Do the rich get richer by donating to charity?

ChiefGrasscutter

alinwales wrote: »

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.

Nope
You've pretty well got it right.
Works the same sort of way with pension contributions as well, though the standard rate tax payers get standard tax rate relief on them as well, but the higher rate tax payers get even more relief as they are getting their relief at the higher rate.
Which is why when I paid tax at higher rates I paid in as much as I possibly could into my pension, additional volunatary contributions whatever ..................
(There are forever rumours that the gov' will abolish this higher rate relief on pension contributions)

Fella

No, what you seem to be misunderstanding is that in order to get the "tax break" the "richer person" must have given away more to the charity than they will save in tax!

The Govt have made a total pigs-ear of this & are misrepresenting charitable donations as some kind of tax-dodge. Since the country is currently chock-full of morons keen to stick a pitchfork into anyone with more money than them they've played this as badly as they possibly could have.

The ONLY way that charitable donations are a tax-dodge is if the charity in question is not actually a charity but is some kind dummy organization being fronted as a charity for nefarious means.

If that's the case it's down to the Charities Commission to get involved & revoke the charitable status of the organizations involved. NOT to muck about with Gift Aid which worked perfectly well as it was.

julieq

Can we just thump one myth touched upon above which is that there is gift aid tax relief on school fees. Whether or not the schools have charitable status, fees for a service are fees for a service and you don't get any relief on them at all.

Gift aid and some degree of tax relief was invented to get money to charities from benefactors, and it's worked very well - I suspect the reason for this problem is that the treasury are eying the money handed back in relief jealously as a stealth tax no-one will notice, and have been taken aback by the reaction. The idea that somehow charity cash is going to rich lobby groups by and large is nonsense aimed at soothing the consciences of people who would prefer not to contribute and want to find an excuse - ultimately a great deal of (for example) UK research in to cancer and other illnesses is directly funded by grants from charities, and long may that continue.

zagfles

N1AK wrote: »

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.

I haven't pointed that out at all, I made the opposite point. You seem to be assuming the motivation to give to a charity is based on the donor's own position, rather than on the position of the charity.

If you were rich but your parents were struggling financially, you might help them out. If your parents' financial position worsened, for whatever reason, what would you do?

Maybe you have a brother who was also well off, and he decided to match your financial support pound for pound. What if your brother one day said "I've heavily in debt so I can't afford to give as much now", would you reduce your donations too even though you have vast amounts of disposable income? (Remember this change only applies to those with vast amounts of disposable income, over £50,000 and over 25% of income). Or would you increase them to make up for the shortfall?

In the US charitable giving from the rich is far higher than here (both in cash and % of income), despite lower tax rates (hence lower relief) and despite there being a cap on tax relief. Why would this be if donors are motivated by their own tax position rather than the need they see?

N1AK

The tax and charity situation in America has nothing to do with the ones we have over here. America has lots of guns and lots of gun deaths, that does not mean that all countries with lots of guns have lots of gun deaths.

If you think that taking the current situation in the UK and dropping tax relief on charitable giving will not lead to a decrease in funding for charities that's fine. I think it is a completely niave position to expect no one to decrease their charitable donations. It is even more absurd to think that everyone is going to make ~40% larger donations to make up for the tax.

These rule changes won't have any impact on my own charitable giving. However if they did affect it then I would be likely to give less to charity. As it stands I can give £60 to a cause and know they are getting £100 (obviously I would actually give £100 and get the £40 back later). Because I can effectively give a cause nearly double what I lose it makes it more appealing.

Finally, again, I am not saying I disagree with the change. If the government had done some research to show that charitable giving would not decrease it would be a different matter. However they haven't and it stinks of hypocrisy given how they've been using charity as a shield to cut spending.

zagfles

N1AK wrote: »

The tax and charity situation in America has nothing to do with the ones we have over here. America has lots of guns and lots of gun deaths, that does not mean that all countries with lots of guns have lots of gun deaths.

I thought there was fairly strong correlation between gun availability and gun deaths.

If you think that taking the current situation in the UK and dropping tax relief on charitable giving will not lead to a decrease in funding for charities that's fine. I think it is a completely niave position to expect no one to decrease their charitable donations.

That doesn't say much for their concern for the cause. Anyone who reduces their contributions because the taxman isn't contributing as much can't really care too much about the cause they are donating to.

It is even more absurd to think that everyone is going to make ~40% larger donations to make up for the tax.

"Everyone" doesn't have to. The vast majority don't give more than £50,000 or 25% of income if higher. We are only talking about those with vast amounts of disposable income. If I had vast amounts of disposable income and a person, or cause, I cared about became in greater need of financial support, I'd probably increase my contribution, not reduce it.

Charities exist because there is a need. I recently gave to a scanner appeal for the local hospital someone was collecting for at work. If the NHS had simply bought the scanner there wouldn't have been an appeal and I wouldn't have donated.

The idea that doners care more about their own position rather than the needs of the charity they donate to is a rather cynical point of view. Maybe you are right, we'll see in a few years...

These rule changes won't have any impact on my own charitable giving. However if they did affect it then I would be likely to give less to charity. As it stands I can give £60 to a cause and know they are getting £100 (obviously I would actually give £100 and get the £40 back later). Because I can effectively give a cause nearly double what I lose it makes it more appealing.

Of course it makes it more appealing, but that's not the only factor. If say your aged parents were struggling financially, would you give financial support to them directly, with no tax relief at all, or would you contribute to Help the Aged and get 40% tax relief?

Tax relief is the tail, not the dog.

Finally, again, I am not saying I disagree with the change. If the government had done some research to show that charitable giving would not decrease it would be a different matter. However they haven't and it stinks of hypocrisy given how they've been using charity as a shield to cut spending.

If the "big society" is about govt doing less and other organisations doing more, then this change fits the bill. Well, the first part at least - the govt is doing less. Whether other organisations/people do more remains to be seen - but like the scanner appeal - where the govt doesn't fulfill a perceived need others often do.

Loughton_Monkey

Leaving aside any 'scams' using bogus charities etc., what we have here is a handful of very rich individuals who think like this:

"Here I am, with more wealth and assets than you can shake a stick at, and my huge income keeps rolling in. I don't need it. So I will give it all to the RSPCA, and thus deny Mr Osborne the chance to get his hands on a single penny."

To defend the Government, I think they are saying that such people should still contribute to the national coffers to help pay for law & order, national defence, infrastructure projects, and other expenditure from which the taxpayer benefits.

This makes sense. But the trouble is that when you pay your dues to HMRC, there is no concept of paying only for the 'good' things [defence, security, infrastructure....], whilst avoiding paying for all the 'bad' things [huge waste, scroungers, Quangos....]

What confuses me, though, is why such rich people continue to live in UK!

princeofpounds

Can we just thump one myth touched upon above which is that there is gift aid tax relief on school fees. Whether or not the schools have charitable status, fees for a service are fees for a service and you don't get any relief on them at all.

I believe you are referring to my swiss boarding schools comment.

Whilst you are absolutely right, you are making the assumption people play by the rules. The whole point about offshore donations is that they immediately leave the jurisdiction of the Charity Commission and HMRC.

And indeed those countries might have very different rules on the traceability and usage of those funds, so outright lawbreaking might not even be necessary.

And that ignores the fact that the oversight the charity commission applies is pretty limited. There are plenty of small charities out there which are not doing much in terms of charitable work even in the UK.

julieq

The top 1% of UK earners pay something like 25% of the entire income tax take. Politics of envy aside, philanthropy is a good thing, is generally done for the right reasons, and there's no evidence anyone is giving money to a particular charity out of spite so the taxman can't have it.

shortchanged_2

julieq wrote: »

The top 1% of UK earners pay something like 25% of the entire income tax take. Politics of envy aside, philanthropy is a good thing, is generally done for the right reasons, and there's no evidence anyone is giving money to a particular charity out of spite so the taxman can't have it.

Yet the evidence is coming to light now that many of them are paying a smaller proportion of their income compared to the average tax payer.

What you have to ask yourself julieq, is that right?