Tax relief on donations too often skewed towards wealthy, says report
Melanie May | 17 May 2016 | News
Tax incentives encourage people and businesses to give more to charity but are too often skewed in favour of the wealthy and causes favoured by governments, according to an international study by the Charities Aid Foundation.
Donation States, a study of 26 developed and emerging economies, compares the way tax incentives for charitable donations are offered across the world. It reveals that two-in-three countries worldwide offer tax incentives on charitable donations and that people are 12 per cent more likely to have given to charity in the past month if they live in a country that offers tax relief on donations than if they live somewhere which does not.
It also found that incentives are widely used by governments to encourage giving to charity, and help drive up both the number of people giving to good causes and the value of donations. In fact, the report shows that the value of tax incentives appears to have a direct impact on how much people give, with more money given when the value of tax incentives increases. Incentives are most effective in nations with higher rates of income tax.
However, it warns that regular basic rate taxpayers often have less access to generous incentives than wealthy people and companies, with red tape in some countries creating major barriers to people on moderate incomes taking up tax reliefs.
According to the report, corporations tend to get more and bigger tax incentives than individuals, with 77 per cent of countries offering tax incentives to businesses making charitable donations, compared to 66 per cent offering incentives to individuals.
The report’s author, CAF international policy manager Adam Pickering, said:
“Tax incentives are worth many billions of pounds to good causes worldwide and it is a great thing that there is such a strong international support for charitable giving being incentivised in the tax system. Such incentives are not the biggest motivation for people to give but it is clear that they can be an effective way for governments to encourage people and businesses to support civil society.”
The report also lays out a series of recommendations for making tax incentives schemes effective, which includes making incentives for all causes equal, as well as the same for both individuals and companies where possible, and making claiming incentives easy.
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About Melanie May
Melanie May is a journalist and copywriter specialising in writing both for and about the charity and marketing services sectors since 2001. She can be reached via thepurplepim.com.