Tax break would be a second
Christmas:
National Post
Sat 24 Dec 2005

Page: FP15
Section: Financial Post: Comment
Byline: Donald K.
Johnson
Source: Financial Post

Who says that Christmas cannot come twice a year? We all
know about Dec. 25, but how about the post-election budget for our second
celebration? I am thinking specifically about the proposal to remove a
significant barrier to charitable giving by eliminating the capital-gains tax on
gifts of listed securities.

Health care and education are the top two priorities for the majority of
Canadians. It is therefore not surprising that hospitals and universities have
proven to be the greatest beneficiaries of the first step, taken in the 1997
budget, when the capital gains tax on such gifts was reduced by 50%.

Other important not-for-profit organizations will also receive additional
private-sector funding if the tax is eliminated entirely. These include social
service agencies such as the United Way/Centraide and organizations in the arts
and cultural, environmental and research sectors.

The measure will touch all Canadians. Our charities employ more than two
million people. Millions of us benefit from our health-care facilities, as well
as our social-service agencies. Nearly one million students attend our
universities and colleges. Both Canadian residents and tourists enjoy our visual
and performing-arts organizations. Not surprisingly, strong supporters of the
proposal include volunteer board members who are actively involved in
fundraising, fundraising professionals employed by our charities, and donors who
give generously from their financial resources.

As we may have another minority government following the Jan. 23 election, it
is noteworthy that parties representing a substantial majority of the House of
Commons support the proposal. The leaders of the Conservative party, the Bloc
Quebecois and the New Democratic Party have given their endorsement in writing.

Assuming that the Liberal party forms the next government, the finance
minister knows full well that including this proposal in the post-election
budget will receive unanimous approval. If the Conservative party forms the next
government, I presume that they will simply implement the amendment.

The costs and benefits of this proposal have already been analyzed in depth.
It was the number one recommendation of the Senate committee on banking, trade
and commerce in its December, 2004, preliminary report on measures to increase
charitable giving. It has been recommended twice by the House of Commons
committee on finance. The C.D. Howe Institute published a backgrounder, written by the
former chair of the Canadian Tax Foundation, recommending the proposal. Twelve
prominent national umbrella organizations, representing each area of the
charitable sector, support the idea, as do 24 prominent, not-for-profit
organizations in the Greater Toronto Area.

As well, the mayors of 33 major cities in every province have written letters
to Finance Minister Ralph Goodale on behalf of charities in their cities, urging
him to implement this proposal. These cities include St. John's, Halifax,
Antigonish, Wolfville, Fredericton, Moncton, Charlottetown, Montreal, Quebec
City, Ottawa, Toronto, Mississauga, Burlington, Hamilton, London, Kitchener,
Windsor, Oshawa, North Bay, Sudbury, Winnipeg, Regina, Saskatoon, Calgary,
Edmonton, Lethbridge, Yellowknife, Whitehorse, Iqaluit, Vancouver, Burnaby,
Victoria and Prince George. They did so in most cases after receiving approval
from their city councils. And 16 former premiers from every province and three
former prime ministers have endorsed it.

The Department of Finance has determined that the tax-revenue cost to the
federal government would be approximately $50-million per year, assuming that
charitable donations of listed securities increased from $200-million to
$300-million annually. For a typical gift of securities, the cost of such a
donation is borne 40% by the donor, 40% by the federal government and 20% by the
provincial governments. This form of private-sector funding is obviously more
tax efficient than simply increasing taxes to provide 100% direct government
funding. If the past is any guide, the government will not step into the breach,
leaving our charities desperate for additional funding from the private sector.

Significant private-sector donations frequently enable our vital
not-for-profit organizations to grow from being "good" to being "great." They
enable our charities to attract and retrain the most talented people, and
provide them with vital research and other support. They can then compete for
the best and brightest people on a level playing field with the United States,
our main competitor.

The upcoming election debates on Jan. 9 and 10 provide a unique opportunity
for Canadians to ask the prime minister whether he will finally implement this
proposed change in the post-election budget. He already knows that it has the
unanimous backing of the leaders of each of the three opposition parties. His
next budget would then be a belated Christmas present to all Canadians!

Edition: National
Story Type: Business; Editorial

Note: - Donald K. Johnson, an advocate of tax changes to encourage
charitable giving, serves on the boards of six organizations representing major
areas of the charitable sector.
Length: 742 words