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Charity, Politics, Tax-Breaks and the CITR

Rod Schwartz
Rod Schwartz, posted on 27.04.12

Blog comments1 comment

Over the past few weeks I have been shifting in my seat over reactions to the Government's decision to limit the tax breaks rich people can receive for charitable giving. We would all like to see more charitable giving, and with all the pressure charities are under, this seemed potentially ill-timed. However, I felt distinctly uncomfortable watching a steady cast of charity execs provide political cover for and plea for continuing this subsidy to the rich. There are sacrifices that need to be made and, after all, there is nothing to stop wealthy individuals from giving should they wish to do so. When the social enterprise sector came out with similar pleas for Community Investment Tax Relief (CITR) for the well-off I felt downright queasy.

The CITR has been an abysmal failure, having raised below £70 million despite seemingly generous fiscal benefits and considerable marketing. It is easy to blame the original legislation or the Treasury for being too restrictive, but the product has simply not caught on. For the social finance sector to use limited political capital to plea for tax breaks--especially ineffective ones, seems a waste--but let me come back to this point later.

The difficulty charities do face will not, in my opinion, be heavily influenced by these Government policies, despite the forecasts of doom. Friends of mine from Justgiving note that there is much research suggesting that fiscal incentives do not heavily influence charitable giving. I can understand why rich people want them--anyone would. But charities have bigger fish to fry. In my view, the secular outlook for the charity sector is worrying. Declining contract revenues have further undermined a model which was relatively inefficient to begin with--the better run charities are wrestling with that and not wasting time fighting the subsidy war on behalf of charitably inclined High Net Worth Individuals.

If my position is true for the charity sector, it must be even more applicable in the "socent" sector, where the pathetic take-up of the CITR suggests that arguing for the break to extend to the wealthy is a complete waste of time, and so I argued at a meeting this morning of the Social Investment Action Group. However, a friend (name witheld unless he wishes to make himself known to readers)offered an insight which I thought quite profound. He argued that any new fiscal incentives would be impossible to secure (due to politics and because of limited legislative time), but if we could "modify" the CITR so that it became attractive and levelled the playing field when compared with conventional investments, it was worth the effort. I smiled and said something like, "so basically change it so that it's something completely different but just called the same thing". He smiled too.

Clever chap.


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1 comment so far.

Blog comments Jeff Mowatt, 18.05.12, 11:23

Tragic, when one considers that our business plans to invest profits into CDFIs were projected to yield £50 million and we weren't even aware of CITR at the time. We just couldn't find a social investor and that's what I wrote to Baroness Thornton of the SEC in 2005. The limitation of Program Related Investment in the US is something P-CED drew attention to in 1996 and I was interested to learn recenrly from Anne Field in Forbes.com that this could soon be changing. Is there scope for this foundation based investment here too? www.forbes.com/sites/annefield/2012/05/04/irs-rules-could-help-the-fledgling-l3c