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Tax policies to promote private charitable giving in DAC countries

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  • David Roodman

    ()

  • Scott Standley

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.

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Bibliographic Info

Paper provided by Center for Global Development in its series Working Papers with number 82.

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Length: 41 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:cgd:wpaper:82

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Web page: http://www.cgdev.org

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Keywords: Foreign aid; charitable giving; tax incentives;

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References

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  1. Clotfelter, Charles T., 1985. "Federal Tax Policy and Charitable Giving," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226110486.
  2. Feldstein, Martin S & Taylor, Amy, 1976. "The Income Tax and Charitable Contributions," Econometrica, Econometric Society, vol. 44(6), pages 1201-22, November.
  3. David Roodman, 2004. "An Index of Donor Performance," Development and Comp Systems 0412004, EconWPA.
  4. Neil Gilbert, 2005. "The "Enabling State?" from Public to Private Responsibility for Social Protection: Pathways and Pitfalls," OECD Social, Employment and Migration Working Papers 26, OECD Publishing.
  5. Greene, Pamela & McClelland, Robert, 2001. "Taxes and Charitable Giving," National Tax Journal, National Tax Association, vol. 54(n. 3), pages 433-53, September.
  6. Andreoni,J., 2004. "Philantropy," Working papers 7, Wisconsin Madison - Social Systems.
  7. Kay, John A, 1990. "Tax Policy: A Survey," Economic Journal, Royal Economic Society, vol. 100(399), pages 18-75, March.
  8. Oecd, 2003. "Philanthropic Foundations and Development Co-operation," OECD Journal on Development, OECD Publishing, vol. 4(3), pages 73-148.
  9. Tiehen, Laura, 2001. "Tax Policy and Charitable Contributions of Money," National Tax Journal, National Tax Association, vol. 54(n. 4), pages 707-23, December.
  10. Clotfelter, Charles T., 1997. "The Economics of Giving," Working Papers 97-19, Duke University, Department of Economics.
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  1. One Nation, Incentivized and Disincentivized
    by Justin Fox in HBR Blog Network on 2013-07-04 13:30:09
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Cited by:
  1. Paxton, Pamela & Knack, Stephen, 2008. "Individual and country-level factors affecting support for foreign aid," Policy Research Working Paper Series 4714, The World Bank.
  2. Dierk Herzer , Peter Nunnenkamp, 2012. "Private Donations, Government Grants, Commercial Activities, and Fundraising: Cointegration and Causality for NGOs in International Development Cooperation," Kiel Working Papers 1769, Kiel Institute for the World Economy.

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