Price Elasticities of Charitable Giving across Donation Sectors in Canada: Is the Tax Incentive Effective?

Belayet Hossain,Laura Lamb

doi:10.5402/2012/421789

Abstract

The effectiveness of tax incentives on charitable donation expenditures in Canada is explored, and the analysis is extended to compare the effectiveness across different donation sectors. Price elasticities are estimated with data from the 2007 Canada Survey of Giving, Volunteering and Participating. Results suggest that specific charitable sectors are affected differently by Canada’s tax credit system. The findings have implications for public policy.

Highlights

As do most governments of developed nations, the Canadian government provides a tax incentive to encourage charitable giving
This assumption has not been tested for Canadian donation expenditures, except for Hossain and Lamb [1] who examined the effectiveness of tax policy on the decision to donate across donation sectors, and Kitchen and Dalton [11] and Kitchen [12] who explored the effectiveness of tax policy on donation expenditures to the religious sector
The price of donation is the key variable of interest in the model, as its estimated value will determine the effectiveness of Canadian tax policy on charitable giving expenditures

Summary

Introduction

As do most governments of developed nations, the Canadian government provides a tax incentive to encourage charitable giving. The current research attempts to fill this void by exploring two facets of the effectiveness of tax incentives on charitable giving in Canada. Much of the existing literature is grounded in the assumption that the responsiveness of charitable giving expenditures to tax incentives is equivalent across all donation sectors, except for two studies on donation expenditures in the U.S [2, 5] and one in Taiwan [4]. This assumption has not been tested for Canadian donation expenditures, except for Hossain and Lamb [1] who examined the effectiveness of tax policy on the decision to donate across donation sectors, and Kitchen and Dalton [11] and Kitchen [12] who explored the effectiveness of tax policy on donation expenditures to the religious sector

Objectives

Methods

Results

Conclusion