I've been arguing for days on any radio programme that will have me that a very significant part of motive for the wealthy when donating to charity is the desire to exercise the power that their wealth brings and to conspicuously demonstrate that wealth. In other words, their apparent philanthropy is an act of conspicuous consumption.
It is for that that reason that I have argued that they do not need tax relief to incentivise their donations and that if anything that tax relief is entirely counter-productive to the causes that charities should promote. After all, charities are meant to correct problems in society, but far too many of those who donate use their wealth and their position of influence to ensure that questions about why charity is needed are not asked by the very people who should be posing the question. That is why, for example, we see some aid agencies not talking about tax justice even though it is very obvious that tax injustice and tax haven activity is a primary cause of poverty in developing countries. As a result of the malign influence of some donors this issue is not addressed and the consequence is that poverty persists. There are, of course, numerous other examples and I'm pleased to see that there is a growing body of opinion expressing this sentiment in the press today.
I would warmly recommend Polly Toynbee's article on this issue, and not just because she mentions me. She refers to a meeting she attended at which Lord Fink, Conservative party treasurer and hedge fund capitalist, spoke about the reasons for giving to charity. As she reports:
"I want to talk about what charity can do for us," he said. He sold charity as a door-opener to high society. "What do you do now you've got all the toys?" he asked. "You've already got all the houses, yachts, cars and jets you can use, so what comes next is charity." Charity is not just for the joy of giving: "I get invited to places I'd never have seen otherwise." It is the passport to the in-crowd, he said, listing the eye-popping names and places his philanthropy had taken him, including No 10.
Precisely. That is exactly what high-powered philanthropy is about. It is a determined effort to maintain the privilege of those in a particularly small group in society through the exercise of power granted by wealth. There are honourable exceptions, of course, and I know it. But let's not beat around the bush: Fink spoke for many.
To find a similar theme in the Financial Times is also welcome. Philip Stephens offers that this morning, saying in his opening, paradoxical, comment:
"I am wealthy. I am also generous. After a lifetime fleecing the clients of a US investment bank I have become a patron of the arts. My accountant approves. A well-timed donation can help push down my tax rate towards single figures. Now, here's the deal. You — and, by you, I mean other taxpayers rich and poor — must provide unlimited subsidies to match my largesse."
And let's be clear, that is exactly what this is about: this is about tax hypothecation by any other name. Stephens acknowledges that, saying:
Lost in all the wailing has been the simple insight that tax relief is public spending by another name. The deduction on my big-hearted gift to the Royal Opera House could otherwise be used to pay down the deficit or help build a new school — even to cut someone else's tax bill.
The case for entirely open-ended relief rests on the curious premise that charitable giving is invariably superior to public spending. What's more, it assumes that rich philanthropists always make better choices than voters or elected politicians in deciding what counts as a deserving cause. So if I tear up my cheque to the National Gallery and divert the funds to the Dedanists' Foundation or to Surfers Against Sewage, my fellow citizens must continue to chip in with their own contribution.
I entirely agree. And it is this hypothecation that must now be challenged.
I'm sure that there is a need for charity, and will be a continuing one. Do not get me wrong. But let's also be clear, charities are badly administered in this country by the Charity Commission, which has been denied funds for this purpose for far too long, and relief is given for causes which have extremely dubious charitable value. Better administration is needed, and funding for that purpose is essential, whilst the stricter definition of what is, and is not a charity is clearly needed.
But the one thing on which, I think, there should be universal agreement at this moment is that there is no reason for higher rate tax relief on charitable giving. Unicef were one of the first to shout about its withdrawal - and are, I would add, one of those charities which has never raised questions about tax and development in its work to the best of my knowledge - but as Stephens notes:
Unicef has fed the hysteria by claiming that the world's poorest children could “pay with their lives”. Apparently, one Unicef benefactor has already refused to support an emergency mission because of the tax implications. Some will wonder what this says about the donor.
And they would be absolutely right to do so. A person who can only give to charity if they get higher rate tax relief is not making a charitable donation and is not a philanthropist. They are simply a person seeking influence and self aggrandisement. And that has never been a charitable goal.
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Oddly for me I am in full agreement with Polly Toynbee and Richard Murphy on this one. It is a simple matter of fairness that the many shouldn’t subsidise the charitable givings (however worthy) of the few.
The depressing point from watching this debate very closely over the last few days is that many (predominantly the Labour Party, but also the Daily Mail/Telegraph) have been using this issue as another way of attacking Osborne’s “incompetent” Budget.
Thus we are actually more likely to see a u-turn on this issue as Cameron sees himself assailed by both his natural supporters (DT, DM and rich philanthropists) and from the opposition, the Labour Party and the likes of the BBC who sense a politically-interesting volte-face.
Is it too much to expect the Labour Party, or UKUncut, to put aside their differences with the rest of Osborne’s economic agenda and back him on this one ?
I suspect UK UNcut does
I suspect your motives too
I’m really baffled as to why you “suspect my motives” as this tax relief is something I feel strongly about, having personally seen the consequences of the well-off dictating charities policies as a quid pro quo for their “subsidised” donations.
I’m even more baffled as elsewhere you have just welcomed Max Hastings to the fold of those campaigning against unfairness in the tax system.
You suspect my motives ? I’ve turned up at many public events to hear you talk from the Frontline Club to Occupy SLX, and I’ve recommended some of your research to personal friends who are financial journalists and Treasury civil servants.
I disagree with you on some specific issues but if there is to be a broad popular movement (as you say witrh Max H we are approaching a tipping point) on tax fairness, which you seem to be leading, then you might have to sacrifice ideological purity for a broader consensus in terms of those you consider supporters.
OK, apology offered
Read Paul Krugmnan a coupole of days ago (actually 12/4 I think) on why I had my doubts
If I am wrong though, sorry
But I’m not good on sacrificing ideological purity
Politicians can do that
It’s why I’m not one
And it’s why politicians don’t change the world and thinkers do
Well said, Richard. As an ex voluntary sector worker (in the 1980s) who worked with a number of charities I can tell you that donations seldom came without strings attached. One of the unspoken ones was that we didn’t publicly talk about the causes of the social problems we were trying to tackle in case we ‘offended’ donors. So yes, power in its many forms is a key elements of the system in many cases.
Anyway, I thought this quote from Hobsbawm’s ‘The Age of Empire’, appropriate. It still has relevance today I’d argue, and not just to Americans:
‘The most that can be said of American capitalists is that some of them earned money so fast and in such astronomic quantities that they were forcibly brought up against the fact that mere capital accumulation in itself is not an adequate aim in lfe for human beings, even bourgeois ones. [Carnegie and Rockefeller philanthropic foundations…]. Philanthropy on this scale, like art collecting, had an incidental advantage in that it retrospectively softened the public outlines of men whose workers and business rivals remembered them as merciless predators.’
Woth adding a quote Hobsbawn cites from Andrew Carnegie:
‘The amasing of wealth is one of the worst species of idolatory – no idol more debassing than the worship of money…To continue much longer overwwhelmed by business care and with most of my thoughts wholly on the way to make money in the shortest time, must degrade me beyond the hope of permanent recovery.’
Agreed
Trust Tony Blair to <a href="http://www.guardian.co.uk/society/2012/apr/17/tony-blair-david-cameron-charity-tax-cap"weigh in on the side of the super-rich as usual.
Some have said that Cameron is simply a more right-wing version of Blair but on this evidence, Blair is actually the more right wing version of Cameron(!) And that tells you something about where the Labour Right wing are coming from.
If the income of an individual is given to a charity and does not receive relief then logically one must question why income received directly by a charity receives relief?
I personally find it hard to distinguish between the two. Can’t one argue that charities with an income could do so much good by paying taxes as well?
I think charities that do not distribute a reasonable part of their income should be taxed
And should be denied relief
Very well said.
The only thing more extraordinary than George Osborne doing something right is the extent to which so many on the left and in the liberal media have got this wrong.
Today’s articles from you, Polly Toynbee, Dan Hodges and Philip Stephens are most welcome.
I suspect Cameron will however “bow to public pressure” and scrap the plans.
Since they are so at odds with the Conservative policy of kowtowing to the interests of the rich, I can’t help but wonder if the whole thing is a ruse that they never actually intended to pursue, plans mooted so that they be dropped with the claim they are listening to “the people”.
Clearly Lord Fink doesn’t subscribe to Matthew 6 v1-4
Does anyone think that the super-rich’s reaction to this measure is proportionate to the tax supposedly at stake (£75M a year)?
One would be more tempted to ask if the bad publicity for the government is proportionate to the tax supposedly at stake. I would suggest it is very rare for a government to act in such a controversial way over so little.
Most of the noise appears to be coming from the charities and it is easily sold to the general public as a measure that impacts upon some very worthy charities.
Rightly or wrongly this is a very bold move for any government to make.
Even if you do away with tax relief on charitable donations, a lawyer friend of mine has found an ingenious way of getting 100% (yes, 100%!) tax deduction.
By donating 3 days a month to pro bono work for a deserving charity, he forfeits 3 days income and of course for those 3 days he pays no tax at all.
I have suggested he should calculate the tax that would have been paid had he charged for his services, and send that to HMRC. What do you think?
But he’s not avoiding tax
There is consistency between tax paid and the economic substance
So no tax due
Hi Richard.
I am the founder of Oasis Trust. We run the People’s Parliament on Westminster Bridge Road. We have a big public debate next Thursday 7pm with John Lowe, CEO of CAF, about this important issue. Big audience expected. We would love you to take part. For more details of the event please follow this link http://charitytax.eventbrite.co.uk/?dm_t=0,0,0,0,0
If you are interested please email me with contact details and we can chat.
Steve Chalke MBE Founder, Oasis Global & Stop The Traffik
United Nations GIFT Special Advisor on Community Action Against Human Trafficking
To contact Dave Parr, my Private Secretary:
Oasis UK The Oasis Centre, 75 Westminster Bridge Road, London SE1 7HS
| T. 020 7921 4244 | E. Dave.Parr@oasisuk.org