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Imagine Canada Releases Paper on Charities as an Economic Sector

August 30, 2015

By Jennifer M. Leddy

The following article has been is an excerpt from Charity Law Update – June 2015

On June 23, 2015, Imagine Canada released a discussion paper entitled Charities in Canada as an Economic Sector (the “Paper”) by Brian Emmett, Imagine Canada’s chief economist for Canada’s Charitable and Nonprofit Sector, and Geoffrey Emmett, research assistant. It was written to “take a balanced look at the Canadian charitable sector from an economic point of view.” In doing so, the Paper emphasizes the important role and scope of the charitable sector in Canada’s economy, discusses revenue sources for charities, and briefly highlights policy implications stemming from the sector’s role in the economy. Overall, the authors stress that while charities are not analogous to for-profit businesses, the impact that they have on the economy is equally strong and is a necessary part of the broader economic picture.

The Paper begins by highlighting the significant role and scope of the Canadian charitable sector. The authors define the charitable sector as part of the service sector and emphasize that its growth “reflects growth in the service sector in general.” For example, the charitable sector’s contribution to Canada’s GDP and employment is growing faster than many “traditional” sectors, such as construction, and the charitable sector employs nearly as many people as the manufacturing sector. This section of the Paper concludes by highlighting the commonalities between charities and small businesses, such as their relatively small size and the “significant risks to success and continuity” that exist for both sectors.

The Paper then discusses revenue sources for charities. It draws a key distinction between the private sector, in which customers determine financial success, and the charitable sector, in which “clients are somewhat passive beneficiaries of funding decisions by governments and donors.” The charitable sector relies on government transfers, member and donor funds, and the sale of goods and services. It is interesting to note that the Paper highlights some of the same challenges regarding donations that were also included in this year’s edition of Statistic Canada’s Spotlight on Canadians: Results from the General Survey, such as the fact that donors are aging. For more information on the Statistics Canada report see Charity Law Bulletin No. 362.

The final section of the Paper is a relatively brief overview of associated policy implications. These include the fact that policy makers should consider the needs of the charitable sector in the same way that they currently consider sectors more traditionally thought of as “economic”. Also, the authors state that “the full suite of support programs available to small private businesses” should be made available to the charitable sector. They also emphasize that regulatory and income tax barriers to expanding earned income and investment opportunities should be addressed and social finance should be expanded. Finally, the authors argue that the importance of the charitable sector should warrant better data collection and analysis such as that which supports the small business sector.

Overall, this Paper provides an interesting and needed discussion, which situates the charitable sector as a key part of the wider Canadian economy. As the Paper highlights, given the fact that the charitable sector is facing increasing financial challenges, understanding its economic role is an important part of understanding how the sector can respond and move forward with innovative solutions.

Jennifer Leddy, B.A., LL.B. – Ms. Leddy joined Carters Professional Corporation’s Ottawa office in 2009, becoming a partner in 2014, to practice charity and nonprofit law following a career in both private practice and public policy. Ms. Leddy practiced with the Toronto office of Lang Michener prior to joining the staff of the Canadian Conference of Catholic Bishops (CCCB). In 2005, she returned to private practice until she went to the Charities Directorate of the Canada Revenue Agency in 2008 as part of a one year Interchange program, to work on the proposed “Guidelines on the Meaning of Advancement of Religion as a Charitable Purpose.” 

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