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 %|
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 email@example.com.