Restrained Kudos to
Mr. Broadbent

It isn’t often that those of us who are suspicious of the encroachment by government on freedom and liberty have the opportunity to congratulate the former leader of the New Democratic Party, Ed Broadbent. However, Mr. Broadbent deserves credit for articulating a fairly realistic vision which could bring the charitable sector into the twentieth, albeit not the twenty-first century.

There is currently much debate and acrimony over what constitutes a charity in Canada. The principle difference between a charity and a non-profit is that a charity can issue tax-deductible receipts to donors. The obvious solution to the predicament regarding the definition of a charity is to end this discrimination propagated by the government against non-profit organizations in favour of registered charities.

The best way to do this is to implement a flat tax system wherein there are no deductions, credits, or other tax-based social engineering schemes. Thus, there would be no tax-based differentiation between charities and non-profits. Rather, charity would be an individual matter and would depend on one’s willingness and ability to give, rather than a government decree as to what’s charitable and what’s not.

Mr. Broadbent does, however, offer a viable second-best solution. The most important of the many recommendations included in his report, Building on Strength: Improving Governance and Accountability in Canada’s Voluntary Sector, is his acceptance of Arthur Drache’s principle of “Charity-Plus.” Mr. Drache has been at the forefront in calling for reform to the definition of what constitutes a charity.

Mr. Drache recommends widening the definition of charities to include more types of organizations, such as social and economic development councils, and a broader definition of education and advocacy organizations, to name but two. The underlying principle of the recommendation is to err on the side of inclusion, rather than the current policy, which errs on the side of exclusion. The reformed definition of charity would significantly increase the scope of organizations eligible for charitable status. It constitutes, within the context of the current tax code and political climate, a step forward.

The rationale for expanding the scope of organizations eligible for charitable status is very much in tune with the philosophies of those who value freedom and choice. By defining the eligibility of charitable status as widely as possible, individuals’ voluntary contributions will determine which organizations survive and which fail. In other words, people will be able to “vote with their wallets.” This type of choice-oriented approach is preferable to the heavy-handed regulation which currently characterizes the charitable sector.

Building on Strength also recognizes the importance of intermediary groups, such as the United Way, in encouraging best practices and ensuring that local agencies attain high service provision standards. Unfortunately, the report also includes a call for funding of intermediaries by government instead of recognizing that individuals have funded, and will continue to fund, intermediaries because they add value.

Unfortunately, Building on Strength is riddled with bureaucratic jargon, such as its recommendation for “joint decision-making” and the creation of “compacts” between government and the charitable sector. The charitable sector’s independence from both government and the for-profit sector is one of its greatest strengths and should not be compromised.

The report also includes several recommendations that stem more from ideological persuasion than from any objective analysis. For example, the report suggests that corporations aspire to donate 1 percent of their pre-tax profits to charities without using “social marketing.” That is, companies should be involved in pure philanthropy and expect absolutely no return on their charitable contributions. This is nonsense. The only reason that any corporation should give money to charity is because it expects to increase its sales and profitability through social marketing. That is, the company expects sales and profits to increase by attaching a marketing program to a social cause or local social agency.

However, all in all, Mr. Broadbent’s report, Building on Strength, is a step in the right direction. In a perfect world, we wouldn’t need second-best solutions. However, we don’t live in a perfect world. The best we may be able to hope for is a rational and thoughtful second-best solution. Building on Strength represents a compromise between the optimal solution and the current predicament.