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50 per cent tax relief on giving to poor
Paul Waugh24 Dec 2008
The wealthy are to be encouraged to give more money to charities under a Treasury plan to offer 50 per cent tax relief on gifts to the poorest.
Under the scheme, which could raise an extra £5billion a year to help relieve world poverty, the Government would match any donations pound for pound.
Although the richest 20 per cent give most to good causes in absolute terms, they donate on average 0.8 per cent of their income to charity, compared with the three per cent donated by the poorest fifth.
Sir Roger Moore, who is a Unicef ambassador, revealed the rich-poor divide on giving.
He said that whenever he travelled on planes and asked passengers to give spare cash to the UN's "change for good" campaign, those in first class often "look out of the window", while people in economy usually handed over money.
The Treasury scheme has been drafted by Nobel Prize-winning economist Sir James Mirrlees with Renu Mehta, founder of the Fortune Forum networking organisation for the super-rich.
Dubbed the MM proposal, it suggests a 50 per cent tax relief on donations towards the UN's millennium development goals.
The cost of the tax relief would be met from the Government's overseas aid budget, effectively doubling the amount diverted in a bid to encourage donations and help Britain meet its goal of contributing 0.7 per cent of national income to development.
By attracting large sums from the wealthy, the plan aims to reduce pressure on the Exchequer over the long term.
Sir James, who is chairing a review of the British tax system for the Institute for Fiscal Studies, believes the current "Gift Aid" scheme for charitable giving, with a maximum 40 per cent tax relief, is poorly understood.
A 50 per cent tax relief would prove much more attractive and if adopted in all G8 nations, could raise more than $78 billion, he believes.
Ms Mehta said her aim was to raise charitable giving in Britain, currently 0.9 per cent of gross domestic product, to American levels of 1.9 per cent.
Donors would be able to specify which development sector their money went to — clean water or disease prevention, for example.
Donations would be kept separate from government aid to reassure donors it was spent efficiently.
The scheme is under consideration by the Treasury at a time when the financial crisis is expected to lead to a sharp drop in charitable legacies.
Reader views (2)
UK based charities are facing huge shortfalls over the next year due to the economic downturn, what incentive will the taxpayer be given to keep contributing to them? None at all, I'll wager, but this is good publicity for Liebour even if it means we have no more Cancer Research, BHF, MacMillan nurses or local hospices to help alieviate pain and suffering whilst providing a support structure for sufferers and their families.
- Bob, Cheam, 25/12/2008 00:22
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All very well, but why cannot the Treasury largesse extend to helping savers and reducing taxes more?
- James Elliott, Eastbourne UK, 24/12/2008 16:09
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