Much has been said and written about the new First-Time Donor’s Super Credit announced in the recent federal budget. Like with anything else, there have been, and will continue to be, differing opinions on its intent and value. Views have ranged from the very positive to the very negative. My own reaction is certainly on the positive side of things.
In our discussions with officials in the office of the Minister of Finance running up to the federal budget, it was becoming increasingly clear that we would not be getting the Stretch Tax Credit for Charitable Giving this time around. The rationale was that the current fiscal context didn’t allow for it and that deficit reduction was the number one priority. As anyone following the Ottawa scene knew, the Government was not about to announce a number of new major expenditures. So not seeing the Stretch in this budget was not a big surprise to us.
That being said, I am still, to say the least, disappointed. Particularly because there has been so much momentum and consensus in the last four years around the Stretch and so much support for it, not only in the charitable sector but on Parliament Hill as well.
But we will get there.
In our discussions with officials in the Minister’s office about the Super Credit prior to the budget, talk was about taking a scalable approach to the Stretch with the Super Credit as a first step. Moreover, we were assured that the budget document would make a commitment to work with Imagine Canada to continue to strengthen incentives to giving. I was pleased to see that commitment made in the budget and rest assured that we will capitalize on it. While the Super Credit is not the Stretch, and while we will not rest until we get its full implementation, I am pleased that we’ve been able to get the government to finally recognize the need to provide better incentives, not only to wealthy Canadians, but modest and middle income Canadians to start giving. Our message from the beginning has been that philanthropy shouldn’t just be for the wealthy. That message has been heard loud and clear. Now, if well communicated, the Super Credit can serve as a powerful message to all Canadians about the importance of giving and of engaging in community, and that even small donations can make a real difference.
The Stretch has two broad goals. The first one is to get Canadians from all walks of life who are already giving to start giving more (i.e. stretch their giving). The second goal is to get those Canadians who have not been giving, to start giving so that we actually start broadening our donor base in Canada, a strategic imperative for charities as we look toward the next decade.
The Super Credit begins to address that second goal and that’s crucial as we continue to work towards the full Stretch. It begins to put in place the base and the structure for the Stretch in the years ahead. It’s common in Ottawa to see tax credits announced and then built upon and reinforced in the following years. And we have also seen cases in which the provincial governments have followed suit. We have seen this recently with the fitness tax credit. So we will work with this in mind. We see this as paving the way to the full Stretch.
It should also be noted that this new credit is not an insignificant measure. The estimated cost to government for this 5-year program is $125 million. The new credit for first time donors will provide a 25% increase on the current tax credits (i.e. the 15% for gifts under $200 is going up to 40% while the 29% for gifts over $200 is going up to 54%). As a point of comparison, we have been calling for a 10% increase through the Stretch. Add that to the provincial rates, and Canadians will have a huge incentive to begin to give.
However, the onus is now on our shoulders as charities to get the word out. Once we have new donors on board, our challenge will be to find creative means to keep these new donors. It will also be crucially important for us in the first years of this program to gather evidence about the impact of the incentive on expanding the donor base so that we can continue to advocate for the Stretch.
So while this new credit is not perfect, we now have an additional tool at our disposal to begin to enhance the donor base in Canada. So let’s get on with it and let’s seize the opportunity!