Tax Policies to Promote Private Charitable Giving in DAC Countries

41 Pages Posted: 3 May 2007

See all articles by Scott Standley

Scott Standley

Center for Global Development

David Roodman

Open Philanthropy

Date Written: January 2006

Abstract

Researchers have written hundreds of papers on the causes and consequences of official foreign aid, while paying almost no attention to private overseas giving, by individuals, universities, foundations, and corporations. Yet private giving is significant - some $15.5 billion/year, compared to more than $60 billion/year in public giving - and is in no small part an outcome of public policy. In most rich countries, tax deductions and credits lower the "price" of charity to donors. And governments with low tax revenue/GDP ratios leave more money in private pockets for private charity. To correct the near-complete lack of information on this de facto aid policy, we survey officials of 21 donor nations on the use of tax incentives to promote private charity. From the results, we develop an index of the overall incentive for private charity, expressed as a percentage increase over the hypothetical giving level absent incentives. France's tax code creates the largest price incentive while those of Austria, Finland, and Sweden offer none. Factoring in the income effect of the tax ratio, Australia, Ireland, Germany, and the United States move to the top, with combined price and income effects sufficient to double private giving. As a result, tax policy appears to have nearly doubled private overseas giving from donor countries in 2003, from a counterfactual $8.0 billion. Two-thirds of the $7.5 billion increase occurred in the United States. Of that, nearly 40% appears to be U.S. charity to Israel. According to 21-country scatter plots, countries with lower church attendance and more faith in the national legislature have lower taxes (stronger income effect), but average levels of targeted tax incentives. Income (GDP/capita) does correlate with private overseas aid/capita, but also with public aid/capita, so that the two aid flows are complementary in magnitude.

Keywords: Commitment to Development Index, CDI

JEL Classification: F35, H24

Suggested Citation

Standley, Scott and Roodman, David, Tax Policies to Promote Private Charitable Giving in DAC Countries (January 2006). Center for Global Development Working Paper No. 82, Available at SSRN: https://ssrn.com/abstract=984021 or http://dx.doi.org/10.2139/ssrn.984021

Scott Standley

Center for Global Development ( email )

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5th floor
Washington, DC 20036
United States

David Roodman (Contact Author)

Open Philanthropy ( email )

182 Howard Street #225
San Francisco, CA 94105
United States

HOME PAGE: http://openphilanthropy.org

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