Treasury urged to reform tax system in bid to boost US-style philanthropy
The culture secretary, Lucy Frazer, has been trying to persuade the Treasury to reform the tax system to encourage US-style philanthropy, according to a report.
The UK sees much lower levels of philanthropy than in the US, particularly among the rich. A 2016 report found that US donations amounted to 1.44 per cent of GDP whereas in the UK the figure was just 0.54 per cent.
This is largely a result the UK’s comparatively generous welfare system, but it also reflects a more generous tax regime in the US which incentivises the wealthy to give more of their income to charity.
According to the Financial Times, Frazer is pushing the Treasury to move the tax regime towards a more US-style system.
One of the proposals under consideration is streamlining the Gift Aid scheme. Gift Aid allows charities to claim back 25p for every £1 donated while also allowing higher-rate taxpayers to claw back some tax too.
According to the report, Frazer is pushing for a tax rebate to be added automatically rather than organisations have to apply manually for each donation.
This could be done by creating a new digital portal through which a donor, recipient and payment method could be registered and which would automatically generate a rebate.
Research suggests that the wealthy in the UK are getting less generous when it comes to charity. According to Onward, charitable donations from the top one per cent of earners has fallen by 21 per cent between 2011 and 2018 even though income rose by 11 per cent in the same time period.
The debate comes at a crunch point for many charities due to the impact of high inflation and rising demand for their services.
Just last month, Macmillan said it was planning to axe 150 jobs because it was getting increasingly difficult to raise enough money to meet soaring demand.
Smaller charities are also feeling the pinch from the crisis in local government funding, with funding likely to be cut back as councils struggle to stay solvent.
The Treasury said: “We continue to engage with the charity sector to improve the way Gift Aid works to minimise administrative burdens through the use of digital technologies”.