Academic journal article Australian Journal of Social Issues

Did Tax Incentives Play Any Part in Increased Giving?

Academic journal article Australian Journal of Social Issues

Did Tax Incentives Play Any Part in Increased Giving?

Article excerpt


The United Kingdom, the United States, Canada and Australia, since the beginning of their income tax regimes, have all permitted a deduction or tax credit for gifts to certain public purpose organisations. In the last decade all these countries have used policy. measures such as nonprofit fundraising capacity building, publicity campaigns and tax incentives to encourage philanthropy (Lyons and Passey 2006). Tax incentives for gifts are usually the largest ongoing outlay in these policy measures and are often difficult to remove.

In 1999 the Australian Prime Minister announced a series of measures 'to encourage greater corporate and personal philanthropy in Australia' (Howard 1999, 1). In terms of government expenditure, the major initiative was a package of taxation incentives amounting to approximately $230m over five years. The centrepiece was the allowance of gift deductibility to private and corporate foundations known as Prescribed Private Funds (PPFs). A further $13m was appropriated to establish and administratively support the Prime Minister's Community-Business Partnership (PMCBP). The PMCBP is a group of prominent Australians from the community and business sectors appointed by the Prime Minister to advise and assist the Government on issues concerning individual and corporate social responsibility. The Prime Minister is the Chair of the Partnership and it operates from the premise that

'Mutually beneficial collaboration between business and community, as well as engagement and participation at an individual level, can provide more efficient and long-term solutions to community issues and build greater social cohesion.' (PMCBP, 2006, 1)

The PMCBP has commissioned and disseminated research, made policy, recommendations and conducted national awards for community business partnerships. (1) The Australian government has not specifically linked these initiatives to wider public policy agendas of capacity building in the Third Sector as clearly demonstrated in the UK and Canada, but merely to the rhetoric of 'mutual obligation' (Lyons and Passey 2006). Taxation incentives and moral exhortations have been the main policy instruments used by government to achieve an increase in Australian philanthropy.

Australians today appear to be giving at greater levels than in previous years and the most recent research on giving and volunteering in Australia indicates a real increase of 58 percent in giving by individuals in the seven years since 1997 (ACOSS 2005). (2) This increase has been explained as a result of economic prosperity; positive publicity for giving; an increase in the number of organisations seeking donations, many with growing sophistication; and perhaps partly due to the 2004 Tsunami halo effect (Lyons and Passey 2005). But what of the taxation incentives for giving? Did the government get a 'bang for its buck'?

This article seeks to understand what role, if any, can be attributed to the government's taxation incentives for this increase in giving. First, it briefly sketches how the government measures the 'bang for their buck' in terms of taxation expenditures. It then examines the material gathered in the Giving Australia project that bears upon the awareness of the taxation incentives and motives for giving (ACOSS 2005). This raises some paradoxes with the statistics available from the Australian Taxation Office (ATO) collected from the income tax returns of individual taxpayers and the information returns from PPFs. In conclusion, suggestions are offered to explain these paradoxes about the expressed motives of donors and actual gift tax incentive behaviours.

Tax Expenditures and Encouraging Giving

The policy rationale supporting allowing a tax deduction for gifts to certain nonprofit organisations is that it will increase giving to such organisations thus producing more public goods such as research, health and education services. …

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