THE Government’s proposed cap on tax relief on charitable giving is “the fiscal equivalent of carpet bombing” and will “hit the innocent”, the chief financial officer of the Church of England has said.
The policy has won support, however, from those who question the ethics of tax relief on giving.
The cap was announced on 21 March, when the Chancellor, George Osborne, in his Budget speech, said that, from 6 April 2013, anyone seeking to claim more than £50,000 of relief on a charitable donation would be subject to a cap set at 25 per cent of income (News, 6 April).
More than 3000 organisations and individuals, including the Church of England and Christian Aid, have now joined the “Give it back, George” campaign, spearheaded by the National Council for Voluntary Organisations (NCVO) and the Charities Aid Foundation (CAF).
The Government has defended the cap on two grounds: the need to clamp down on tax avoidance, and the concern that some individuals are donating to bogus charities.
On Monday, the Treasury released new figures showing that almost one in ten people earning more than £10 million a year was paying less than the 20-per-cent basic rate of income tax. The Exchequer Secretary at the Treasury, David Gaulk, told the BBC Radio 4 Today programme that the cap would secure between £50 million and £100 million in revenue, out of a total of £300 million generated by capping tax relief.
“The broader point is that at the moment people are able to give to charities and, indeed, make use of other reliefs within the tax system that gets their rate down, and . . . we don’t think it’s fair that people are able to get their rate down that low, even when donations are to perfectly legitimate charities.”
As reported in The Daily Telegraph on Saturday, the C of E’s chief financial officer, Ian Theodoreson, questioned this rationale, and accused the Government of “so often” taking the attitude that “Everyone is on the make; so let’s hit the innocent as well as the guilty.
“How can paying a charity £100,000 to save paying tax of £25,000 be considered as a sensible tax-avoidance strategy?” he said. “As long as the donation is to a genuine operational charity and not some family trust, then the donor is paying their way four times over.”
Speaking on Wednesday, he emphasised that the current rules ensured that a donation was taxed at the basic rather than higher rate of tax — not zero. He denied that it was necessary to have relief in place to encourage philanthropy, but argued that “there is something particularly appealing to think that your donation can go a bit further than would otherwise be the case if it wasn’t for the higher-rate tax-relief in place.”
A letter in last Sunday’s Sunday Telegraph, signed by 46 philanthropists, says: “None of us view tax relief as a primary motive, although it may substantially increase our donations. But it is an important signal that the decision to use wealth to help others, rather than to enrich ourselves, is recognised, encouraged and supported by society.”
One of the signatories, Richard Ross, the chairman of the Rosetrees Trust, which funds medical research, told Channel 4 News on Monday that the cap would mean that he would be giving less money, because “the more relief you get, the more you can give away.” It was “incredibly difficult” to persuade people to give money to charity.
Zac Goldsmith, the Conservative MP for Richmond Park, writing in The Mail on Sunday, said that he was “ashamed” of the cap, which “could well prove to be this Government’s single costliest mistake”.
The Government has said that it will hold a “full, formal consultation” on the plans, but remains committed to the principle of a cap. On Tuesday of last week, the Prime Minister’s official spokesman said that donors might be giving to charities that “don’t, in all cases, do a great deal of charitable work”, including charities operating abroad. CAF argues that an investigation by the Charity Commission rather than a cap is the correct way to stamp out abuse.
But the former chief executive of Barnardo’s, Martin Narey, argued in The Times on Thursday of last week that the claim that the cap would stifle philanthropy was “dubious”. Philanthropy should be not be “an alternative to paying tax”. Eton College, he said, was a member of the top-100 UK charity index, whose income last year grew to a record £11.4 billion. He agreed with the Prime Minister’s spokesman that “there are charities that do little in terms of charitable activity.”
John Cristensen, director of the Tax Justice Network, said on Tuesday that the tax relief was “money which the state is forgoing which could be used for whole range of public services. We are basically handing over to philanthropists the opportunity to spend what would otherwise be state money on their pet projects. This is very dangerous, because we should all equally be part of the social contract between citizen and state which involves handing over through the tax system resources for the state to allocate on a democratic basis.”
A spokesman for CAF said: “People are giving to charities which are recognised in this country as causes for the public benefit. If one questions what the public good is of individual causes, that is a debate one can have, but that is a different debate from argument over the blanket tax-cap on tax relief.”
The Revd Steve Chalke, a Baptist minister and founder of Oasis, a charity that runs 14 academies, said on Tuesday that creating a “Big Society” required a “strong, vibrant and diverse charity sector”.
“Take, for example, the 14 academies we run,” he said. “The basic education provisions may be state-funded, but the ‘Big Society’-style extended provisions such as youth workers, breakfast clubs, extended sports, and arts activities are not. All of this makes the timings of the Government’s decision quite curious; why make it harder for people to give money at a time when we all acknowledge society needs a flourishing charity community?”
Oasis is holding a debate on the cap on Thursday 26 April from 7 p.m. at the Oasis Centre, 75 Westminster Bridge Road, London SE1 7HS.
Question of the week: Do you agree with the tax-relief cap?