New tax changes have ‘not helped promote philanthropy’ in Ireland

Howard Lake | 24 July 2019 | News

Tax changes that have been enacted by the Irish government since 2013 to increase charitable giving have not had the desired effect of increasing the level of philanthropic giving in Ireland, according to a new report.
The report, The Impact of the 2013 Change in the Tax Treatment of Charitable Donations, was commissioned by Philanthropy Ireland and undertaken by consultancy BDO and involved examination of charitable tax returns to eligible charities from 2013 to 2016.
In 2013 the Irish government enacted the recommendation that both individual PAYE and Self-Assessed Donors should be treated the same. Under changes to Section 848(A) TCA 1997, tax relief on donations made on or after 1 January 2013 by individuals, whether from self-assessed or PAYE taxpayers, is granted to an approved charity rather than to the donor.
Eligible donations are grossed up and the approved body/charity is deemed for the purposes of the relief to have received the grossed up amount currently at 31%. The difference between the actual donation and the grossed up amount is refunded by the Revenue Commissioners to the approved body/charity.

What the report found

Key findings of the report were:
• Only 1 in 5 (21%) of the registered charities in Ireland are benefiting from the S.848A Charitable Donation scheme.
• From 2013 to 2016 there was a 12% decrease in charities filing claims from 1,938 to 1,707 charities.
• Changes to the tax treatment of charitable donations has not resulted in an increase in the number of charities taking up the scheme.
• The number of donors giving under the scheme increased between 2013 and 2015 from 149,174 to 160,306. However, in 2016 the number decreased to 149,106.
• The self-assessed donor is worse off under the new scheme, in that they lose out on being able to claim a tax deduction for charitable donations.
• On average self assessed donors give more than PAYE donors, €728 v €558 per donor.
• Changes to the tax treatment of charitable donations has not resulted in an increase in the number of donors since 2013.

Approximately 90% of donations under the scheme, fall within the €250 – €999 value band, while this figure increases to 99% when all donations below €5,000 are considered. The current scheme therefore has not been effective in mobilising large scale philanthropic giving, as the vast majority of amounts given are characterised as small charitable donations.
87% of claims filed by charities were subject to restriction or rejection each year since 2013 which would suggest that the scheme is not working as effectively as desired.
The €250 minimum level of donation required to qualify for the tax incentive scheme in Ireland is the highest of the countries benchmarked with many having no minimum.
The report found Ireland relies heavily on income from the public sector compared to international standards. 77% of not-for-profit revenue in Ireland is derived from the public sector where the international average is 31%.


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