1. Helping individuals give to charity
  2. Making charities stronger
  3. CAF Venturesome >
  4. Governance >
  5. Global Alliance >
  6. Campaigns and Public Affairs >
  7. Research >
  8. Blog Home >
  9. CAF Resilience programme >
  10. Careers >
  11. Media office >
    1. CAF welcomes party leaders’ commitments to Legacy 10 campaign
    2. CAF welcomes launch of Give More campaign
    3. New online tool for charities makes social investment simple
    4. Religious donors give more than double those of no faith
    5. Paul Cheng moves on from CAF
    6. Ted Hart appointed new CEO of CAF America
    7. CAF respond to arts donation figures
    8. Government urged to foster stronger giving culture
    9. Tax changes could strangle major donations - says charity
    10. Motherhood can change our giving
    11. CAF and Legal & General to launch pioneering local social investment scheme
    12. Charity staff in Kent help bring in £37,000 for Sport Relief
    13. CAF leads campaign with NCVO to drop ‘charity tax’
    14. Philanthropists say Budget change will slash charitable donations
    15. CAF responds to Chancellor's comments about tax relief
    16. Top charity execs: Government cap on tax relief will hit donations from major donors
    17. Poll reveals scale of backbench discontent on charity tax changes
    18. CAF responds to comments made by Treasury minister David Gauke
    19. South London music charity keeps up their good work
    20. Fewer than one in four support Government tax relief cap on charitable donations
    21. CAF congratulates winners of 2012 Business Charity Awards
    22. The Sunday Times Giving List 2012
    23. Charity Awards 2012 shortlist
    24. Charity Tax cap will cost society up to £1.5 billion a year
    25. Pasty tax and caravan tax: charity tax must be next to save “Big Society” says charity
    26. Our response to Government u-turn on charity tax
    27. Her Majesty’s Charity Work is an Example to the World
    28. HALO Trust wins top award at Charity Awards 2012
    29. Government announces endowment funds to arts organisations
    30. CAF comments on Government's announcement on Giving
    31. Donations to Armed Forces charities surge, while giving to other charities dips
    32. United Score in First Premiership Battle as Britain’s First League of Giving is Revealed
    33. CAF Social Impact Fund supports 80,000 in a year, as demand for charity funding grows
    34. Community sports clubs and charities face 15% slump in income – despite 'Olympic Effect'
    35. Make people with disabilities role models say public as Paralympic Effect takes hold – poll
    36. Payroll Giving organisations seek ways to work together
    37. Banking reforms will cost charities millions, say charity leaders
    38. Ed Balls Tops CAF's Generation Game
    39. Charities face generation time-bomb, as younger people lose the habit of giving – report
    40. Government-backed programme to fund ‘good causes’ launches
    41. Government payment by results reforms risk leaving charities in the cold – report
    42. Banking Reform Bill will leave charity cash at risk
    43. CAF responds to PM's announcement on payment-by-results contracts
    44. CAF contact centre 7th in top industry award
    45. Donations to charity fall by 20% as fewer people give, UK Giving 2012 finds
    46. Charities Aid Foundation backing this year’s Children in Need
  12. Events >
  13. Publications >
  14. CAF Glossary of terms
  15. Security centre >

Media office

CAF is one of Europe’s largest charitable foundations. We produce research on charities and charitable giving, develop policy ideas and work with people, companies and charities to help good causes thrive.

Our Media team provides journalists with comments, interviews and information. We can be contacted 24/7 and have an ISDN line for broadcast interviews. Call us on 03000 123 286.

Press releases

Contact our Media team

Press office direct line (24 hours): 03000 123 286


Tax relief on charity donations ‘effective’ but often skewed in favour of the wealthy – CAF

17 May 2016

Tax incentives encourage people and businesses to give more to charity but are too often skewed in favour of the wealthy and causes favoured by governments, an international study has concluded.

People are significantly more likely to have given to charity in the past month if they live in a country which offers tax relief on donations than if they live somewhere which does not, according to a report by the Charities Aid Foundation.

Donation States - An international comparison of the tax treatment of donations - a study of 26 developed and emerging economies - compares the way tax incentives for charitable donations are offered across the world. CAF is one of Europe’s largest foundations and supports charities worldwide.

The report found that incentives are widely used by governments to encourage giving to charity, and help drive up both the number of people giving to good causes and the value of donations.

But it warns that regular basic rate taxpayers often have less access to generous incentives than wealthy people and companies. In some countries excessive red tape creates major barriers to people on moderate incomes taking up tax reliefs at all.

While focussing incentives on those with the greatest ability to give money may appear pragmatic in the short term, it risks inflicting long-term damage on charities and discouraging giving by the majority if incentives are perceived to be unfair.

The report also found that, in some countries, governments only offer incentives for causes that promote their priorities. Such favouritism risks damaging the long term development of a healthy civil society.

Two-in-three countries worldwide offer tax incentives on charitable donations but little comparative research has previously ever been undertaken into how they work. The CAF study analyses the tax regimes and incentives of 26 countries covering six continents ranging from the UK and United States to Nigeria and Bangladesh. It sets out a series of recommendations for making such schemes more effective and highlights the need for them to be as simple, open and progressive as possible.

The report was aided by the provision of legal support through the TrustLaw program – Thomson Reuters Foundation's award-winning global pro bono service which connects top law firms and corporate legal teams around the world with charities and social enterprises working to create social and environmental change.

Findings of the report include:

  • Greater numbers of people and businesses give to charity in countries which offer tax incentives on donations. People are 12 percentage points more likely to have given to charity in the past month if they live in a country which offers tax relief on donations than if they live somewhere which does not.
  • The value of tax incentives appears to have a direct impact on how much people give, with more money given when the value of tax incentives increases. Incentives are most effective in nations with higher rates of income tax.
  • Corporations tend to get more and bigger tax incentives than individuals. 77 per cent of countries offer tax incentives to businesses making charitable donations compared. 66 per cent offer incentives to individuals.
  • In some countries, tax incentives are being used to sideline parts of civil society which do not conform to the government’s agenda.

The report’s author, CAF International Policy Manager Adam Pickering, said:

“Tax incentives are worth many billions of pounds to good causes worldwide and it is a great thing that there is such a strong international support for charitable giving being incentivised in the tax system.

“Such incentives are not the biggest motivation for people to give – and nor would we want them to be. But it is clear that they can be an effective way for governments to encourage people and businesses to support civil society.

“As we look to build the capacity of charities to do good across the world, there are important lessons which can be drawn from the benefits and weaknesses of the diverse range of tax incentive schemes in different countries.

“Crucially, it is important that they 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.”

The report sets out a series of recommendations for making tax incentives schemes effective. These include:

  • Equality of causes. All causes should be incentivised under exactly the same terms. It should not be for governments to decide which types of causes qualify.  Charitable giving cannot be used to compensate for public service cuts.
  • Equality of incentives. Incentives should, as far as possible be the same for companies and individuals. Governments should also strive to ensure that incentives are not seen to give a disproportionate benefit to the wealthiest in society. While tax deductions are the most common method of incentive, tax credits are the most progressive. These ensure that those on the lowest incomes do not endure the highest cost when donating.
  • Claiming incentives needs to be easy. Complex arrangements make people less likely to claim. Where possible, hybrid systems – which combine tax credits and tax deductions – should be avoided.
  • Low tax economies should offer more favourable incentives in order to offset the relatively lower value of tax that can be claimed back. This can include removing caps on the total amount which can be claimed, or offering credits at above the highest rate of tax.
  • In countries where tax expenditure must be limited, for instance in some developing nations, government should resort to caps rather than limiting eligible causes.

NOTES TO EDITORS

1. Donations States – an international comparison of the tax treatment of donations, analyses a sample of 26 nations which span six continents and account for 77 per cent of global GDP.  Our sample includes Argentina, Australia, Bangladesh, Brazil, Canada, China, Egypt, France, Germany, India, Ireland, Italy, Japan, Mexico, Nigeria, Peru, Philippines, Poland, Russia, Saudi Arabia, Singapore, South Africa, Turkey, United Kingdom, United States and Vietnam

2. Charities Aid Foundation (CAF) is a leading international charity. The CAF Global Alliance includes nine offices covering six continents which help people and business support charities in more than 100 countries worldwide.

3. The report was made possible thanks to the provision of pro bono legal support through the Trustlaw programme. TrustLaw works with over 550 legal teams in companies across 170 countries that generously support the legal requests of TrustLaw NGO and social enterprise members for free. CAF is extremely grateful to the Thomson Reuters Foundation, TrustLaw, and to DLA Piper who coordinated this legal research together with Doulah & Doulah, General Electric Company, and Grünkorn & Partner Law Co., Ltd., for donating their time and expertise.

Back to top