Do the rich get richer by donating to charity?

TruckerT

SailorSam wrote: »

donations be made without it costing a lot to the individual philanthropist 'cos of the tax

The point is that, out of all the many tax-relief schemes which exist, giving to charity is probably the only one which does not save money and/or generate income for the donor

Yet the government has chosen to target charitable donations as proof of their determination to make our society 'Big'

TruckerT

princeofpounds

The giftaid scheme does not really contradict my original point, which was that you cannot get richer by donating to charity

The reason that a cap is being sought is because there is serious abuse of the system (as we have already discussed in another thread 'allergy to austerity').

People are making charitable donations out of pre-tax income. Those charities, often based abroad, use the bulk of the money to benefit the donor. Perhaps some are real charities who take a 'cut' in return for facilitating the tax evasion.

For instance, I wouldn't be surprised if a lot of school fees for swiss boarding schools are being paid as charitable donations, or a lot of pakistani charities are building housing for the relatives of donors back home.

There was a similar scam here in the UK until recently, where you put a donation in a company, list the company on a 'dummy' stock exchange like jersey, pump up the valuation as you are the only one trading the shares, donate the shares. You get to record a huge donation to charity and wipe it off your taxable income, the charity is happy as it still gets some money, although far smaller than the 'recorded' donation. This was closed by HMRC a couple of years ago.

wotsthat

LydiaJ wrote: »

Why £50,000? Rather than a cap, it would be better to change the rules so you can only gift-aid things if they are donations, pure and simple, but not if you are getting goods or services in return. (OK, I understand that might be harder to implement, but a £50,000 cap seems such an incredibly blunt instrument.)

Or simply get rid of gift aid altogether and require all charitable donations to be made out of post tax income.

The current system allows individuals to bypass the taxation system of the elected government. I'd take it a step further and have a cold hard look at the charitable donations being made direct by government and councils on behalf of the taxpayer.

I'd consider making additional charitable donations if I didn't already think that I was already effectively donating money to charity via my taxes.

N1AK

princeofpounds wrote: »

The reason that a cap is being sought is because there is serious abuse of the system (as we have already discussed in another thread 'allergy to austerity').

The government has now outright stated that it believes abuse of the system via 'dodgy' charities is minimal and that this isn't why it is making the change. The government has decided that people should not be able to take money that would have gone to central government and give it to causes of their choice. Personally I don't think this is unreasonable, but even as a generally conservative person I find the governments misleading statements and the hypocrisy given their 'big society' agenda disappointing.

zagfles

N1AK wrote: »

The government has now outright stated that it believes abuse of the system via 'dodgy' charities is minimal and that this isn't why it is making the change. The government has decided that people should not be able to take money that would have gone to central government and give it to causes of their choice. Personally I don't think this is unreasonable, but even as a generally conservative person I find the governments misleading statements and the hypocrisy given their 'big society' agenda disappointing.

I don't think it contradicts 'big society', which seems to means people doing things themselves, rather than relying on nanny state.

Before these changes, someone earning £250,000 can decide give £100,000 (gross) to charity, and the govt will pay half of it for them.

Now the govt will only pay half of the first £62,500, not the whole lot. There's nothing stopping the donor still contributing £100,000, just the govt has limited the amount it will subsidise.

zagfles

TruckerT wrote: »

The giftaid scheme does not really contradict my original point, which was that you cannot get richer by donating to charity

Clearly, the fact that higher rate taxpayers can get a subsidy on their leisure activities is an anomaly which should be removed - it is not clear that individual admission fees are eligible for gift-aid - it is possibly arguable that by giving their gift-aided members free admission to their sites, charities are going against the spirit of the rules - this is the fine line between tax avoidance and tax evasion which the government claims to wish to clarify

Other tax-relief schemes, which have not been discussed, are investment opportunities from which the wealthy 'donors' stand to make huge gains

TruckerT

There are rules about gift-aid where the donor receives a benefit - I think there has to a 10% voluntary element or it has to be an annual admission. When we went to space centre they gave annual admission for the same price as a one-off visit if you gift-aided the entrance. Other places charge 10% more for gift-aid but then might give you tokens for the coffee shop etc. It's well worth a higher rate taxpayer paying 10% more as they'd get 25% back off the taxman.

There are other more indirect ways where days out are subsidised by the taxpayer through charities. A friend of mine has a son with a minor disability - there is a charity for this disability, which in common with most childrens' charities is well supported, but they don't really need money for research or treatment, so the money raised by the charity is used in the main for social events. The idea is they meet other children who have the same disability.

In the past year the whole family has had free days out all sorts of places including expensive theme parks, free meals outs, even weekends away, all paid for by the charity. He donates well to the charity, but effectively he gets tax relief on days out in a more indirect way.

N1AK

zagfles wrote: »

I don't think it contradicts 'big society', which seems to means people doing things themselves, rather than relying on nanny state.

It contradicts it because it is a change that will lead to less money being given to charity. If I was going to get half of the money taken away from me anyway then that is a serious incentive to give it to a cause that I cared about. The government know this is going to lead to more money going to central government otherwise they wouldn't bother to change the rules and that money was previously going to go to charity.

So what we've ended up with is a government that cuts services and tries to deflect criticism by suggesting that charity should play a bigger role. Then cuts donations to charities. It's a smoke and mirrors ploy.

zagfles

N1AK wrote: »

It contradicts it because it is a change that will lead to less money being given to charity. If I was going to get half of the money taken away from me anyway then that is a serious incentive to give it to a cause that I cared about.

If you really cared about it you'd still give to it even the govt doesn't. In fact if you truely cared you'd give extra to make up for the shortfall the charity will suffer because of this change

On the other hand if you're more interested in the size of your tax bill you might not.

The government know this is going to lead to more money going to central government otherwise they wouldn't bother to change the rules and that money was previously going to go to charity.

No, that money (other than the first 20%) was previously going to the doner.

So what we've ended up with is a government that cuts services and tries to deflect criticism by suggesting that charity should play a bigger role. Then cuts donations to charities. It's a smoke and mirrors ploy.

Well with more money going to central govt there will be less pressure to cut services.

It's not like they've stopped subsidising charitable giving, they're just capping tax relief at £50,000 or 25% of income whichever is higher.

Unlimited relief effectively allowed the very rich to decide their favourite charity was more important than govt spending, that a donkey sanctaury or an arts charity were more important than the NHS, education and social security.

Taxation becomes pretty pointless if it's optional.

alinwales

I'm a little confused now

If you're a basic rate tax payer, you go somewhere, sign a giftaid form and the somewhere can claim 20% tax on what you have paid them. Therefore the 20% you have paid in tax goes to them instead of the Government.

If you're higher rate, the same somewhere can claim their 20%, but you can also get your 20% back at the end of the year, if you avoid ticking the box to give this extra to charity. Therefore it's a bit like getting a discount.

If I am right, surely this is in effect a discount for richer people? This is assuming they don't feel a moral obligation to give the other 20% to charity. They don't get richer as they've spent £45 to get in, but they don't get poor very quickly because they have only really spent 33.50. (less than concessions rates I bet)

If I am wrong, please furnish me with the details of where I went wrong.

N1AK

zagfles wrote: »

If you really cared about it you'd still give to it even the govt doesn't.

All of which is irrelevant to the original point. I've already said I don't necessarily think that charitable giving should get tax back so arguing the relative merits seems like an exercise in futility. All you've done is pointed out how, as I stated, this is will lead to less money going to charities.

My only point was exactly this. The government has used charity as a diversion to allow it to decrease government services. Now it is limiting the money those charities collect which will hamper their ability to provide them. I'm not saying the services should exist at all. I am saying that the current governments position is hypocritical. In fact it is one of the few things that's really frustrated me about the coalition.