Madam Speaker, I welcome the opportunity to participate in the debate on Motion No. 318. I will begin by taking a few minutes to respond on behalf of the government to the motion put forward by the member for Fraser Valley.
Let us be clear. The government recognizes the motivation for the hon. member's motion and fully supports the principle of offering generous tax assistance to charitable giving. The purpose of the present tax regime with respect to charitable giving is to encourage larger donations. The current tax regime was put into place in consultation with the charity industry.
Through the work and assistance of the Standing Committee on Finance stemming over a period of four years of prebudget hearings, the tax treatment of charitable donations has evolved to the point where we are now beginning to see a stronger and more vibrant charity industry. That is a good thing.
In fact the government has provided additional incentives to charitable giving in four of the last five federal budgets. Measures have been included and adopted. The first is lowering the threshold for eligibility for the 29% level of the tax credit to $200 from $150. The second is raising the annual income limit for the use of charitable donations to most charities from 20% when the government took office to 75%. The third is reducing the income inclusion rate for capital gains arising from the donation of appreciated publicly traded securities to 37.5%.
These measures are very important. The hon. member should recognize that the differences in the treatment of political contributions and charitable donations reflect the different policy intentions of the two measures. The design of the federal political contributions tax credit reflects the desire to encourage greater grassroots involvement by all Canadians in the political process.
For this reason generous tax assistance is given to small political contributions. This tax assistance is reduced by incremental amounts to the point that federal tax assistance is eliminated for amounts contributed to federal political parties in excess of $1,150 per contributor per year.
In contrast, tax assistance for charitable donations is greater for amounts in excess of $200 in order to encourage larger donations to charities. This type of larger scale giving allows for a greater measure of stability and predictability for those charities.
Indeed in the case of very large donations tax credits may be claimed for donations up to 75% of the taxpayer's income in any given year. Tax credits then may be carried forward to future years should the 75% limit be exceeded.
Recently we have witnessed the important role the present tax regime has played in charitable giving. The charitable industry has reported seeing more large scale donations from individuals than ever before. In particular, it has witnessed this trend following the implementation of the 1997 budget which contained provisions allowing for reduced taxation of capital gains on publicly traded shares given to registered charities.
I was interested recently in reading in the Globe and Mail that they called this tax change, which effectively cut in half the capital gains tax that donors pay on such gifts, a bonanza for the charity industry. The University of Toronto, for example, has received more than 70 individual contributions of $1 million or greater during its current fundraising drive.
Gorden Floyd, director of public affairs at the Canadian Centre for Philanthropy, recently stated that the charities have “all seen a real surge in major gifts or stock since the legislation change. It is important to see that take place.
Meg Beckel, executive director of the Royal Ontario Museum Foundation, has also noted an increase in tax driven gifts to charities, particularly from new beneficiaries. He states:
Since 1997 we have received gifts from individuals in the form of shares that we would not have otherwise received. It has made a real difference.
The incentives for large scale giving also have borne fruit in terms of a new community foundation movement which is a collection of endowment funds committed to local projects. A coalition of leaders heading up this movement recently announced in Calgary that its collective assets are now worth more than $1 billion. This announcement is clearly good news for communities. I think that is something with which all of us in the House can agree.
These foundations tend to fill a unique need in that they are funded locally in their base projects in the community and in the country in almost every province. Gifts to such foundations can be allocated in many ways including a general community fund or a specific cause.
A little more than a week ago members of a youth advisory committee from the Calgary Foundation announced a series of grants that they were being awarded including $1,000 to a high school program that helps with the integration of immigrants and $500 to a Hispanic youth centre.
This type of community action by these foundations is very encouraging, helping to reinforce in our collective notion the relevance and importance of community in an increased and ever globalized world.
We can see from these examples the tax regime that has been put into place has been working to maximize the benefits of charitable giving both for individuals and for charities in the important work that they carry out. Charities have mushroomed into an $88 billion affair spreading through 76,000 organizations ranging from hospitals to houses of worship, to social services. There are another 100,000 not for profit agencies as well.
By any measurement that we might choose this industry has been growing more important and stronger every year under the present tax structure. While we have seen that large scale giving has been greatly affected by tax incentives, we have also found that the donation of small amounts to charities has not been strongly motivated by the availability of tax assistance.
Consequently the greatest effect of this proposal before the House would be to increase the fiscal cost of tax assistance according to donations that would in all likelihood have been made in any case.
There is one further and important note: the level of tax assistance accorded most charitable donations results in a roughly 50:50 partnership between government and the private sector in support of charities. That is important to note.
This is consistent with the principle that although charities promote the public good they have direct control over their activities in these areas and their priorities will not generally be identical to those of government. Increasingly tax assistance for small donations would not have been in accordance with this principle.
The government cannot support the motion for the following central reason. The current design of the current charitable donations tax credit acts to encourage larger donations while recognizing the value of smaller donations. The greatest impact of the motion would be to increase tax assistance accorded to donations that would have been made in any case.
In conclusion, I want to simply say that tax assistance accorded charitable donations as we have seen by the growth of the industry is already very generous.
I thank the hon. member opposite for bringing forward the motion for debate. We are all reminded of the importance of charitable giving and the worthy causes that are pursued through such work. In that we all benefit.