SOCIAL: PROPOSED POLICY CHANGES/ CORPORATE CHARITY CONTRIBUTIONS

SUBJECT:  CORPORATE CHARITY CONTRIBUTIONS

PURPOSE:  This briefing note is a recommendation for changes in policy pertaining to charitable contributions of corporations. 

ISSUE:  There is not enough government support when in relation to charitable options of corporations.  

Background:

Canada has a low birthrate.  At its current pace the baby boomers will remain the largest demographic amongst others.  This poses a problem for policy makers especially when in relation to pension.  There have been long time rumors that the pension will run dry by the time younger generations get to that age.  The Canadian government cannot possibly support all these people like they have in the past.  They are going to need external support in order to be able to continue to provide services to the people.  This briefing note explores the possibility of corporations implementing  a Ministry like department.  In order for this to occur, there will need to be changes to the Canada Revenue Agency regulations pertaining to charitable causes.  This proposed department should be included in corporations at the discretion of the company.  Its purpose is to donate funds which were allocated to recognized charities to people in need such as those on disability or income assistance. 
Current Canada Revenue Agency policy pertaining to charitable donations is the following, donation receipts can only be issued by those recognized by the Canada Revenue Agency, and the maximum for a corporation to be able to claim is 75 percent of the income.  In order for this to occur, the registered municipality must collaborate with corporations as they are one of the authorized charities as per the Canada Revenue Agency.  

Canada has to provide a long list of social supports to the community of which include transfer payments to municipalities to deal with income assistance, disability, unemployment, Medical Services Plan, Pharma Care, Education, police and RCMP to name a few.  It is estimated that these services cost Canada a hefty some of tax payer money.  In 2016 – 2017 Canada spent $ 48.1 Bn on elderly benefits, $20.7 Bn on employment insurance, $22 Bn on children’s benefits, $36 Bn on Canada health transfer and $ 13.3 Bn on Canada social transfer.  These are just some of the expenditures Canada had during that period and it explains very thoroughly why the Canadian dollar is indebted.  

Considerations:

Canada aims to reduce poverty for the average Canadian and in doing so they increase the living standards of each of its citizens.  The tax payer money goes to a variety of multiple government programs designed to assist people in their endeavor to get back on their feet.  Poverty in Canada refers to people that do not have enough income to purchase a specific basket of goods and services within the community.  The poverty line is really based on a Market Basket Measure.  The Low income measure in 2017 was 13% in 2017.  Moreover Canada is expected to spend $242 Bn in health care for 2017 which is about $6600 per person approximately.  Canada has a Medical Services Plan that each citizen is entitled to receive further there is the Pharmacare program which adds costs as well.  Canadians are awfully weary when the discussion of pension comes about because there have been nonstop rumblings about its viability, that it is unsustainable especially with the ageing population.  Canadians require an average of $1 million before retiring with a 4% withdrawal rate.  This income supplements their pension which they receive from the government.  This is funded by the taxpayers.  The steak holders here are the people, the government and lastly, the corporations.

Options:  

Option 1:  Mandate companies to have a ministry like department.

By making it mandatory to start such department, we can see that this option is not really feasible.  Perhaps a gradual mandatory implementation should be considered as this could put a lot of strain into the efficiency of the companies in Canada.  Although these companies are already donating, we could see some backlash from them.  What really has to happen if this option is selected is that municipalities should cooperate with corporations to provide such ministry like services to the people.  These corporations donation should be checked by the Canada Revenue Agency as verifiable donees.  This option is really the most sustainable.  It would relieve the government while assisting each person qualified receive equity that they are entitled to under the constitution. 
Option 2:  Give corporations the choice of whether to start a ministry like department.
This option is feasible.  The government can role out a service to assist companies that are interested to provide supports to the people.  They can cooperate with municipalities whom are registered charities.  The government should slowly then make it mandatory for corporations to give back based on their revenue.  Through this option, corporations will have the ability to adjust their operations accordingly.  This is a very sustainable option as it will facilitate the mandatory implementation of such policy.

Option 3:  Status quo:  Not working which is why we have options.  

This option is very feasible.  Doing nothing however, could I implicate the budget of the government and possibly cause it to be more indebt.  Therefore selecting this would not be very sustainable.  People would still receive their government money as scheduled but the government wont be able to sustain it as the baby boomers are the largest demographic.  The younger generations are having less kids, which means that there will be less people to tax which would then result in deficits.  This is really an unsustainable option and the government needs to move quickly to rectify the problem we as Canadians will have in the future.

Recommendation:

Option two is recommended.