CAF report argues that tax incentives should not just favour the wealthy

A new report by the Charities Aid Foundation (CAF) claims that tax incentives which are intended to encourage charitable giving, too often favours the wealthy.

The foundation’s international study, which looked at 26 developed and emerging economies concluded that donors who live in countries that offer tax relief on donations are 12 per cent more likely to give to charity.

The report – Donation States – also found that corporate organisations received better and bigger incentives than individuals, with more than three quarters of countries offer tax incentives to charitable businesses, compared to around two thirds which offered incentives to individuals.

The study suggested that there is a direct correlation between the value of tax incentives and the size of donation people make. It also noted that these incentives are particularly effective in countries which have higher income tax rates.

The report recommended a level playing field by incentivising all causes under the same terms and, wherever possible, providing equal incentives for companies and individuals.

CAF’s international policy manager and the report’s author Adam Pickering commented that whilst tax incentives are rightly not the biggest motivation for people to give, they can be an effective way for governments to encourage support for civil society.

He suggested that important lessons could be drawn from the various weaknesses and strengths of different tax incentive schemes.

Mr Pickering said: “Crucially, it is important that [tax incentives] are easy to understand, non-politicised and progressive. This means that governments should not cherry pick favourite causes and that incentives should be just as generous to people on moderate incomes as they are to the wealthy and big businesses. If incentives are seen to be stacked in favour of an elite few, this could have a chilling effect on mass engagement in charitable giving in the long run.”