Tax Incentives Worldwide Help Increase Charitable Donations Says New Global Study
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 percent) than in those that do not (21 percent).
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.
A Culture of Philanthropy
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.
Tax Incentives Key
“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.”
To download the report and find out more about the Global Campaign for a Culture of Philanthropy please visit: www.nexusyouthsummit.org/campaign.