Here\’s another eccentricity: if a basic-rate tax payer – ie 87% of the population – gives £1, the state adds another 25p in gift aid to the charity, but the donor gets no tax relief. Only 40% or 50% tax rate donors can claim a personal benefit and get their tax bills cut. Since those in the bottom 10% give a higher proportion of their income than those in the top 10%, that seems unfair.
No, the Treasury doesn\’t add anything nor does the higher rate donor claim a personal benefit.
It\’s all simply a mechanism of allowing charitable gifts to be made out of pre-tax income. We could do it another way. As indeed the US does in part (it\’s more complex than this but…). Everyone in the country has to file a tax return. When you calculate your taxable income you subtract from your gross income your charitable donations.
Put that way we can see that the Treasury isn\’t making any extra donations nor are higher rate payers getting any personal benefits. Everyone is one exactly the same level paying field: everyone gets to donate to charity out of pre-tax, not post-tax, income. The only way Polly\’s argument has any traction at all is because of the method we use to achieve this goal, rather than looking at the underlying effects of it.
As to this:
I had an email exchange with Stanley Fink after that breakfast, pointing out that big time charitable donors could do far more civic good by campaigning among their own kind against tax avoidance and in favour of a living wage.
That\’s really very strange indeed. For it\’s the bastard neoliberals like me who have, quite successfully actually, been campaigning for years or a living wage. We\’re actually getting there, slowly, under the coalition.
For as we all know, the difference between the current minimum wage and the living wage as determined by JRF and the like is the taxation that is applied to low incomes. No, really, if those on minimum wage did not have to pay NI and income tax then the current minimum wage is within pennies per hour of the living wage. Which is why the ASI has campaigned for years for a serious rise in the personal allowance (and a raising of the NI limits). Something which has made it into the Lib Dems policy book, UKIP\’s, heck, we\’ve even had Oxfam endorsing it nd the current coalition actually implenting it at least in part.
Want to make the poor richer? Stop taxing them so bloody much!
And tax avoidance instead of charity? Poll dear, there\’s a logical point to be made here. If we feed the money into the maw of government then it gets spent on what politicians want it to be spent upon. If we send it off to a charity there\’s at least a chance that it will get spent on what we want it spent upon. Which is rather the point: true democracy on offer, pound by pound by pound.
For example, I might want the drowing to be rescued from the sea in which case I will donate to the RNLI. And it\’s very dificult indeed to say that it is better to confiscate that same cash from me at gunpoint and insist that it be used to pay Vince Cable\’s SpAd. Giles is a nice bloke and all but preventing bloated corpses washing ashore seems a better use of my money to be honest.
I do recognise why you might not agree: you\’ve got great influence over how the tax money is spent what with that position as a national columnist and all. So of course you\’d rather it all went into one pot that you have influence over the spending of. You know, those years you argued for Sure Start for example: you got to campaign for our money to be spent as you wished. Which is rather the point really: we\’d like to spend our money the way we wish, not as you do. So charity, not government.
“If we send it off to a charity there’s at least a chance that it will get spent on what we want it spent upon.”
So you get to donate to a medical charity or hedgehog preservation charity and expect everyone else to fund the NHS, schools and the police ?
Fortunately we have devised a better system whereby we vote for a government to set spending priorities for the nation as a whole.
Because otherwise no one else is going to fund the unglamorous essential areas of public spending.
And if you don’t like some of the stuff governments spend money on do you really think your 30 million fellow tax payers individually will spend it any better or less wastefully.
Left to our own devices would the UK not end up with the world’s most over funded childrens hospitals, cancer research centres and animal sanctuaries and pretty much nothing else.
“And if you don’t like some of the stuff governments spend money on do you really think your 30 million fellow tax payers individually will spend it any better or less wastefully.”
This is really a fantastic summary of the left worldview
“Left to our own devices would the UK not end up with the world’s most over funded childrens hospitals, cancer research centres and animal sanctuaries and pretty much nothing else.”
Only if people give all their money to charity rather than spending some of it on themselves.
“do you really think your 30 million fellow tax payers individually will spend it any better or less wastefully.”
I know for a fact they will. People always spend their own money more wisely than the spend other peoples.
“I know for a fact they will. People always spend their own money more wisely than the spend other peoples”
On themselves, yes. That’s why markets work.
On things that they know nothing about and can expect no benefit from, it seems far more likely that people who do know what they’re doing – whilst being subject to exactly the same agency problems – will do a better job.
“Fortunately we have devised a better system whereby we vote for a government to set spending priorities for the nation as a whole. ”
Indeed, and that system is already perfectly well funded. We know this, because there is health, education and shelter for all.. plus plenty left over to go to war with anyone who won’t trade their natural resources on our terms.
A think I like to do if I’m going to donate any worthwhile amount of money to a charity is check out their accounts.. see how much of my money will be spent on the things I like (e.g. providing healthcare or education to people overseas who would otherwise not get healthcare or education) and how much will be spent on the things I don’t like (e.g. paying the management team, building fancy London head offices, fattening up an ego-boosting investment portfolio).
I don’t really get to do that with the government.. so I have to accept that a whole heap of the tax I pay will go to things I don’t like. They spend enough on things I don’t like to make me perfectly at ease with lessening the amount of tax I pay by diverting income to a charity who will spend it on things I do like.
There are various arguments around the charity topic that I have time for.. but the ‘you should give your money to the state’ is not one of them.
“You know, those years you argued for Sure Start”
and didn’t the government’s review of Sure Start conclude that it had been a massive waste of money?
What is this? “The Guardian’s – Comment is free”?
People contribute to charities because they share some of the concern of those charities. Ultimately, some charities (like Guide Dogs for the Blind) will be oversubscribed, but that happens only in rare circumstances.
People contribute to governments because they are forced to, see various arguments on ‘monopoly use of force’, etc.
If people had a choice between paying the state and paying for little Henry to go to Eton, then Eton would have a school in every town.
Ultimately, if the state would “Fuck out of people’s lives” and withdraw to the minimalist functions of the state (Protection of our Borders, core Justice – i.e. excluding the vast majority of the current victimless crime agenda), then there would be a lot more in peoples pockets.
Things like roads and schools would still get built just that they would have to be funded through other means such as tolls, public subscriptions, school fees, etc.
This sounds bad, but remember that you’re no longer paying tens of thousands in tax each year to the government to supply you with poor quality stuff you don’t need or want.
The vast majority of people pay thousands of pounds each year in Council Tax, just to get their bins emptied (the colloquial view).
Now we all know that it would only cost a few hundred pounds a year for an efficient waste collection service running as often as people need it.
All of the rest of the council tax goes on offices, staff, pensions, etc. which is why it rises inexorably every year by as much as they can get away with.
Sure, people might have to go out and contract with service providers for these things that they pay taxes for nowadays (or not for the feckless underclass), but this would be an improvement in both costs and service for the vast majority and that INCLUDES THE NHS.
“On things that they know nothing about and can expect no benefit from,”
If they know nothing about something, and derive no benefit from it, they will not spend their money on it, and so will not be wasting their money.
” The only way Polly’s argument has any traction at all is because of the method we use to achieve this goal, rather than looking at the underlying effects of it.”
I also blame the Inland Revenue adverts when Gift Aid was introduced (at least as I remember them), which strongly implied there was an extra contribution from the tax man. “Donate so much and the tax man will add such-and-such.” That idea is amazingly widespread throughout this whole discussion. I can’t decide whether the Chancellor also thought it worked that way or whether he and the Treasury are just being devious and misleading.
There’s also a strong assumption that “income” is a quantity that a person is somehow destined to receive whereas, especially for the very rich, they could simply choose not to receive the amount they previously transferred to charity, rather than receive it tax-paid.
Well, Mrs S-E and I pay our charitable contributions directly out of company funds. Thereby not saving just tax but both sorts of NI as well. But then I’m an evil capitalist baby-eater.
“Since those in the bottom 10% give a higher proportion of their income than those in the top 10%, that seems unfair.”
Only Polly could write something so ludicrous. I’m not sure what the logic is. Is it: It’s so unfair! They’re giving money to charity, and they can get proportionally more of a fuzzy feeling than the not-so-rich? How terrible!
Look, we know exactly why the government are really doing this. They’ve run out of money, and are looking at any means possible to increase the tax take.
I must say, I can’t see any problem with the govt capping tax relief on charitable donations.
If you could choose to give your taxes to charity, almost everyone would. Then the government would have no revenue. This would be bad. It’s only because there’s a “penalty” of having to give some of your net income to charity as well, that not everyone does it and the government has some revenue.
If I were very rich, I might say, what the hell, I’m going to give all my income above a certain level to charity, just to f_ over the government; just to stop the government getting any of it. Hence the cap.
Why do they offer it at all? Because some people in the govt recognise that those marginal pounds are probably going to do more good spent by a charity. But that doesn’t imply that no pounds will do more good if spent by the government instead of a charity.
Also, you can only get tax relief on donations to organisations on the government’s list. So there’s a (small, but not disregardable) problem there. There are plenty of worthy causes I’d like to give my money to, for nothing in return, but which aren’t official charities so I can’t get tax relief on. And there are plenty of fake charities: registered “charities” which aren’t charitable at all.
Isn’t it possible that if hospitals etc weren’t state funded then people would donate money to them rather than donkey sanctuaries ? Tough on the mokes but as there would be more spare cash to give away maybe not too tough. As The Thought Gang says the state is already taking enough to fund all the things we tend to think of as essential for human well being so people give to charities that do other stuff. Tim’s example of the RNLI is proof that state funding is not a necessity as it has always declined to accept it. I give money to the Arthritis & Rheumatism Research Council which is also self funding and supports a lot of scientific work in this field, this is an unglamorous area of medical research but it still gets enough support to make a valuable contribution, people aren’t as selfish as progressives think.
You may not be aware of another lunacy. It is now possible to “gift-aid” assets to charity. Suppose you give an piece of furniture worth £100 to Oxfam. They sell it for £100. But before they can obtain the tax relief, they have to write to the donor to offer him or her all the money back! Oxfam has to spend money asking people who have freely donated something if they want to reverse the donation! And some actually say, yes, please! Thousands of pounds are returned to donors every year.
The rationale is that Oxfam is acting as agent, and it is the resulting sale proceeds which are donated. They even suggest that people might not realise the value of their donated article, so need to be protected from themselves.
Suppose they gift-aid a box of books and a bag of clothes . With the best will in the world, some are unsaleable and are disposed of.
In theory, Oxfam must keep tabs on every single article to be able to return it to the donor, as the taxman deems the transfer of the article not to be a gift at all. (Though it would be if it had occurred without gift-aid.)
Furthermore, I think that some donors will be extremely miffed that their donation of books, which they tought were of value, has been sold for a fraction of that. In theory, they could go back to Oxfam and demand the return of their property, for which Oxfam, as agent, is responsible.
Whether Oxfam is a good charity to support, or whether goods should be allowed to be gift-aided are separate questions. But the current arrangement is nuts!
My take is that we need both public services – universal, democratically accountable and funded through taxation, AND charities – targeted, responsive, and operating according to their principles and consciences and those of their donors – in a liberal society.
Public services are probably the best approach where the problems being addressed are relatively evenly distributed, widespread, and the means of addressing them are relatively uncontroversial. Hence universal health care.
Charities are probably a better approach where problems affect a relatively small number of people, are highly local, or the means of addressing them are controversial or otherwise up for debate.
Fundamentally, I believe that people should not be compelled to financially support means that they do not agree with.
Imagine two animal welfare charities; charity A addresses the problem of abused and neglected animals by restoring them to health and finding caring homes for them. Charity B humanely destroys them. Charity B probably operates rather more cheaply than Charity A, and its donors probably also donate to one or more charities (perhaps Charity C, which provides adoption services for orphaned children). The respective supporters of charities A and B will probably never see eye-to-eye, and so it is probably best left in the hands of charities – and the market – as to which one secures most funding.
The Catholic adoption agencies that refuse to place children with gay parents has the unequivocal right to exist, even though I think that they’re not prioritizing the needs of their clients – the children. Thankfully, we have public adoption services which are universal, and which think and act differently.
Only this weekend, The Observer reported on UK (state) aid being used to fund forced sterilisations in India. ( http://www.guardian.co.uk/world/2012/apr/15/uk-aid-forced-sterilisation-india?newsfeed=true ). If this was being done by a charity, I’d make a note of their name, and choose to never, ever, donate to them. Unfortunately, being a state funded scheme, none of us UK taxpayers can do so (without emigrating, at least).
Alex B, given the problems any UK government has in trying to every change the NHS, and indeed given the plethora of different healthcare systems around the world, I am not sure it is accurate to say that the means by which healthcare is provided is uncontroversial.
Surely the sensible thing to do would be for GiftAid to be adjusted so that charities receiving a donation from higher-rate or top-rate payers could gross-up those donations all the way, and not just halfway.
That way Polly wouldn’t be able to complain that higher-rate charitable donors can get back money to their own pocket.
No-one has yet commented on Polly’s claim that some 52 million people are basic-rate taxpayers despite HMRC saying there are less than 30 million taxpayers in all.
The bottom 50%, let alone 10%, by income of the population don’t pay income tax (OK, that includes almost all children, but they are only c.20% of the total), so how would they be helped by tax relief on donations?
[If anyone thinks that I should only be looking at %age of taxpayers firstly she’s still wrong: it’s 83% who are on the basic rate, secondly the “bottom 10%” are not part of that group, and thirdly the number on basic rate includes a number who would be paying higher rate tax if HMRC had not extended their “basic rate band” to take account of pension contributions and./or Gift Aid donations. Maybe she doesn’t make any Gift Aid donations, maybe she doesn’t read the statement sent to her by HMRC, maybe she can’t remember what she has read.]
You wrote: “The Catholic adoption agencies that refuse to place children with gay parents has the unequivocal right to exist, ….”
Err… no they don’t. They are closing down because they are not allowed by law to discriminate in that way.
They’re closing down, rather than /being/ closed down, though?
More a case of sulking and taking their ball home, in other words. Which backs up my point about them not prioritizing the needs of the kids they purport to serve.
Sure, the /structure/ of universal health care as provided in the UK is controversial. But the medical approaches used, are, by and large, uncontroversial. Homeopathy being an obvious exception.
But then charities would have to know the tax rate of each one of their donors. I imagine some donors might not be happy with that (though it’d indicate to the charities which donors might be milkable for a few more £).
Alex B, perhaps I misunderstood you then but you said:
“Public services are probably the best approach where the problems being addressed are relatively evenly distributed, widespread, and the means of addressing them are relatively uncontroversial. Hence universal health care.”
ie you were not commenting on the medical approaches, but on how healthcare be provisioned.
I am not sure you can use the fact that medical approaches are uncontroversial to then argue that the means of provision (eg public) are uncontroversial
“universal health care” is not the same thing as “the NHS”, even if many (lefties?) think the NHS is the only possible way to provide such.
“If we feed the money into the maw of government then it gets spent on what politicians want it to be spent upon. If we send it off to a charity there’s at least a chance that it will get spent on what we want it spent upon…….For example, I might want the drowing to be rescued from the sea in which case I will donate to the RNLI. And it’s very dificult indeed to say that it is better to confiscate that same cash from me at gunpoint and insist that it be used to pay Vince Cable’s SpAd. ”
Has this blog moved from advocating low taxes to advocating voluntary taxes?
Alex B, I am not sure I said it was.
I was separating medical approaches from provision of healthcare. For the most part, I accept the most medical approaches are fairly uncontroversial. In stark contrast, methods of providing healthcare are amongst the most controversial political issues around.
Catholic Care, the one in the various court cases, is still open but is only placing children with people it had accepted before 2009.
Many others are still running as adoption agencies but have split from the Church – seeing that as the lesser evil, I suppose.
Some, as nick said, have simply closed.
” maybe she doesn’t read the statement sent to her by HMRC, maybe she can’t remember what she has read.”
She might have misinterpreted it: it’s possibly not obvious what the effect and intention of raising the higher-rate threshold might be, and it could be taken as having given you something back, I suppose, instead of removing that amount from further tax.
“…big time charitable donors could do far more civic good by campaigning among their own kind against tax avoidance…”
Yeah, because money given to the government does much more good than money given to charity.
She’s mad, isn’t she?
Actually, reading the press and comments about this and other tax matters makes me wonder about the accuracy and quality of the content of all those SA100s the Revenue has been receiving over the years.
“They’re closing down, rather than /being/ closed down, though?”
That is true, but only because they would be prosecuted if they continued. They really have no choice, if they are determined not to allow gay adoptions.
“More a case of sulking and taking their ball home, in other words. Which backs up my point about them not prioritizing the needs of the kids they purport to serve.”
Except that they consider that allowing gay adoption is bad for kids.
For what it’s worth, I think that Catholicism is appalling bad for kids (and adults too), so I am not defending their practices, but ISTM that provided they had firm links with suitable agencies who would allow gay adoption, that equality rules have just removed valuable asets from the system. After all, if you were gay and wanted to adopt, would you really want to go to a Catholic agency?
“John77 // Apr 17, 2012 at 2:39 pm
No-one has yet commented on Polly’s claim that some 52 million people are basic-rate taxpayers despite HMRC saying there are less than 30 million taxpayers in all.”
Good point. Shows that if you get a foot journalism due to nepotism you are not going to be that great at fact checking.
If they know nothing about something, and derive no benefit from it, they will not spend their money on it, and so will not be wasting their money.
So people only donate to charities after performing exhaustive due diligence, and even then they only donate to charities which will personally benefit them? Interesting.
No, I didn’t realise you were talking about charitable donations, I thought we were talking about how people spend their money on themselves. This is what I was talking about.
That said, so people either know nothing about something or else they have perform exhaustive due diligence. Those are the only two options? Interesting.
Nor am I convinced that people who donate to a charity have no interest of knowledge of what that charity does.
ChrisM: this suggests you probably can’t read, given that my first paragraph was “[People spend money more wisely than others] On themselves, yes. That’s why markets work.”
You really are rude fucker at times John B. That and you often display Hislopian levels of smugness.
I think there can be an element of pure subsidy in UK charity tax relief. If I arrive in country and donate £10m to charity, the Treasury will up it to £12.5m as long as I pay £2.5m in tax. So say I did, earning what about £4m or something. I can then claim back all of that tax. So the total tax relief comes to a lot more than the tax paid?
No, the tax repaid to the Charity under GiftAid has to be not more than the tax you paid. So anyone giving all his income to charity would pay 20% on it. If you make Gift Aid donations on which the tax reclaimed is more than the tax you paid that year, HMRC will send you a bill for the difference.
Osborne was *not* attacking charities, as none of the examples he quoted of trivial tax rates could even in theory be due to charitable giving – he was attacking tax avoidance which just scraped into being legal and the Guardianistas started screaming that he was attacking charities despite his big give-away on IHT to encourage charitable giving.
Are you sure about that? The 25% the Treasury adds on has to be covered by tax. But you can then still claim tax back yourself, on top of that. Can’t you donate enough to claim back all the tax you paid? Which then needs to be added to the bit the Treasury has paid.
You can donate enough to make HMRC give away as much as they take from you, but you would then be living on less than the minimum wage. You cannot use Gift Aid to claim back all the tax you paid: there are some ways to do it but I am not an expert – OK I choose not to be an expert in tax avoidance – so apart from forestry and EIS schemes I can’t tell you what they are.
You don’t actually ever get money back *unless* you they have taken too much from you under PAYE and you fill in a self-assessment return after the year-end or you have made a loss for the year and are allowed to set that off against profits on which you have already paid tax.
What happens is that your Basic Rate band is extended to cover your Gift Aid donations and Pension Contributions so if you are self-employed they tax these at basic rate and only charge higher rate if you still have £40k of income after netting these off.
Some high-paid employees get a tax refund if their tax code has been wrong and they have overpaid tax. This happens regardless of the reason why their tax code is wrong – or may not if the refund due is small and the effort required to claim it is too great.
“You can donate enough to make HMRC give away as much as they take from you, but you would then be living on less than the minimum wage.”
I don’t understand what this means.