Policy Issues in Charity Taxation - Revision history

Ruth Shaw at 16:18, 12 April 2024

2024-04-12T16:18:26Z

Ruth Shaw at 16:16, 12 April 2024

2024-04-12T16:16:27Z

Ruth Shaw at 11:54, 11 October 2023

2023-10-11T11:54:11Z

Ruth Shaw at 10:41, 23 September 2023

2023-09-23T10:41:14Z

Ruth Shaw: /* Reliefs of donor */

2023-09-23T10:36:19Z

‎Reliefs of donor

Ruth Shaw: /* Reliefs of donor */

2023-09-23T10:32:24Z

‎Reliefs of donor

Ruth Shaw: /* Reliefs of donor */

2023-09-23T10:31:25Z

‎Reliefs of donor

Ruth Shaw: /* Proposed cap on donor reliefs */

2023-09-23T10:25:48Z

‎Proposed cap on donor reliefs

Ruth Shaw: /* Proposed cap on donor reliefs */

2023-09-23T10:22:31Z

‎Proposed cap on donor reliefs

Ruth Shaw: /* Rewrite of HMRC guidance */

2023-09-23T10:19:57Z

‎Rewrite of HMRC guidance

← Older revision		Revision as of 16:18, 12 April 2024
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−	''Users may [[contribute to the text]]. If you see anything that needs correcting or expanding, please click on the edit link and make the corrections. A copy of the next edition of the book will be given to the user who makes the most edits. User contributions are reviewed by [https://www.taxchambers.com/team/~~sshah~~/ ~~say~~ Shanzé Shah]''	+	''Users may [[contribute to the text]]. If you see anything that needs correcting or expanding, please click on the edit link and make the corrections. A copy of the next edition of the book will be given to the user who makes the most edits. User contributions are reviewed by [https://www.taxchambers.com/team/shanze-shah/ Shanzé Shah]''

	For this chapter in pdf format click here: [https://toc.wiki.anarres.org/images/7/71/ToC_01_Policy_Issues_in_Charity_Taxation.pdf Chapter 1 Policy Issues in Charity Taxation]		For this chapter in pdf format click here: [https://toc.wiki.anarres.org/images/7/71/ToC_01_Policy_Issues_in_Charity_Taxation.pdf Chapter 1 Policy Issues in Charity Taxation]

← Older revision		Revision as of 16:16, 12 April 2024
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−	''Users may [[contribute to the text]]. If you see anything that needs correcting or expanding, please click on the edit link and make the corrections. A copy of the next edition of the book will be given to the user who makes the most edits. User contributions are reviewed by [https://www.taxchambers.com/team/~~rebecca-sheldon~~/ ~~Rebecca Sheldon~~]''	+	''Users may [[contribute to the text]]. If you see anything that needs correcting or expanding, please click on the edit link and make the corrections. A copy of the next edition of the book will be given to the user who makes the most edits. User contributions are reviewed by [https://www.taxchambers.com/team/sshah/ say Shanzé Shah]''

	For this chapter in pdf format click here: [https://toc.wiki.anarres.org/images/7/71/ToC_01_Policy_Issues_in_Charity_Taxation.pdf Chapter 1 Policy Issues in Charity Taxation]		For this chapter in pdf format click here: [https://toc.wiki.anarres.org/images/7/71/ToC_01_Policy_Issues_in_Charity_Taxation.pdf Chapter 1 Policy Issues in Charity Taxation]

← Older revision		Revision as of 11:54, 11 October 2023
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−	''Users may [[contribute to the text]]. If you see anything that needs correcting or expanding, please click on the edit link and make the corrections. A copy of the next edition of the book will be given to the user who makes the most edits. User contributions are reviewed by [https://www.taxchambers.com/team/~~jon~~-~~selous-borlace~~/ ~~Jon-Selous Borlace~~]''	+	''Users may [[contribute to the text]]. If you see anything that needs correcting or expanding, please click on the edit link and make the corrections. A copy of the next edition of the book will be given to the user who makes the most edits. User contributions are reviewed by [https://www.taxchambers.com/team/rebecca-sheldon/ Rebecca Sheldon]''

	For this chapter in pdf format click here: [https://toc.wiki.anarres.org/images/7/71/ToC_01_Policy_Issues_in_Charity_Taxation.pdf Chapter 1 Policy Issues in Charity Taxation]		For this chapter in pdf format click here: [https://toc.wiki.anarres.org/images/7/71/ToC_01_Policy_Issues_in_Charity_Taxation.pdf Chapter 1 Policy Issues in Charity Taxation]

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 ''Users may [[contribute to the text]].  If you see anything that needs correcting or expanding, please click on the edit link and make the corrections.  A copy of the next edition of the book will be given to the user who makes the most edits.  User contributions are reviewed by  [https://www.taxchambers.com/team/jon-selous-borlace/ Jon-Selous Borlace]''
-For this chapter in pdf format click here: [https://toc.wiki.anarres.org/images/0/00/ToC_01_Policy_Issues_in_Charity_Taxation_%282%29.pdf  Chapter 1 Policy Issues in Charity Taxation]
+For this chapter in pdf format click here: [https://toc.wiki.anarres.org/images/7/71/ToC_01_Policy_Issues_in_Charity_Taxation.pdf  Chapter 1 Policy Issues in Charity Taxation]
 ==Introduction ==

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 :<i>https://www.cafonline.org/pdf/CAF%20UK%20Giving-FINAL%20-%20web%20enabled.pdf</i></ref>  The relevant figures are those specifying the total amounts given, not the total number of donors.  I here set out the most recent graph:<ref>The proportion of donors do not add up to 100% due to the fact that a donor can choose more than one cause. The category of 'other' has been excluded from the table and for this reason neither does the proportion of total amount donated sum to 100%.</ref>
-:[[Image:Fig 5.jpg|600px]]
+:[[Image:Fig 5a.jpg|600px]]
 In this graph, religious organisations receive  the largest share of donations in terms of total monetary value (19%).  If the process of secularisation in the UK continues at its current rate,<ref>For the sociological background, see Bruce <i>Secularization </i>(2011).</ref> the case for tax relief for religious charities may come under scrutiny (though conversely, the sums given for religious charities would decline).<ref>The case against tax relief is set out by Edge, "Charitable Status for the Advancement of Religion: An Abolitionist's View" (1995) 3 CLPR 29.</ref>  But medical charities are by far the most popular cause and receive almost one-quarter of all donations, if one regards medical and hospitals (including hospices) as a single item.  It is clear that "choice between funding the National Health Service or the Royal Opera House" is a tendentious way of summarising the issue, though if one did put it that way, donors greatly favour health over the arts.

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 :<i>http://www.law.unimelb.edu.au/notforprofit1#Project Overview</i> in reviewing the US material it is of course necessary to consider to what extent the position in the UK is the same as in America.  For a UK study, see Smith,"Increasing Charitable Giving: What Can We Learn from Economics?" (2012), Fiscal Studies, 33: 449–466.
 :See too See Feldstein (1975) "Income tax and charitable contributions: Aggregate and distributional effects", National Tax Journal 28(1) 81-100;  Brown(1987) "Tax incentives and charitable giving – evidence from new survey data", Public Finance Quarterly 15(4) 386-396.</ref> summarises the American economic literature:
 :... early accusations that the charitable contribution deduction was inefficient as it did not induce more giving than it 'lost' in revenue<ref>Footnote original: See, eg, Taussig, 'Economic Aspects of the Personal Income Tax Treatment of Charitable Contributions,' (1967) 20 National Tax Journal 1; Schwartz, 'Personal Philanthropic Contributions,' (1970) 78 The Journal of Political Economy 1264.</ref> stimulated the growth of a voluminous econometric literature on the relationship between tax incentives and charitable giving... The research focuses on whether tax incentives are economically efficient ways of driving charitable giving,<ref>Footnote original: For summaries, see Charles T Clotfelter, <i>Federal Tax Policy and Charitable Giving</i> (University of Chicago Press, 1985); J Johnson, 'The Determinants of Charitable Giving with Special Emphasis on the Income Deduction Under the Income Tax—A Survey of the Empirical Literature' (1981) 3 <i>Canadian Taxation</i> 258; Scharf, Hogg, and Cherniavsky, <i>Tax Incentives for Charities in Canada</i>, (Working Paper No CPRN, No 03, Canadian Policy Research Networks, 1997)</ref> based on their '<b>price elasticity</b>'. Price elasticity measures the increase in aggregate giving in response to a decrease in after-tax cost, and a price elasticity figure greater than 1 indicates that is a '<b>treasury</b> <b>efficient</b>' measure.
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 :<i>https://www.cafonline.org/pdf/CAF%20UK%20Giving-FINAL%20-%20web%20enabled.pdf</i></ref>  The relevant figures are those specifying the total amounts given, not the total number of donors.  I here set out the most recent graph:<ref>The proportion of donors do not add up to 100% due to the fact that a donor can choose more than one cause. The category of 'other' has been excluded from the table and for this reason neither does the proportion of total amount donated sum to 100%.</ref>
 '''Click here for Graph''': [[http://wiki.mankin.org.uk/toc/images/c/c4/Toc1_Graph.jpg]]

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 :If this was the real motivation, it would have been possible to deliver it in a way which was consistent with the new approach to making tax policy.<ref>HMRC, "Tax policy making: a new approach" (2010).</ref>  ... Instead, ... we are back to the ‘rabbit out of a hat’ approach. If so, the government has only itself to blame for the firestorm it has created.<ref>Mike Truman, Taxation Magazine, 3 May 2012.</ref>
 It has become standard practice that the government proposing a reform offers every possible reason, good bad and indifferent, in its support.  So in the absence of a proper policy paper, it is impossible to ascertain what were the actual policy reasons behind the proposed reform, if indeed there were any.  But whatever the reasons, the charity lobby had the better of the argument, and public support; and after floating a compromise of increasing the cap to 50%, the government abandoned the proposal.<ref>HMRC, “Delivering a cap on income tax relief: a technical consultation” (2012) para 2.13.</ref>
-In all the public debate  there was no mention of the history of income tax reliefs; though this issue has arisen many times before.<ref>The consultation paper which followed misrecords the debate with a chutzpah which deserves to be recorded: "At the Budget, the Government was clear that it does not want donations to charity to be affected by the relief cap. Therefore, following extensive engagement with the charity sector, the Government has excluded the following from the cap: Gift Aid; Relief for gifts of land and shares; Payroll Giving; and Community Investment Tax Relief."
+In all the public debate  there was no mention of the history of income tax reliefs; though this issue has arisen many times before.<ref>The consultation paper which followed misrecords the debate with a chutzpah which deserves to be recorded: “At the Budget, the Government was clear that it does not want donations to charity to be affected by the relief cap. Therefore, following extensive engagement with the charity sector, the Government has excluded the following from the cap: Gift Aid; Relief for gifts of land and shares; Payroll Giving; and Community Investment Tax Relief.”  See [[Cash Gifts from Individual to Charity (Gift Aid)#Gift Aid: History | Gift Aid: History]]</ref>  For those who support a principles-based approach to tax reform, the story is a depressing one, though not unfamiliar.  But at the end of the day, the right result was reached, and the issue is probably settled for the medium term.
-::See [[#Gift Aid: History | Gift Aid: History]].</ref>   For those who support a principles-based approach to tax reform, the story is a depressing one, though not unfamiliar.  But at the end of the day, the right result was reached, and the issue is probably settled for the medium term.
 ==Matched funding incentives==

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 The government was not sure whether it was an attack on tax avoiders or the introduction of something like a minimum tax rate. Initially the narrative focused on the former. There were off-the-record briefings about donations into Romanian charitable trusts which would end up back with the donor. If that had been the target, the phrase ‘sledgehammer to crack a nut’ would never have been more appropriate. It appears that at least one such scheme does exist, but it equally does not appear to be a widespread problem, and could have been stopped by the existing rules if only HMRC had put some manpower into investigating those running such “charities”. Conscious that the argument was getting away from it, the government tried to regain some ground, explaining that the Chancellor had seen anonymised tax returns of high-earning individuals who had significantly reduced their tax bills by offsetting ... charitable donations. ... there could have been no way of knowing whether .. any charitable donations were genuinely made for truly charitable purposes, so what the Chancellor saw was meaningless.
 :Only recently has a more realistic line of argument surfaced, which was (ironically) best put in that bastion of Conservative journalism, the Guardian:
-::‘There is an entirely reasonable principle behind limiting the relief on donations: namely that people should pay their taxes… No one would openly suggest that the rich should be given special power to divert some large chunk of scarce public funds towards their pet priorities. But that is what happens where donations can be deducted from taxable income without any limit.’<ref>See [[Policy Issues in Charity Taxation#Policy reasons for reliefs for charities and donors to charity | Policy reasons for reliefs for charities and donors to charity]].</ref>
+::‘There is an entirely reasonable principle behind limiting the relief on donations: namely that people should pay their taxes… No one would openly suggest that the rich should be given special power to divert some large chunk of scarce public funds towards their pet priorities. But that is what happens where donations can be deducted from taxable income without any limit.’<ref>See [[#Charity reliefs: Policy | Charity reliefs: Policy]]</ref>
 :If this was the real motivation, it would have been possible to deliver it in a way which was consistent with the new approach to making tax policy.<ref>HMRC, "Tax policy making: a new approach" (2010).</ref>  ... Instead, ... we are back to the ‘rabbit out of a hat’ approach. If so, the government has only itself to blame for the firestorm it has created.<ref>Mike Truman, Taxation Magazine, 3 May 2012.</ref>

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 :<b>Improving HMRC guidance - next steps</b>
 :HMRC recognises that some published guidance is targeted at certain groups within the charity community and can be difficult for people who are not tax professionals to use. HMRC are determined to make guidance accessible to the whole of the charities community, from volunteers to professionals.
@@ Line 290: / Line 289: @@
 :Over the course of the next few months HMRC will be:
+:*  exploring how better to engage and interact with customers
-:•  exploring how better to engage and interact with customers
+:*   assessing and prioritising all existing charities guidance
+:*   scoping, developing, designing and piloting some different ways of presenting guidance to see if customers find them more helpful
-:•   assessing and prioritising all existing charities guidance
+:*   developing a more detailed timetable for this work
+:*   setting up arrangements to discuss specific topics and issues with customers
-:•   scoping, developing, designing and piloting some different ways of presenting guidance to see if customers find them more helpful
-−
-:•   developing a more detailed timetable for this work
-−
-:•   setting up arrangements to discuss specific topics and issues with customers
-−
 :This will be a large undertaking, in the interim HMRC will produce a number of short guides on specific topics to support charities.<ref>''http://webarchive.nationalarchives.gov.uk/20140109143644/http://www.hmrc.gov.uk/charities/improving.htm''</ref>