Call for additional tax credit

 Generous donations support medical research at many hospitals across the country. istockphoto.com

Generous donations support medical research at many hospitals across the country. istockphoto.com

Donating to charity should be seen as a tax revenue source and a social benefit and not a drain on government revenue, says Ron Bernbaum, founder and CEO of Toronto-based PearTree Financial.

“In our experience, politicians and bureaucrats perceive the charitable sector as a tax drain on the economy because the Treasury allows a tax credit for a donation to a charity,” says Mr. Bernbaum.

“But in most cases, for every dollar of tax deduction there is an equal dollar of taxable income earned by the individuals delivering the social benefit.”

For example, he says a donor who gives to a hospital to fund research receives a tax receipt, but the researcher pays tax on her or his salary.

Without donor support, hospitals and other social services – which are already financially stressed – would need to rely solely on government funding.

To incent even more giving, he suggests that the government consider a modest additional tax credit similar to the Mineral Exploration Tax Credit (METC), a 15 per cent non-refundable tax credit on eligible expenses.

A taxpayer claiming the METC may also claim the 100 per cent Canadian Exploration Expense (CEE) deduction. Investors can access the CEE through flow-through shares. Junior mining companies rely on flow-through shares to raise capital. Access to the CEE is an incentive to subscribe for flow-through shares. He suggests that in addition to the standard charity tax credit that government can further incent giving without tax revenue loss.

Mr. Bernbaum’s company created the platform and is the only enterprise of size that assists otherwise generous individuals in giving more by reducing the after-tax cost of giving using flow-through shares, funding exploration in Canada. A donor obtains two sets of tax benefits for one cheque, but also funds two socially responsible and tax revenue neutral activities: Northern jobs and the delivery of social benefits by charity.    

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