has not declined to where it was before the recession.
Unfortunately, I hate to say that the prospects for economic growth in the near term are likely to be very modest. There is going to continue to be a lot of demand on charities to provide support.
On the other hand, on the fiscal side, the environment is challenging. Charities get more than 50% of their financing from governments, but governments in Canada at all levels are turning their attention to deficit fighting and fiscal rebalancing. This is absolutely the right thing to do. It is responsible fiscal policy, but it raises the possibility of reduced transfers to the charitable sector.
At the same time, it is surprising to many Canadians, when you ask them what percentage of their revenues charities receive from donations and gifts, that the answer is less than 20% of their revenues come from those sources. Obviously there is scope here for increased generosity on the part of Canadians. In 2010 the number of donors was below that of the level of donors in 2006. In terms of actual donations, from 2007 to 2010 donations were down 4.6%. When you strip off inflation to reflect what has happened to the purchasing power of those donations, in actual fact it's a decline of 14.2%. As already mentioned, in terms of taxpayers, only 23% of taxpayers are claiming on their income tax forms that they are actually making donations. That's down from 30% in 1990.
There is a body of research debating exactly how much impact changes to tax credits have in terms of boosting donations. For example, the national survey of giving, volunteering, and participating highlighted that only 11% of Canadians reported that they donated for the purpose of getting the tax credit. However, at the same time, the survey showed that one in three people indicated that they would give more if the tax credit were more generous, and 45% of top donors—who were actually responsible for more than 80% of donations—said they would give more if there were increased tax incentives.
I am an economist, I am not a tax expert. I understand that there are three policies the committee may be considering right now. That involves gifts of real estate, gifts of private company shares, and a stretch tax credit.
In my opinion, I would advocate for the gifts of real estate and private company shares simply because it makes an awful lot of sense to put them on the same basis as donations of public company shares. This is just a consistency issue. I would flag that there is some concern by groups about the fact that if we have the same tax treatment for real estate, it will raise the issue about the taxable treatment for ecologically sensitive land, because all of a sudden that advantage will disappear. I don't think this should be used as an argument not to widen the scope to all real estate, but it may be that consideration should be given as to what other incentive might be used to try to encourage the donation of ecologically sensitive land to things like land trusts.
In terms of the stretch tax credit, I have to be honest, in principle I like the idea of encouraging people to give more, but I think administratively it could be difficult to put the stretch target in place. Again, much like earlier comments, I would endorse the idea of eliminating the minimum $200, or the first incremental tax treatment for the $200. I suspect that fiscally it's too expensive at the moment.
So the question becomes that while the stretch tax credit is difficult to implement and might not be ideal, it may provide an incentive for increased giving at a time when other options are limited.
Sorry for running over my time.