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Winnipeg Free Press - PRINT EDITION

Political parties best 'charity' for tax purposes

Donors get a much bigger credit than if they gave to other causes

By: Bruce Cheadle

Posted: 12/7/2010 1:00 AM | Comments: 0 (including replies)

OTTAWA -- The old adage that charity begins at home was never so true as it is for Canada's political class.

As Canadians open their wallets this holiday season for causes such as cancer research, food banks and homeless shelters, they should know their giving would get dramatically better tax treatment if it went to a federal political party instead.

Consider this: The first $200 a Canadian donates to a registered charity gets him or her a 15 per cent tax credit. The same $200 to the Bloc Québécois, Conservatives, Green party, Liberals or NDP rakes in a 75 per cent tax credit.

"Explain to me why any of our parties is more valuable than the Girl Guides," New Democrat MP Brian Masse said in an interview.

Masse has a two-year-old private member's bill languishing in the parliamentary queue that would treat charities the same as federal parties for tax purposes, up to the current annual political spending limit.

His proposal, however, would cost in the neighbourhood of $1 billion annually in lost tax revenue. It's a non-starter.

A far more modest private member's bill was tabled this month by New Democrat MP Thomas Mulcair, who proposes boosting the tax credit for new charitable donations of more than $200.

"You get an extra 10 per cent (tax credit) on anything new above the baseline year 2009," Mulcair said in an interview.

Even with the proposed improvement, a charitable donation of $250 -- the median in 2009, according to Statistics Canada -- would still be worth less than a third of what a comparable political donor could claim at tax time.

The measure would cost the federal treasury about $40 million annually in foregone taxes and is projected to leverage an additional $200 million in charitable giving.

"There is proof that this works," said Al Hutton, president and CEO of United Way Canada.

The idea was floated last year by the charitable umbrella group Imagine Canada, but was rejected when the Conservative government presented its big-spending 2010 budget.

In the current cost-cutting climate, a $40-million tax loss will be an even tougher sell in Ottawa.

Vern Krishna, a tax expert at Borden Ladner Gervais in Ottawa, calls it a "wonderful" plan.

"Why? Because you are encouraging giving money away to a worthy cause," said Krishna.

According tax expenditure tables from the Finance Department, the charitable donations tax credit cost the federal treasury about $2.38 billion in each of 2008 and 2009.

Those same tables show tax breaks for political donations cost the government $25 million in the 2008 election year and $18 million in '09 -- chump change compared with the charitable sector.

But it's the kind of chump change that sparked a political crisis exactly two years ago, when Prime Minister Stephen Harper's minority government almost fell after he sprung a plan to axe the $1.95-per-vote party subsidy to save about $30 million annually.

All the federal parties make a point of highlighting the tax breaks available to donors.

Political donors get a 75 per cent tax credit on the first $400 they contribute, 50 per cent on the next $350 and 33.3 per cent on anything over $750 up to the current $1,100 maximum.

Contributors to a registered charity can claim 15 per cent on the first $200 and 29 per cent on anything above that amount.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition December 7, 2010 A9

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