Good afternoon. Thanks for the invitation to present here.
We at Charity Intelligence are a charity, but we are a different type of charity. We work for donors. We research and analyze Canadian charities; we are the 1-800 hotline that donors call. We do our best to answer their questions.
I'm assuming that the tax incentives package has been put before you with the assumption that it would result in more money going towards Canadian charities. I'd like to share with you three findings.
In all the surveying and polls on motivation about what makes a donor give, tax incentives consistently rank as the least important to a donor. Canadian donors give with their hearts, and they give out of compassion.
The second finding I'd like to share with you is that since 2002, the Muttart Foundation out of Edmonton has consistently used Ipsos Reid to survey Canadians. What their poll results report is that there is a widening trust gap between donors and charities. In the poll taken in 2010, 31% of Canadians said they had a lot of confidence in charities, and 69% of Canadians said they had some, little, or no trust in charities. This is the largest trust gap we've seen in Canada. Tax incentives do nothing to address this gap. Furthermore, in that most recent poll, 71% of Canadians said they would like more information about charities, which goes to Mark's points about transparency. Canadians want to know how charities spend the money and what results they achieve.
Thirdly, there was an extensive survey of 3,000 donors in the U.S. that we think is relevant for this. In that survey, 34% of donors said they would give more to charities if they had more information; they would give 12% more. In Canada, that would result in $1.2 billion in additional charitable giving.
So as we would see it at Charity Intelligence, the incentive to get more money flowing to charities is completely within the charities' hands. They can take steps independently, without the need at this time for increasing tax legislation or tax incentives.
I'm reminded here of Newton's third law of physics: for every action, there is a reaction. What could the potential harm be of expanding tax incentives? Unfortunately, one outcome of the tax incentives is that they drive unsavoury characters into the charity sector.
We haven't shared this research with Canadians; it is not public, but I share it with you today. In May 2010 we began an extensive research project on Canada's 100 largest charities. I hope you deal with this information with all the sensitivity that it is owed. Of the 100 largest charities in Canada, we found two that we strongly suspect are tax fraud schemes.
The research team at Charity Intelligence was startled by this finding. We had always assumed that the tax scam charities were small, bucket-shop operations operating beneath the radar. We never expected to find, in the 100 largest charities in Canada—in the elite—two tax schemes.
If one were to extrapolate from this tiny sample size, that would represent 2% of Canada's 85,700 charities as bad apples, or, in other words 1,715. I would concur completely with Mark's comments that the CRA needs a lot more resources and a lot more help protecting our charitable sector.
These two charities in 2009 received $370 million in donations. If you were to extrapolate that.....
I'm sorry, that would be the equivalent; that is what we estimate tax fraud right now is costing Canada, Canadian taxpayers, and the charity sector.
So before you legislate, I would just ask for a second sober thought. Are tax incentives going to be effective? What is the benefit you would anticipate to flow into the sector? What are going to be the consequences? And what steps can you give the CRA that could possibly mitigate the negative impact of having more of these tax incentive scams corrupting Canada's very precious charitable sector?