Madam Speaker, I welcome the opportunity to participate in the debate on Motion No. 318.
I will take a few moments to respond on behalf of the government to the motion that has been put forward by the member for Fraser Valley.
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 in place in consultation with the charitable organizations. The government has provided additional incentives to charitable giving in four of the last five federal budgets. Measures that have been adopted include: lowering the threshold for eligibility for the 29% level of the tax credit to $200 from $250; raising the annual income limit for the use of charitable donations to most charities from 20%, and when the government took office to 75%; and reducing the income inclusion rate for capital gains arising from the donation of appreciated publicly traded securities to 37.5%.
The hon. member should recognize that the differences in treatment of political contributions and charitable donations reflect the different policy intention 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 a generous tax assistance is given to small political contributions. This tax assistance is reduced by incremental amounts to the point that the 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 charities.
In the case of very large donations, tax credits may be claimed for donations up to 75% of a taxpayer's income in any given year. Tax credits may be carried forward to future years should the 75% limit be exceeded. Recently we have witnessed the important role that the present tax regime has played in charitable giving.
The charitable industry has reported seeing more large scale donations from individuals. 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. The Globe and Mail recently 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 has received more than 70 individual contributions of $1 million or greater during its current fundraising drive. Gordon Floyd, director of public affairs at the Canadian Centre for Philanthropy, recently stated that charities have “all seen a real surge in major gifts of stock since that legislation changed”.
The executive director of the ROM Foundation has also noted an increase in tax driven gifts to charities, particularly from new benefactors.
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 difference”.
The incentives for large scale giving also bore fruit in terms of a new community foundations 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 their collective assets are now worth more than $1 billion. This announcement is clearly good news for communities.
These foundations tend to fill a unique need in that they are funding locally based projects across 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 Calgary announced a series of grants they were awarding, including a $1,000 grant to a high school program that helps with the integration of immigrants. This type of community action by these foundations is encouraging and helps to reinforce our collective notion about the relevance and importance of community in an increasing globalized world.
We can see from these examples that the tax regime that has been put in place has been working to maximize the benefits of charitable giving for both individuals and charities and the important work 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.
By any measurement 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 donations of small amounts to charities have 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 accorded to donations that would have, in all likelihood, been made in any case. Canadians donate in the smaller increments because they want to.
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. It 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.
In summary, the government cannot support this motion for the following central reason, our basic difference in approach. The current design of the charitable donations tax credit acts to encourage larger donations while recognizing the value of smaller donations verses the argument put forward by the hon. member across the way where he draws the analogy between charitable donations and political contributions. The political contribution tax credit encourages small donations but limits tax assistance for large contributions. That is the basic difference between the two. The greatest impact of this motion would be to increase tax assistance accorded to donations that would have been made in any case.
Tax assistance accorded charitable donations has contributed significantly to the growth of this industry. For the reasons outlined we cannot support the motion. I thank the member opposite for bringing this motion forward for debate so that we can all be reminded of the importance of charitable giving and the worthy causes pursued through their work.