The new Conservative government’s campaign pledge to eliminate capital gains on donations of traded securities to charity could provide a major boost to the charitable sector, according to a new report from TD Economics.

Since 1997, individuals and corporations donating publicly traded securities to public charities have received preferential capital gains tax treatment, and have only had to include 25% of capital gains realized on the donation as income instead of the normal capital gains inclusion rate of 50%.

This preferential tax treatment contributed to a 190% increase in the donations of listed shares to charities between 1997 and 2000, TD says.

The elimination of the remaining 25%, if introduced in the spring 2006 budget, could lead to a further dramatic increase in such donations in future.

TD economists note that the total market value of stocks held by Canadians is an $1.3 trillion with unrealized capital gains accounting for almost half of these holdings.

“The elimination of the capital gains tax could benefit many Canadians, from the employee who has acquired company stock at a low cost over the years, to the typical investor who has enjoyed nice returns in their stock portfolio,” explains Jo-Anne Ryan, vp, Philanthropic Advisory, TD Waterhouse. “Our clients have already demonstrated a strong appetite to reduce capital gains tax when donating to charity.”

“If this measure is passed, we expect donations of securities to charities to skyrocket,” adds Ryan. “The additional tax savings from donating securities to charity will result in a direct shift of social capital from the government’s hands to individual donors who can allocate those funds to the causes that are most important to them.”