There has been much discussion and controversy in recent weeks
regarding the proposed limits on the amount of tax relief that taxpayers can
receive. I am inclined to be supportive of this idea, based on the worry that
this charitable relief is effectively just a means for those with large tax
bills (who are generally speaking going to be among the most fortunate members
of society) to choose where government money is spent. Governments are perhaps happy
to allow this loss of revenue on the basis that some of these high earners
wouldn’t bother earning so high if they weren’t allowed such a large say in
where their taxes are spent.
Nevertheless, despite my qualms, I will assume “charitable tax
deductions” can be acceptable in what follows. Accepting this alone does not
imply that there is no need for reform of this position of what I will refer to
as ‘tax-privilege’ for charities.
One line of argument in favour of limiting the deductions is
that a lot of the charities are bogus, and that the wealthy use them to circumvent
taxation in a surreptitious fashion. The response to this is—rightly—that if members
of the public know of a bogus charity it will be investigated by the charity commission
and struck off. There may be charities used for corrupt purposes, but hopefully
they will be found out and their sponsors end up in the dock on charges of
fraud. Whether or not this is likely to ever happen, I will assume that these
cases of fraud are not a major concern.
I still think there is a strong case to be made for reform
of this charitable giving deduction, and not necessarily that of a cap of the
sort proposed. My proposal is that if
charitable relief is to be retained, the conditions on charities receiving tax-privilege
status should be much more restricted than the conditions required simply to be registered as a charity.
What the public do not like, I would suggest, is that those
with large earnings can direct tax benefits towards their personal agendas. Charitable gifts should be directed to improving the
country, the world, or the lives of the badly off. On that we can agree.
However, the conditions on becoming a charity are relatively lax. The body
should be set up with some kind of charitable purpose, and must not exist to
enrich its owners/administrators in the same way that profit-making companies are.
This is fine, but this broad church includes charities that don’t seem to be
worthy of tax-privilege status.
Two examples spring to mind. The first is religious organizations.
It seems totally unacceptable to me that people should be able to redirect tax
money to their preferred religion. The second is think-tanks and research
charities that are clearly political. A lot of what such organisations do is
not thinking up new ideas at all but rather attempting to influence opinion, media
and so on in favour of their pre-existing agenda. Propaganda, if you will. But
even if it was more open-minded research into issues, it is likely to attract
money on the basis that it has a particular agenda. Given that the agenda is
usually that of the interests of one group of society against the interests of
the rest it is particularly offensive. (And it should be noted that since the
charitable deductions rules apply to the very wealthy, it hardly needs to be
said whose interests they would further).
These activities are not designed to improve society or help
the needy, but rather to further the interests of the donor. And directing tax
revenues to particular personal interests in this way circumvents democracy without
gaining the intended benefit—greater resources to help those in need.
I therefore propose that the charity commission or tax
authorities should set themselves the task of separating charities into those
that are, and those that are not, worthy of tax-privileges for their donors. Worthy
charities are those that attempt to help the needy and improve the culture of
the country. Allowing tax deductions for this is not such a loss to the country
since the money goes to a good cause (even if it helps those abroad). However, there
will be charities that meet standard conditions for charitable status which
would not meet these more stringent criteria.
If any charities are
worthy of such tax-privilege for the benefit of their donors, it is still quite
easy to identify some which are certainly not.
Bogus charities for one, but also campaigning charities. Governments supporting
charity is acceptable. Supporting the interests of high-earning tax payers is not.
