Author: Andrea Wong, President, Endeavour
Endeavour volunteers have provided an equivalent of $1,350,000 in consulting services to non-profit organizations since 2007, according to Endeavour’s first annual report released on October 21, 2009. Should these volunteers receive monetary compensation for the thousands of hours that they donated?
Politicians in Ottawa and interested parties across Canada are talking about providing some sort of tax credit for volunteer effort. This controversial issue is addressed in a study by Volunteer Alberta, The Potential Impact of Canadian Federal and/or Provincial Tax Credit Incentives for Volunteer Participation, and a discussion paper by Volunteer Canada, Attaching Economic Value to Volunteer Contribution, both published in 2009.
According to most estimates, Canadians contribute more than one billion volunteer hours every year. Even a conservative valuation of this contribution would suggest over $20 billion in economic value. According to the Volunteer Alberta study, the implementation of a tax credit policy for volunteer time donations may translate into hundreds of millions in lost tax revenue at the provincial/federal level directly impacting governmental transfers, creating problems for both non-profit organizations and governments. There are other critical concerns:
- Measuring the economic value of donated time: While there are many different models for estimating a cash equivalence of volunteer hours, there is no consensus on the best model.
- Compliance issues: Many volunteers might be tempted to overvalue their tax-credit-qualified donations of time and effort. At the same time, non-profits may be motivated to place a low value on volunteer time because high value may negatively impact cash donations. Regulatory and funding bodies would face excessive administrative costs related to compliance.
- Negative impact on volunteer motivation: Attaching an economic and tax value to what many volunteers consider to be an altruistic contribution might, in fact, de-motivate some volunteers or potential volunteers.
- Negative net economic effect on total donations: A tax credit for volunteer time could have a negative impact on cash donations. The opportunity of gaining a tax credit for volunteer-time might motivate some to decrease their cash donations in tough economic times.
- Hazards of imposing the consumer model on non-profit organizations: Tax credits might cause donors and the public to view non-profit organizations as the consumer model, rather than social and community solidarity. This may have the unwanted and adverse effect of turning volunteering into a marketplace exchange and could, over time, depress rates of volunteering in Canada.
Volunteer Canada is now preparing a plan to consult with people in the field and to work with stakeholders in developing a response to the growing pressure to assign a dollar value to volunteering.
The research done by Volunteer Alberta and Volunteer Canada speak to many unresolved issues related to a volunteer tax credit. In my opinion, the non-profit sector does not need government to invest in a volunteer incentive program to attract individuals who otherwise would not volunteer. Instead, government needs to invest more in leadership development and organizational effectiveness programs to build the capacity of the non-profit sector and ensure its long-term sustainability.
Post your comments below to let us know if you think a volunteer tax credit is a good investment by government.
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