Charity
Charity

Nothing is as constant as change, or so they say. Even something as old and straight forward as charity seems to have undergone a metamorphosis in modern times. Charity used to involve selfless giving. People used to give to help others, not for any personal benefit. Indeed, many insisted on giving anonymously. Some still do. But not if they want a tax deduction. In their endeavour to encourage charitable donations many governments have made donations to charity tax deductible. This just goes to show how considerate our political masters are.

This particular tax exemption was created to make society a fairer place by encouraging people to donate to charities. Like all tax exemptions there might be some cost to society from the exemption. It adds to the size and complexity of the legislation. It increases the amount the Government will have to raise from somewhere else. So we pay higher rates of tax in order to allow charities to maintain their tax-exempt status. But it is worthwhile, because it encourages us to give to worthy causes. That’s what governments do when they create this exemption in their tax codes. Presumably the additional givers are not donating for selfless reasons, but for the rebate.

I hear you say that there is something odd here. Why would people give money away to get less back in the form of tax deductions. Well of course they generally will not. But the deduction reduces the comparative cost of giving to charities and thereby increases the amount they get. Economic rationalism strikes again. It’s odd that those who rail against our consumerist society and the influence of economic rationalism do not call for the scrapping of charitable rebates. Presumably it has nothing to do with the preponderance of the great and the good on charity boards. There is nothing like a spot of fund raising to bring out the best in a CEO’s spouse. For some reason working for a living does not have the same kudos as working for a charity. At any rate, people are now giving for the pleasure gained from giving to a worthy cause and because part of that pleasure is almost free. This “almost free” part being the component of the donation that they get back in their tax rebate. Who says nothing is for free anymore?
So having a tax deduction for charitable donations increases the complexity of the taxation legislation and nominal rates of tax. This is a small price to pay. But this worthy distortion of the tax code has other more insidious effects. It creates a very strong incentive for bodies to register as charities. After all, what better way to avoid paying taxes? But of course the bureaucrats are wise to that trick. It’s not so easy to register with the tax office as a religious or charitable body. We can’t have just anyone legally avoiding taxes.

Now the simple tax exemption has resulted in yet more red tape. Legitimate charities have increased compliance costs in demonstrating that they exist for selfless, rather than selfish reasons. That they are not just a business trying to avoid taxes in the simplest possible manner. The government bureaucracy is not just more powerful as a result having gained the rite to determine what is or is not a charity, but larger. People are involved in assessing and monitoring applications for charitable status. These people could be doing something that actually increased societies wealth. Perhaps by employing people, who instead go to soup kitchens or rely on charity shops. But oh no. Now they are busy monitoring people’s applications to become a registered charity. Some might even be writing minutes to other public servants on how processes could be streamlined or policy amended.

Clearly there are significant costs to society from providing a tax exemption for charities. Maybe they outweigh the benefits, maybe they do not. But what is really interesting is why so few politicians ever stand up and call for the exemption to be removed. Surely some must perceive the cost as greater than the benefit. A cynic might examine the status of political parties, think tanks and other political fund raising bodies. They might find that bodies that donate or support politicians’ re-election campaigns are often registered charities and conclude that the politicians have a vested interest in maintaining their tax-exempt status. But I suspect the cynic would be being too clever by half.
The reason politicians tend not to get on their high horse and call for a scrapping of tax exemptions for charities is that they would be crucified by the media if they did so. Abolishing tax exemptions might stimulate economic activity and lead to fewer poor and unemployed people. But the only real way of helping the poor is to give them a handout; not better prospects of getting well paid work. Furthermore, not trying to get the government to help is proof positive that you don’t care about the issue.



11 Comments
  1. 857373 791686Currently it seems like BlogEngine could be the very best blogging platform out there appropriate now. (from what Ive read) Is that what you are employing on your weblog? 255147

  2. 855701 188418Any way Ill be subscribing to your feed and I hope you post once more soon. I dont believe I could have put it far better myself. 749608

  3. 488013 930923Hi! Someone in my Facebook group shared this website with us so I came to check it out. Im definitely loving the information. Im book-marking and will be tweeting this to my followers! Outstanding blog and wonderful design and style. 987393

  4. 377013 218642I discovered your blog website on google and check a couple of of your early posts. Proceed to keep up the outstanding operate. I just extra up your RSS feed to my MSN News Reader. In search of ahead to studying extra from you in a whilst! 867118

  5. 244888 415779I took a break to view your write-up. I discovered it extremely relaxing 850088

  6. 705872 740199Hiya! Great blog! I happen to be a every day visitor to your website (somewhat much more like addict ) of this web site. Just wanted to say I appreciate your blogs and am searching forward for much more to come! 607491

  7. I know this if off topic but I’m looking into starting my own blog and was curious what all is required to get set up? I’m assuming having a blog like yours would cost a pretty penny? I’m not very web savvy so I’m not 100 positive. Any recommendations or advice would be greatly appreciated. Cheers

  8. There are some fascinating points in time in this write-up but I don’t know if I see all of them center to heart. There is certainly some validity but I will take hold opinion till I look into it further. Excellent post , thanks and we want a lot more!

  9. 88077 843412As I web site owner I believe the articles here is truly great , thankyou for your efforts. 990081

  10. I and my friends were actually analyzing the great tricks found on your web page and then before long got an awful suspicion I had not expressed respect to the web site owner for those techniques. These young boys appeared to be absolutely passionate to read all of them and already have surely been tapping into these things. We appreciate you getting so accommodating as well as for deciding upon this form of high-quality issues millions of individuals are really needing to be aware of. My sincere apologies for not expressing gratitude to earlier.

  11. Thanks for ones marvelous posting! I actually enjoyed reading it, you can be a great author.I will be sure to bookmark your blog and may come back very soon. I want to encourage you to definitely continue your great posts, have a nice morning!