New tax proposals to benefit Irish charitable giving
Howard Lake | 28 February 2012 | News
The Irish government has announced a significant new initiative to further support planned giving involving simplifying the rules governing tax relief on charitable donations, according to the Irish Charity Tax Reform Group (ICTR).
The proposals have emerged from detailed discussions between ICTR, the Revenue Commissioners and the Department of Finance following the election of the new government last year.
The government proposal involves a new composite rate of tax relief on charitable donations of ‘around 30%’ to replace existing higher and standard rates, with the benefit of the tax relief in all cases going to the charity i.e. from now on PAYE and self-assessed taxpayers will be treated the same with charities benefiting from the tax refund in all cases.
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The Report of the Commission on Taxation supported treating all donors the same but had proposed to standardise relief on charitable donations (i.e. 20%). The Commission, however also stated that “there is a general benefit to society from donations to charities… the state should continue to support this activity.”
ICTR successfully argued that such a rate would dis-incentivise giving by the public and seriously undermine the financial ability of charities to respond to the needs of the most vulnerable in society.
The proposed new composite rate is a major achievement in this context. Given that the benefit of the relief will in future go to the charity in all cases, the sector will receive an opportunity to boost donations and income from this source. Also, now that the tax benefit from donations will go to the charity the tax relief scheme on donations will no longer be subject to the “higher earner” limitation on the amount of cumulative tax relief that can be claimed by individual taxpayers in any tax year. Instead the donations scheme will be capped at €1m.
The proposals are subject to a three-month consultation period, beginning immediately, during which charities and others may make comments and suggestions to fine-tune or improve the proposals. It is intended that the specific terms will be formally announced in next December’s Budget and become operative from January 2013.
The Minister for Finance has also signalled his attention to address the long-running issue of VAT Compensation for charities.
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.