Times tax r elief charities april 2012


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My piece from The Times last year arguing for restrictions on charities' tax relef

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Times tax r elief charities april 2012

  1. 1. Why Charity Tax Relief should be limited From The Times, April 2012 Charities are outraged at the Chancellor’s plans to limit tax relief on charitable donations, which they say will sap the munificence of the wealthy. But it’s dubious to argue that the proposed tax changes will stifle philanthropy. In fact, as a group, the rich in the UK do not give generously, certainly not in comparison with the US. There — where there are restrictions on tax relief similar to those proposed by George Osborne — those with annual incomes of more than £150,000 donate eight times more than their British counterparts. Fifty-seven of America’s richest people have responded to Bill Gates’ Giving Pledge by donating half their wealth. There is no equivalent movement in the UK. Charities are treated generously by the taxman. They enjoy Gift Aid, a scheme under which the Treasury adds £2.50 for every £10 donated. Individuals get tax relief when they give land, buildings or shares and anything left in a will is not counted as part of the estate for tax purposes. Charities that run shops are exempt from corporation tax, pay no VAT on the sale of donated goods and receive an 80 per cent rebate on business rates. If a billionaire wants to give a large sum to Eton College, the United Bible Societies Trust or Islamic Relief Worldwide (all members of the top 100 UK charity index, whose income last year grew by £355 million to an £11.4 billion record) that’s fine but only if he or she has paid their taxes. Giving to charities, some of which are doing well in the recession (three of the UK’s biggest saw voluntary income grow by a third or more last year) should not be an alternative to paying tax. The Government is right to promote giving. But the belief that unlimited tax relief is necessarily a good thing must be challenged. There are charities that do so little in terms of charitable activity that, in effect, they are bogus. Stephen Bubb, of the Association of Chief Executives of Voluntary Organisations, demands in his blog — in near disbelief — that if such charities exist they must be named. Well here’s just one that the Charity Commission is closing down: Needy Children International spent only 13 per cent of its income on charitable purposes in 2010. The effectiveness of many legitimate charities is unproven at best. Too few open themselves up to outside review. The New Philanthropy Capital thinktank provides analyses of some that have been willing to expose their activities and spending to scrutiny, but they are a minority. Tax relief on donations needs to be linked to demonstrable effectiveness by individual charities. The fond public belief that all charities use money well doesn’t bear too much examination. Martin Narey is a former chief executive of Barnardo’s