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April 11, 2012

Government 'Tax Dodgers' Claim is Hypocritical, Damaging and Lacking Evidence

By Spear's

That this government can, virtually in the same breath, ask the wealthy to give more and yet label the most generous as potential tax-dodgers, reveals an embarrassing lack of inconsistency and integrity.

According to the Coutts Million Pound Donors Report the UK’s most generous donors, individuals donating more than £1 million a year to charity, gave £5.8 billion away between 2006-2010.

It is thanks to the generosity of individual philanthropists that our universities and art institutions are considered among the best in the world. In 2010 alone, individuals donated £383.2 million in the arts in the UK. As we report in this issue of Spear’s, despite its worldwide renown, Oxford University wouldn’t be able to balance its accounts without private donations.

Britain is a global leader in medical research, but it is private individuals who plug the gap when government funding fails. Spear’s Philanthropist of the Year Richard Ross has invested £33 million of his own money in medical research, funding projects researching common illnesses from arthritis to dementia.

Time and time again, private individuals have stepped in where government funding has failed to support the most vulnerable and disadvantaged in society. In today’s austerity, the need for philanthropy is even greater, which is why Spear’s launched its <a target=”_blank” href=””>’One Per Cent Campaign’ to encourage its readers to donate their time, energy and money to worthwhile causes. Spear’s has long placed philanthropy at the forefront of its agenda, but even our extensive coverage can only hint at the breadth of causes supported by individual donors.

The baffling – or to quote one philanthropy adviser ‘mind-boggling’ – thing is: the government is perfectly aware of this. Whether motivated by ideology or pragmatism, few governments have been more vocal in their support for philanthropy and their championing of the ‘Big Society’ – which calls on the public to invest time, money and energy into their communities.

This makes the government’s recent attack on philanthropists– through the proposed cap on individual tax relief and the claim that the wealthy use their charitable giving to dodge tax — not only short-sighted but deeply hypocritical.

As David Cameron told Channel 4 News: ‘There is no doubt in my mind that some people are using charities that have been set up – sometimes specifically for the purpose – to reduce their tax rates so they are not paying enough tax. That is an abuse.’

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That this government can, virtually in the same breath, ask the wealthy to give more and yet label the most generous as potential tax-dodgers, reveals an embarrassing lack of inconsistency and integrity.

Spear’s does not doubt that any tax relief can be open to abuse, but given how much philanthropists contribute to society, we can only conclude that the government’s reaction is entirely disproportionate. Moreover, we would welcome evidence of the prevalence of this tax dodging, a subject that Downing Street has hardly proved forthcoming on.

Also a Spear’s Philanthropist of the Year, and founder of Timpson’s, John Timpson, made the point that if some wealthy individuals are using charitable tax relief system for their personal gain, a more rational response would be to address the failings in the charitable status system rather than the tax system.

While all philanthropists will feel let down by the government’s claim that many use their charitable donations as a way of dodging tax, those who will be most affected by the proposed cap on tax relief are precisely the kinds of philanthropists that Spear’s (and apparently the government) would like to encourage.

Established philanthropists, who have set up their own charitable foundations, will not be affected by the cap on individual tax relief. But the new generation of philanthropists, the newly wealthy or the newly generous who are just starting to give and have a lot to give away, will be.

The UK already offers far fewer incentives for charitable giving than the US, a country often cited as an example for philanthropy, and soon it will offer even fewer incentives for the wealthy to give. The decision to start giving a hard-earned fortune away is not an easy one; ‘carrots’ like tax relief really can be decisive.

If the government is serious about promoting charitable giving — and considering its cut to arts, science and welfare spending it ought to be — then it urgently needs to reconsider its inconsistent, inflammatory and hugely damaging rhetoric.

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