1 December 2014
The proportion of people who make financial contributions to
charity is significantly higher in countries offering tax breaks
for giving, reported a ground-breaking study conducted by Nexus,
McDermott Will & Emery LLP, and the Charities Aid Foundation,
along with distribution partner NFP.
The Rules to Give By Index, the world’s first international
index of government support for charitable giving, found that the
percentage of people donating money to charity is 12 percentage
points higher in nations offering tax incentives to individuals (33
per cent) than in those that do not (21 per cent).
The study compared tax incentives and other aspects of charity
law to people’s likelihood to give as measured by the Charities Aid
Foundation’s World Giving Index, the international index of
generosity. It found that the influence of tax incentives on giving
does not depend on a country’s level of economic development.
Across the economic spectrum, countries which offer tax incentives
to individuals see higher rates of people giving money to charity
according to the World Giving Index.
However, there is a disparity between support for corporate
donations and support for donations by individuals. Seventy-seven
percent of countries offer some form of tax incentive to corporate
donors, but only 66 percent offer incentives to individual
donors.
While the majority of countries offer incentives for people
making donations within their lifetimes, only 46 percent of
countries that impose taxes on the estates of the deceased offer
incentives for people who wish to leave money to a charitable cause
in their will.
The report was produced to support the Nexus Global Campaign for
a Culture of Philanthropy, which aims to enable and stimulate
philanthropy around the world.
“As a network, Nexus convenes young wealth-holders and social
entrepreneurs annually at the United Nations. We want to
encourage international standards. This report is a start,” said
Jonah Wittkamper, Global Director of Nexus. “If young people see
legislation and tax codes as the ‘operating systems’ for their
countries, then this report helps to reveal the differences between
Linux, MacOS and Windows. It reports about the infrastructure of
philanthropy and donor institutions and encourages legislative
action where it is needed. Is it time to upgrade the OS of your
country?” he continued.
“The Rules to Give By Index will provide an invaluable resource
to aid the promotion of global philanthropy and McDermott is proud
to have contributed to its development" said Jeffrey E. Stone and
Peter J. Sacripanti, Co-Chairs of McDermott Will & Emery
LLP.
“This unique study shows that tax incentives play a crucial role
in encouraging people to support the work of non-profits and the
charitable sector," said John Low, Chief Executive of the Charities
Aid Foundation, an international charity that helps people and
businesses support the causes they care about and provides
financial services designed specifically for the charitable
sector.
He continued, “Tax incentives are of course very useful in
encouraging greater levels of giving but they also represent an
important principle; that we don't tax donations to civil society
organisations for the public good.
"This work suggests that we are close to a global consensus on this
principle, which bodes well for the future of charitable giving and
civil society. Of course, it is vital that tax incentives for
giving are not misused in order to avoid paying a fair rate of tax,
but if used well, they can help encourage people to support the
non-governmental organisations that do so much to improve
communities and the lives of vulnerable people around the
world.”
Kris Stegall, NFP International’s Assistant Vice President of
Research and Development, added, “This report provides factual
support for the argument of expanding tax incentives for
philanthropic tendencies. With wealth and anticipated
intergenerational wealth transfers at all-time highs, the time is
right to have a broad discussion on the tax incentives that may
help shape legacies and benefit generations to come. This
study provides the roadmap for those conversations across the
globe, from the individual and corporate level all the way to the
legislative level.”
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Notes for editors
Nexus formulated seven questions around philanthropy in 2012,
then partnered with McDermott Will & Emery to conduct research
on the tax codes and laws in all 193 UN Member States regarding
these questions. The information gathered is presented in the Rules
to Give By Country Reports.
Charities Aid Foundation joined in 2013 to develop an
informative indexing method and collaborate on analysis. A weighted
scoring method was developed (explained in the report) to reflect
the importance of certain legal infrastructure for charitable
giving. The index does not attempt to assess the implementation of
laws or to assess the size/value of tax incentives as differences
in rates of tax levied on income and in the way incentives are
offered (credit or deduction) would make comparison unworkable.
Rather, the index assesses whether the legal instruments are
technically in place. Further information about this can be found
in the "Scope and Limitations" section of the report.
About Nexus
Nexus is a global movement of 2,000+ young people from over 70
countries working to increase and improve philanthropy and impact
investing by bridging communities of wealth and social
entrepreneurship. Founded in 2011, Nexus puts the hope and promise
of young people on the world stage by bringing young leaders
together at Nexus Summits around the world for dialogue, education,
and collaborative problem solving.
About McDermott Will & Emery
McDermott Will & Emery is a premier international law firm
with a diversified business practice. Numbering more than 1,100
lawyers, we have offices in Boston, Brussels, Chicago, Düsseldorf,
Frankfurt, Houston, London, Los Angeles, Miami, Milan, Munich, New
York, Orange County, Paris, Rome, Seoul, Silicon Valley and
Washington, D.C. Further extending our reach into Asia, we have a
strategic alliance with MWE China Law Offices in Shanghai.
About Charities Aid Foundation
Charities Aid Foundation (CAF) is a leading international
charity registered in the United Kingdom with nine offices
covering six continents. Our mission is to motivate society to give
ever more effectively and help transform lives and communities
around the world. We work to stimulate philanthropy, social
investment and the effective use of charitable funds by offering a
range of specialist financial services to charities and donors, and
through advocating for a favourable public policy
environment.
About NFP
NFP (National Financial Partners Corp) is a leading insurance
broker and consultant that provides employee benefits, property
& casualty, retirement, and individual wealth and insurance
solutions for high net worth individuals, corporate clients and
non-profit organizations around the globe. NFP companies work in
partnership with clients to help maximize the potential of their
legacies through asset protection, diversification, and wealth
transfer.