Columnist – Wealth Management Malcolm Burrows

By Malcolm Burrows

The words “generous” and “generosity” come up a lot in the world of charity. But there is little discussion about what influences generosity in Canada. Is it growing or shrinking? And is nature of generosity changing? It is a slippery and fascinating subject.

Let’s first ponder the generosity supply question. In 2017, donations reported by Canadians on their taxes totalled $9.6 billion, up 7.7 percent from 2016. So far, so good. Dollars aren’t, however, the only measure.

Are donors disappearing?
Statisticians and pundits have been commenting on the presumed disappearance of the Canadian donor since 1990. In that year, 30 percent of taxpayers claimed a charitable donation on their annual return according to Statistics Canada. In 2017, that number was a shockingly low 20 percent. Where did all the donors go?

The answer isn’t fully known, but the loss may not be as bad as the tax data implies. Theories include a shrinking middle class, decline of organized religion, and increased social isolation. One rarely mentioned factor is a change in the way taxes are filed. Now that 88percent of Canadians file their taxes electronically, software automatically merges the giving of spouses to offset the effect of a graduated tax credit rate. Two donors, for the purpose of the tax system, become one.

The tax system is our major source of data on giving, but it’s unreliable. It tells us that seniors are the most generous donors.

Tax filers age 65 and older represented 30 percent of all donors in 2017 and 42 percent of the amount donated. What nobody ever mentions is this data includes both lifetime and estate donations.

Does tax matter?
Contrary to popular belief, tax savings matter little for most donors and donations. The latest statistics report that 84 percent of Canadians donate to charity each year, and the majority give without receiving or claiming a receipt. Could be at a store checkout or a holiday kettle.

More curious: almost $2 billion of donation receipts are issued annually by registered charities and not filed. Taxpayers need a better shoebox for their donation tax receipts.

Another sign that tax is not a primary motivator of giving is the huge growth of crowd funding. The Humboldt Broncos’ bus crash tragedy spontaneously generated over $15 million in donation in a few weeks. None of these gifts received tax receipts, and technically, they weren’t even charitable donations. Instead they were gifts to individuals in need, which is benevolence, not charity. Hence no tax savings.

This surge in online generosity may be eating into charity revenue. GoFundMe, an international crowd funding platform, now handles approximately $200 million in donations each year in Canada. If GoFundMe was one of Canada’s 86,000 registered charities, it would lead the pack in number of donors and donations — as well as dollars.

Personal philanthropy
I’ve spent the last 30 years working with a different type of donor. She, and the majority of these donors are women, gives some or all of her life savings to charity. Typically this happens at the end of life through a gift by will (estate), but increasingly she gives during life. And the dollar numbers are impressive.

This type of giving from savings or asset is hard to track through traditional methods. Estate donations, for example, are not reported separately from lifetime donations by Canada Revenue Agency. Yet the growth “major gifts” and “planned gifts”, as they are called by fundraisers, is clear. For the charities that are lucky enough to receive big donation — mostly the big, established ones — they are the difference between success and failure.

Campaigns have become increasingly reliant on major gifts. The rule of thumb from the last century was that 20 percent of donors would give 80 percent of donations to a campaign. That rule is now closer to 0.1 percent of donors giving 99percent of donations. This certainly points to a world where the wealthiest have sprinted ahead of majority of the population, which for better or worse fuels big philanthropy.

In 2019, so far, there has been four donations over $100 million announced in Canada — all to universities and hospitals in Ontario. Charity insiders know there are another 20 or so $100 million donations and foundations that have been made over the last decade. There has also been a massive increase in $1 million+ donations, especially in estates. Certain established charities now receive 10 percent or more of donations from estates.

But are these donors more generous than earlier generations? Or is there much more money concentrated in fewer hands?

There is more to these big donations — and to the seeming increase in “generosity” — than wealth alone. Big asset donations are being affected by societal factors such as increase in housing values, aging population, population mobility, smaller families, increase of the number of couples and individuals without children, and the increased awareness of philanthropy. Since 1996, Canada’s system of donation tax incentives has become the most generous in the world. (Yes, you read that correctly.)

Ordinary people — typically age 60+ — with real estate, some savings and no kids are becoming million dollar donors. And it’s not because they are more generous than previous generations, but because they have the opportunity due their personal circumstances.

So the question of generosity in Canada is hard to resolve. The factors that trigger, count and enable giving are changing. Rest assured, the desire to help others remains strong.

Malcolm Burrows is Head, Philanthropic Advisory Services at Scotiabank Wealth Private Client Group. He writes this column exclusively for each issue of Foundation Magazine.

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