This tax change would increase philanthropic behaviour

Many investors are also very generous when it comes to helping good causes but a new study finds philanthropy could be boosted by a change to tax regulations.

A team of researchers from UBC Okanagan, University of Melbourne and the University of Guelph found that when people are able to claim donations earlier, they will give more.

The theoretically-simple change that moves the deadline closer to tax time saw donations increase by 9%.

Using the example of the Haiti earthquake, the team noted that the disaster happened in January 2010, meaning that typically donors would claim the gifts on their tax returns until April 2011.

However, Quebec took a lone stance by allowing people to claim the tax relief on their 2009 provincial tax returns, resulting in the boost for giving.

The researchers controlled for other factors that may have affected donations including average incomes, percentage of French speakers, and number of people with Haitian ancestry.

"We wanted to make sure our results were as if nothing else affected donation behaviour other than the policy change," says Ross Hickey, an associate professor of economics at UBC Okanagan and co-author of the study. "If you were to ask a random sample of Canadians how much of a reduction in their taxes they would get if they were to donate another dollar to charity--most Canadians don't know."

We need to have the conversation
The team says that combined federal and provincial taxes in British Columbia mean that, for every dollar donated to a good cause up to $200,

20 cents would be returned in tax credits; but that it would take more than a year before donors would see the benefit.

"When we look at the Haiti case, people would have to wait one year and four months to get that money back and consume that 20 cents on the dollar everywhere outside of Quebec," says Hickey. "Those in Quebec got their provincial tax credit back only three months later--and because people value a dollar today more than a dollar a year from now--it reduced the cost of giving."

Hickey says we should stop avoiding the conversation about how changing the tax rules would boost charitable giving.

“What this research shows is that there is real money being left on the table," he said.

More details are published in the National Tax Journal.

.@IKBSAS, @unimelb and @uofg research shows that time is money, especially when it comes to giving https://t.co/nWj7SGVnQ6 pic.twitter.com/RBKquvglMv

— UBC Okanagan News (@ubconews) April 15, 2019