Thank you, Mr. Chairman.
On behalf of the BMO Financial Group, I'm pleased to join my colleagues here this afternoon to discuss the topic of tax incentives for charitable giving.
I come to the table this afternoon from two perspectives. One of them comes from working for a company, BMO, which donated over $28.2 million to Canadian charitable organizations in 2011 and saw its employees donate nearly $12.8 million in its annual employee giving campaign. Second, as a tax specialist within BMO Nesbitt Burns who supports our financial planning services, I help individuals and families with their own charitable-giving goals.
All of us here this afternoon share the objective of making charitable giving an easier proposition for Canadians, and BMO is pleased to offer its thoughts on how we might accomplish this through the tax system.
As many of us in this room are already aware, the share of Canadians claiming deductions for their charitable donations has drifted steadily lower over the past two decades, from as high as 30% in 1990 to just 23.4% in 2010. As a point of comparison, this figure is below the 26.6% we currently see in the United States.
Further, the total value of charitable donations claimed has gone down. While it's true that donations rose 6.5% in 2010, to $8.25 billion, that figure is still lower than the level seen in 2006 and 2007. Each were more than $8.5 billion. Donations stood at just over a 0.6% share of total income, and again we find ourselves trailing the Americans with their 1.3% share.
From my experience with clients, the current system can be somewhat confusing. Donations below $200 receive a credit at one rate, while those above $200 are subject to a different rate. At BMO we help people make the best financial decisions. For example, we have created programs such as BMO SmartSteps, and we are committed to improving the financial literacy of Canadians. Indeed, we were an active and enthusiastic supporter of Mr. Flaherty's efforts to establish November as financial literacy month.
For some time I have been of the view that a single rate would have the potential to simplify the tax implications of charitable giving, so I asked BMO's economics department to look at this issue. They agreed that while such a change would have little or no impact to large donors, it would help encourage giving for more modest donors, as the tax benefit would nearly double for gifts up to $200. Not only would this result in greater parity for Canadians by providing a standard rate for all levels of charitable giving, it would also increase transparency and simplicity in the tax system.
Given that the median claimed charitable donation in 2010 was $260, versus an average donation of $1,437, we believe that many donors could benefit from levelling the playing field in this way. Obviously, such a change would result in a fiscal cost, including revenue losses on any donations that currently receive the lower tax credit and revenue losses on any credits for new additional donations.
Our economists estimate the overall cost would be less than $200 million, even if more than 1.5 million Canadians began giving more generously as a result. One cannot underestimate the impact that increased charitable giving would have on the not-for-profit sector, particularly at a time when governments at all levels are monitoring their expenditures.
We recognize the government faces budgetary realities. We therefore recommend implementing this change only when the revenue situation is stronger and the fiscal position is closer to balance.
Mr. Chairman, we're pleased to add our thoughts to this important discussion, and I look forward to joining my colleagues at the witness table in this afternoon's dialogue.
Thank you.