What the gov’t should do about the charity tax row

Part 1: Try to regain some credibility in this debate

1. Make HMRC release the relevant donor data

Whatever the rights & wrongs in the debate, sentiment is inflamed by the fact that the charity sector can’t even size the problem because HMRC won’t release the relevant data. For a gov’t ostensibly committed to transparency and open data, this is a childish own-goal. [Technical note: the proposed cap will hit any donor whose total ‘tax avoidance bill’ comes to 25% of their income or £50k (which you’d get from a 40% tax payer giving about £80k). Since many donors might give over £80k but split between several charities, charities individually won’t know which of their donors are affected, nor how much they give in total, so can’t estimate the amount they stand to lose. HMRC uniquely has these data. Obviously it should release anonymised, aggregate data.]

Hiding data implies that there’s something to hide.

2. Persuade everybody that the gov’t does not equate giving with tax avoidance

We can’t have a sensible discussion about the rights & wrongs of capping the tax-payers’ subsidy to charities and raising tax revenue  – which is long overdue – because the government has offended donors by implying that it regards giving as tax avoidance. I don’t know how HMG can do this – I’m not a politician – but I’d suggest it involve Ministers talking about what they give, some strong visual, e.g., a press conference at the Wellcome Trust or at the Foundling Museum.

3. Name the 100 fraudulent charities, or admit that that was bullshit

In an early skirmish on this row, HMG said that it was necessary because ‘some – about 100 – charities don’t do much charitable work’. A bit odd to hit 190,000 charities in pursuit of 100, especially when there’s  a regulator in place. HMG then wouldn’t say which 100 it meant.

Either there are some charities about which the gov’t is concerned, in which case say so; or there aren’t, in which case, have the honesty to admit that you didn’t mean it. Just lying outright is hardly helpful in an adult discussion.

4. Get Vodafone to pay its tax

You can’t tax charities whilst letting Vodafone off its tax, and – according to Private Eye – the Chancellor is lobbying the Indian government so that Vodafone doesn’t have to pay tax there either.

Part 2: Try to have a sensible discussion about the role of the state vs. charities & giving

As I’ve said before, the current tax system allocates taxpayers’ money as though there were no scarcity, and on the basis of neither merit nor democracy. It’s rubbish and I don’t defend it. The gov’t’s proposed system doesn’t change the problems of merit or democracy, and doesn’t even really solve the scarcity problem.

Scarcity: the gov’t could announce the total amount of subsidy which it will give charities.

Quality:  then it announces some mechanism for ensuring that only charities of decent standard are eligible (use ideas from health).

Allocation mechanism: have a public debate about what types of charity should get included (for my money, health but not donkeys).

Part 3: Stem charities’ current losses by offering a compromise of improvement

There is MASSES of money which the government forces charities to waste – about a billion quid  from reporting on contracts to bits of the public sector. Since reducing cost has the same effect as increasing revenue, the gov’t could gain a lot of friends by making some significant effort to reduce this haemorraging, which is entirely within its own gift.

And many charitable donors are rubbish: foundations waste ~£400m of charities’ money in their absurd reporting requirements, and even more in their absurd, unilateralist application processes. Most of them provide zero transparency (spending tax-subsidised money entirely in private) and make zero effort to figure out if they’re helping or to share learnings (discussed tangentially in my book).

The government could, potentially, defuse the current row by offering the following as ‘concessions’:

– announce some major drive to chop the waste created by public sector funders

– announce that tax subsidy will only be available to foundations (i.e., permanent, non-operating donors) which are more accountable and transparent. For example, to qualify, donors must (A) have some mechanism for charities to give honest  & anonymous feedback, (B)  publish estimates of the ‘externalised costs’ of their reporting & application processes & how they’re reducing them (again, discussed in my book), (C) have some stated proportion of their meetings in public and/or a public AGM at which any member of the public can ask the directors to account for their strategy & decisions (a good idea for any charity of scale), and (D) publish annually what they’ve been doing, and useful, machine-readable data on what works & what doesn’t, a bit like Shell Foundation does.

Why the gov’t’s position makes no sense, but neither does the campaign against it–>

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One Response to What the gov’t should do about the charity tax row

  1. Pingback: The giving tax: what do we actually know? | Giving Evidence

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