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You are here: Home / Articles / Charities - Current Articles / Paying for the Privilege of Giving Away Money!

Paying for the Privilege of Giving Away Money!

January 26, 2022

The structure of the Income Tax Act is such that if one earns a dollar, one pays taxes on the dollar. If one earns a dollar and gives away the dollar to charity then, in days gone by, the individual is really out of pocket only the after tax amount that they would have otherwise had if they did not donate the dollar; and the governments (federal and provincial combine) are out the tax revenue they would have received if the dollar owner had kept it.

Several years ago, as federal and provincial government began adjusting their tax brackets, this alignment went out of sync. The net result of which was that in some provinces a donor would earn a dollar, give away that dollar and yet still have to pay tax on that dollar as if they have kept it. So, a person would have to pay for the privilege of giving away their money! This situation only existed at the highest tax brackets and, unfortunately, still exists in New Brunswick, Ontario, British Columbia and Yukon.

This result is exceedingly unfair and is hard to understand given that those with more wealth typically give more of it away (in absolute terms).

Below you will find a chart which compares the highest tax donation rate with the highest tax credit rate for each of the common law provinces.

 

Provinces Highest Tax Rate Highest Donation Tax Credit Rate
Newfoundland and Labrador 19.8 % 19.8 %
Prince Edward Island 16.7 % 16.7 %
Nova Scotia 21 % 21 %
New Brunswick 20.3 % 17.95 %
Ontario 13.16 % 11.16 %
Manitoba 17.4 % 17.4 %
Saskatchewan 14.5 % 14.5 %
Alberta 15 % 21 %
British Columbia 20.5 % 16.8 %
Yukon 15 % 12.8 %
Northwest Territories 14.05 % 14.05 %
Nunavut 11.5 % 11.5 %

 

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By:  Adam Aptowitzer

Adam Aptowitzer is the managing partner at Drache Aptowitzer LLP.  He practices in the area of Charity Law and Tax Litigation. He can be reached at aaptowitzer@drache.ca.

Filed Under: Articles, Charities - Current Articles Tagged With: Adam Aptowitzer, donation, donor, tax, tax bracket

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