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Let's End Tax Deductions for Charities

For many decades, donations to registered Canadian charities have been tax deductions for individual Canadians. The stated reason is to encourage Canadians to donate to charities. I’m calling an end to this deduction. Here are my reasons.

My family’s income should be considered as lower-middle class. We are in the 25% tax bracket. When we make a $100 donation to a registered charity, we pay $25 less in taxes. Wealthier Canadians who are in the 50% tax bracket get a $50 deduction for the same $100 donation. Doesn’t this seem like the rich have another advantage over the poor?

A charity consumes extra resources when it becomes a “registered charity.” First the organization has to apply to the government for this status. This requires a formal application to be filled out by someone who knows the rules and can convince a government bureaucrat that the charity is worthy of this status. Second, the charity has to do extra bookkeeping to issue legal receipts for the individual donors. And third, the charity has to prepare an annual accounting schedule acceptable to the government for all the donations. There is extra work in being a registered charity. And this work takes extra time and paper; these resources could be put elsewhere in the organization.

Is the government really checking up on all these registered charities? If so, it costs the taxpayer to have auditors look at all these reports to be able to spot violations. Do the auditors even find enough violations to justify their wages and offices? Hmmm. If there is only a minimal followup from the government, why are we requiring all these charities to prepare this annual report?

I suspect most Canadian charities are never audited. As long as they submit that annual schedule, there’s little chance of an official inspection.

And when the media points out a registered charity behaving corruptly, fingers start pointing toward the government for not monitoring that charity. But to monitor that charity to catch violations before the media find out would mean monitoring thousands and thousands of other charities to the same level. Have I already alluded that all this monitoring would be expensive? And intrusive?

Many of these charities are churches. Much of these church donations go to building expenses and pastor salaries. Should the taxpayer subsidize these operations? Especially for mega-churches with their much bigger and mostly empty buildings? How about when the congregation decides to give their pastor a CEO salary?

Some charities are efficient with their donations. Others are incompetent. Should the federal government be a judge-and-jury to decide which charities are still eligible of being registered? Can you see such a judgment becoming too political? Or perceived as too political? What about charities who lobby government for certain legislation?

My decision to donate is not based on my tax deduction. Rather it is because I believe the cause is worthy. After I make the donation, I then take advantage of the tax deduction. I believe at least 80% of generous Canadians are thinking the same way as I am.

For sure, there are some Canadians who might stop donating if their tax deduction is taken away. They will raise enough noise for Canadian politicians not to go in this direction. But we really need to ask ourselves this question: Should we really continue with this big paper-chase game just to save 20% (or less) of current donations?

Recently, I donated $60 to a charity. I will get a $15 reduction in my taxes. Some of this $15 goes towards my accountant who properly records my donations in my tax return. I spend an hour or two each year making sure my charity receipts are properly filed; some personal hassle and lost time. And it probably costs the charity $3 to issue me a receipt. So my $60 donation is now worth $57 to this good cause. We are chasing lots of paper for so little value for society.

I would have donated without the tax deduction.

Published on Medium 2022

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