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Would you be more likely to donate to a charity if you could declare the donation earlier on your taxes? According to a new article published in the National tax newspaper, The answer is yes.
Researchers at UBC Okanagan, the University of Melbourne and the University of Guelph found that changing the deadline for receiving donations closer to the tax period increased donations by 9%.
The team relied on a political experiment conducted in 2010 in Quebec. In order to encourage donors to help with the earthquake in Haiti, the province has allowed residents to claim their donations sooner.
The earthquake occurred in January, which means that donors would typically wait until April 2011 to claim the donations in their tax return. Quebec has allowed residents to claim donations on their 2009 tax returns, a move not followed by other provinces.
In what the researchers described as a "near-natural experience," the team built control groups using data from homes across the country and took into account factors such as average incomes, percentage Francophones and the number of people of Haitian descent.
"We wanted to make sure our results were as if nothing else was affecting donation behavior, other than policy change," said Ross Hickey, badociate professor of economics at UBC Okanagan and co-author of the study. "If you asked a random sample of Canadians what tax reduction they would get if they gave another dollar to a charity – most Canadians do not know it."
In British Columbia, combined federal and provincial tax credits for donations of $ 200 and under are 20%. This means that a donation of one dollar would cost 80 cents if you pay provincial and federal taxes.
"When we look at the case of Haiti, people should wait a year and four months to recover that money and consume that 20 cents a dollar everywhere else in Quebec," says Hickey. "Quebecers have only recovered their tax credit three months later – and as people now value a dollar at more than a dollar a year, it reduces the cost of doing business. donations. "
Extend the deadline for charitable donations closer to the time when the taxpayer file is not a new idea. Proposals have been made in Canada to move the date – but have not yet come to fruition.
While Hickey does not dispute that existing policies encourage donations, some adjustments, including an extension of time, would provide additional incentives.
"We could increase the amount donated to the charitable sector," said Hickey. "I think part of the problem is that we are maintaining the status quo and we are not really discussing the real purpose of charitable tax credits, which is to encourage donations. shows, it is that there is still real money the table. "
This research was funded by the Social Sciences and Humanities Research Council of Canada.
Source of the story:
Material provided by Campus of the University of British Columbia at Okanagan. Note: Content can be changed for style and length.
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