Hello, you're listening to the Philanthropisms Podcast. This is the podcast where we try to put philanthropy in context. I'm your host, as ever, Rodery Davis, and this week we are taking a look at tax relief on donations. Something I've been wanting to look at for a while, certainly the question of philanthropy and tax. And I was going to do a whole uh big episode about that, you know, that entire question. And in fact, I did record a longer version of this this podcast, but it ran to an hour and fifty minutes, which I thought was unacceptable. Um so I thought I'd focus in on the particular questions around tax relief on donations, which is something I'm kind of have been interested in for a long while, and it felt timely because there are various different places in which kind of debates and discussions around this topic are bubbling up in the UK, in the US, and elsewhere, in a positive sense, because there are various governments that are sort of thinking through at the moment what they can do in policy terms to try and uh encourage and incentivize philanthropy, and obviously tax breaks on giving tend to be a big part of that debate. But also in a negative sense, I think in places like the US, where there's quite a lot of debate uh at the moment about whether the current systems they have are fit for purpose and whether they produce the sorts of outcomes that they want to produce or whether they need to be sort of uh radically uh transformed and revised. So I thought I would look at the question of tax breaks on philanthropic donations from a couple of different uh aspects. So, what I'm going to do in this episode is break down a few things. So, one is the first question of you know, why do we even have tax incentives for philanthropy? Why do we offer tax breaks on donations? You know, what is the fundamental principle on which this is based, given that it's quite a common thing for governments and policymakers to do, and you they have tax breaks for charitable donations uh in many different countries around the world? How has this come about? Uh is another thing I'd like to look at. So, what's the actual history? You know, you've got that theoretical underpinning, but in reality, you know, do these things come about because somebody has made a clear, principled policy decision to institute them on the basis of one of these justifications, or do they tend to come about through a more complicated process of uh kind of organic growth and accident? And you know, spoiler alert, it's it's the latter, not the former. Given that, given this history and uh given the theoretical uh underpinnings of this stuff, what does that mean in terms of the decisions we have to make about the form in which we offer reliefs? You know, what do these things look like? At what level do we set them? Uh what kinds of policy aims do we have in mind specifically? And how do we then assess whether they're effective or whether they work in terms of delivering on those policy aims? So I want to try and dig into all of these things throughout the course of the episode. So without further ado, let's get into the the first of those questions about you know the fundamental why, uh, and then I'll be back at the end for the usual bit of housekeeping and tidying up. Okay, so in this section we're gonna look at the whole question of tax relief for giving. Uh so essentially using the tax system to try and encourage and incentivize charitable giving or philanthropic giving of various different kinds. And I want to ask a couple of questions about this. I essentially I want to ask a why question. So, why is it that we do this in the first place? What is the basis on which we do it? What's the theoretical justification? I want to ask a how question. How do these things actually come about? You know, what's the history behind them? And does that actually reflect what we've said about the theoretical underpinnings at all? And then the what question, you know, what do these types of tax incentives look like? How do they operate? And what kind of choices do we make in practical terms when it comes to instituting them? So let's look at the why question first. So, why is it that we might think it's a good idea for governments to offer tax incentives aimed at encouraging or supporting uh philanthropic giving? I think I found early on in my career a really useful framing uh around this to be uh the one that Rob Reesch, uh the Stanford philosopher, provides in one of his papers looking at kind of inequality in philanthropy, and I think he replicated it in his book, Just Giving. Um, and I think it that builds on um framings that have been used elsewhere, particularly. I mean, I subsequently found that there's a useful framing in some of the papers um that accompanied the Filer Commission, um, sort of big uh look at charitable uh giving policy and tax policy in the US in the the mid-70s. Um, and actually there's a huge amount of uh of information and sort of subsequent uh uh kind of accompanying papers that go with that, and some of that there's quite a lot of work about the economics of philanthropy, and and buried within that actually is a kind of earlier formulation of many similar ideas. But I think Rob Riesch's um framing of it and his explanation of it is very clear and very useful. Um so I'm gonna borrow from that as a starting point. And I think what he does is kind of breaks it down into three possible justifications. Now, there you know, you might be able to subdivide these and there might be other ones you can add on, but I think this kind of gets to the heart of the kind of key ways in which you can understand this. So the first possible rationale you might offer for uh tax incentives for giving is what Riesch calls the tax base rationale. So essentially the idea here is you argue, you say, look, tax incentives for charitable giving or philanthropic giving, they're not really tax breaks at all, because you need to deduct any charitable gifts from an individual's income in order to define what they should properly be taxed on. So to define their tax base, you know, the reasoning being that people should only be taxed on personal uh consumption or wealth accumulation, and money given away to charity doesn't count as either. Actually, it's kind of you know, once you've given it away, it's not yours anymore, and so it's not income. So that's the first one, and we'll come back in a moment to why I don't think that one works, and I don't think Reish does either. Um, the second one is probably the one that you will hear more often invoked by, you know, policymakers or commentators whenever this issue ever actually does come to the forefront, this will be the sort of thing they reach for. And this is what Reish calls the subsidy rationale. So the argument here is it's appropriate for the state to offer tax breaks of of some kind for people to be charitable and to give money to charity, because by doing so it stimulates greater social value than the state could have produced on its own, or at the very least, it kind of produces the same amount of social value. So the underlying reasoning is that you know the state can choose to collect taxes in order to pay for public or social goods. Um, and since you also have charities and non-profit organizations working often to produce those same uh public goods, another way of doing that would be to incentivize people to give to those organizations and allow them to do the work instead. So you know it's kind of fair and efficient to allow people, instead of paying tax necessarily, to be incentivized to choose to contribute voluntarily to social good through their charitable gifts. Um, and so essentially, you know, that by offering those incentives for people to give to charity, you are uh allowing the state to some extent not to have to deliver quite the same level of public goods in in certain areas, and so it's you know makes rational sense to do that. And we'll see later, you know, if there's an argument that actually there is additional value to doing this through philanthropic or voluntary means, then that kind of makes the argument even stronger. And again, I think there's reason that this doesn't really work, even though it very commonly gets invoked. And then that leaves it leads us to the third of the rationales, which essentially I think is the one that that does work and that we probably should be using, but actually in practice, I think it's very uncommon for it to be the general way in which policymakers or politicians think. And this is what Riesch calls the pluralism rationale. So the argument here is that so instead of trying to justify tax breaks for philanthropic giving on the basis of some specific social good produced by a particular charitable gift, so you're not saying, right, well, that here are these particular services or public goods that charities produce, and because they're doing so and it means that the state doesn't have to do it, it makes sense to to offer that kind of subsidy. Instead of that, we should understand tax breaks for philanthropic giving as a kind of generalized subsidy for uh supporting and nurturing a pluralistic and healthy civil society on the basis that there is kind of inherent value to that, and that you know, any decent liberal democracy should value having a healthy civil society as a you know as something that goes alongside uh the state and the electoral system and the market, and so in recognition of that, they might, you know, it makes sense to offer a subsidy in order to support that. And I think there are kind of you know good reasons for for doing so, although interestingly it then raises questions about the way in which you design these policies for you know, such as the level at which you decide to offer reliefs that maybe um are kind of less obvious than if you're using some of these other justifications. So, in terms of those three broad justifications, just very quickly, you know, my take, and you know, feel free to disagree on this, on why the subsidy rationale is really the only one that holds water. So the tax-based rationale, to my mind, it doesn't really work because, well, first of all, it doesn't differentiate between gifts to to charity and any other form of discretionary gift. So it doesn't really differentiate between a gift to a family or to you know to a political party that wouldn't count as charitable. If the argument is basically I've given the money away, so it's not part of my tax base, therefore you shouldn't tax me on it, does that apply just as much to money that I've given to somebody else in my family as it does to money given to charity? And and you know, if so, uh, you know, is this a a sound justification for offering tax breaks for charity? You know, someone might turn around uh in response to that and say, well, no, there is a difference there because in giving to charity you are producing a public good, whereas the good, you know, if it is delivered through a gift to family is a private good. But I think once you get to that point, actually you've tipped over into not just talking about the tax base, you've started to say something about the fact that charitable gifts deliver public benefits, and that's a kind of external justification. So actually you'll then I think that almost takes you into talking about the the subsidy rationale because essentially what you're doing at that point is um you're saying something about what's produced by the gift um and the fact that the government recognises the value of that rather than something inherent about the fact that the money is being uh given away. I think the other thing to say is, you know, that's sometimes said as a kind of argument against this, is that the idea that money given away even to charity doesn't offer any form of benefit to the donor is an important part of justifying the um the this kind of tax-based rationale because the argument kind of has to be, well, I've given it away, so I don't get any benefit from it. But actually, you know, some people would say, well, you know, a lot of evidence shows that even when it's altruistically motivated, most people get a benefit at the very least in terms of a sort of psychological warm glow from their giving, and they may get more tangible benefits in terms of you know power or social status from their philanthropy, and therefore, to some extent, does it really differ from discretionary spending of other kinds? Because they are you know to some extent purchasing things, even if even if that isn't the main purpose of their donations. So actually, you know, you can't keep it pure enough to meet the requirements of that tax base rationale. Um, so I think that then moves you on to okay, well, if we're going to say that it's something about you know what is produced uh through those uh philanthropic donations in terms of the public goods, then we're talking about the subsidy rationale because essentially we're saying, okay, well, philanthropic donations result in public goods, since those are things that the state would otherwise have to provide, it makes sense to offer tax breaks for them. The main problem with that, I think, brings us back to something we said in the first section, which is you know, seeing philanthropy as a substitute for public spending is quite misguided because you know the profile and the scale and the nature of philanthropic giving is not the same as that of public spending. You know, you could try and make the two things more similar in terms of you know, you could try to align charitable tax incentives more overtly with government policies. So, say, actually, you know, we do believe in this subsidy rationale, but we acknowledge that uh at the moment philanthropic giving isn't very well aligned with government priorities. So actually, what we're gonna do is only offer tax incentives for uh philanthropic donations to causes which do align with government priorities uh and therefore will take some of the burden off the state. Um and some countries do do that, but I you know I think for various reasons that is problematic uh in terms of kind of undermining the fundamental nature of philanthropy and the fact that it's sort of voluntary and additional. Um, and I'm always very kind of wary of the governments that take that view and that sort of approach to policy making about philanthropy. But then again, if you don't do that, obviously, try and align the incentives that you have more with government priorities, the situation you have is that you as a government might be offering effectively a subsidy for the delivery of public goods that are you know kind of outside the remit of of your own priorities or what you would otherwise have to um to deliver. And also, even in those areas where there is overlap, there is a question about efficiency. You know, is it genuinely, at the very least, kind of you know, on a one-for-one basis, treasury efficient to offer incentives for people to give uh private donations to produce public goods, as opposed to just doing it yourself as a state through taxation and public spending? And what I mean by treasury efficient, so you know, does one pound or dollar in charitable subsidy um result in one pound you know equivalent of spending on public good? Because if it doesn't, essentially you're sort of purchasing something you know that results in lower value than you would otherwise have had if you just taxed people and then spent it yourself. Um so you know, why why not just kind of deliver that public good yourself or even just give a grant directly to civil society organizations to do it rather than trying to incentivize people to give to it? Um and I think that then points to the fact that you either need to you know change the approach to offering charitable uh giving incentives, or you need to adjust the rationale to take into account a few other things. So I think for one thing you need to think, well, you know, are we making a virtue of plurality rather than just seeing this as something, you know, an externality that happens to be the case? And or you try to make a case for why there is value to allowing people to give voluntarily through philanthropy, and why, in at least some circumstances, that might be you know preferable to direct public spending of the equivalent value on the same thing. And you know, one reason might be that supporting civil society through subsidizing giving is that that then allows that there is support for parts of the sector that aren't primarily concerned with service delivery and may run counter to government interests. And I think this is where kind of embracing plurality, you know, potentially becomes the basis for a broader conception or you know, from from the government's point of view, of why incentivising giving is a good thing, which is to say it's not just about what are the things that we as a government would want to deliver ourselves and can we incentivize people to donate to those through offering tax breaks. It's actually kind of acknowledging that if you allow people free choice about where to give, because legitimate charitable causes, certainly in the UK, go wider than things that you know the government might otherwise want to um deliver, it might include things that you know the government has no interest whatsoever in in uh delivering itself. And as I say, it also includes things like campaigning on issues that might challenge government policy. Um and from a you know from a policymaker's point of view you might recognise that that is actually important and a sort of vital part of a healthy democracy, and therefore it's you know offering tax breaks to support people to do that is a good thing, but you need to be kind of clear um about that that rationale, because it you know actually, if you think about it, campaigning for social change doesn't really very doesn't really fit very neatly in certainly in the subsidy rationale um uh justification for tax breaks. If the the justification for ta offering tax breaks on philanthropic giving is that it's a subsidy for things that the government would otherwise have to deliver, that doesn't seem to apply to you know the work of charities to campaign on raising awareness around issues or challenging government policy, surely that's not something the government would ever do itself. So actually, it kind of shows that this wider conception of the value of civil society, you know, if that is reflected in the justification for tax reliefs, that might allow for a broader range of cause areas and uh activities. Right, so that's the theory in any case, and we've arrived at a justification that certainly, you know, I think works as a theoretical basis for allowing tax breaks on philanthropy, the pluralism rationale. You might disagree and think that some of the other potential rationales work better. But the question I want to turn to now is how have tax reliefs on uh charitable gifts actually come about in practice historically? Is it a case of people sitting down and mulling over these various different justifications, deciding on one, picking it, and then deciding to design uh appropriate tax incentives in light of that? Or is it more a case of you know a series of kind of accidents and organically developing uh events that that actually doesn't really reflect any of what we've said so far at all? And if you're wondering, the answer is it's the latter. Uh so the history here in the UK at least um is one that goes back at least as far as 1799, which as we've already mentioned is when the first temporary income tax was introduced by Pitt the Younger. And I should say, actually, maybe the story goes back even further than that, because what I'm focusing on when I focus on the question of taxation is the sort of paradigm example of taxation on income rather than other forms of taxation. Actually, across the whole of this episode, there are other forms of uh wealth and assets that are taxed in various different ways that we could be talking about, but it, you know, this is already complicated enough, many would probably feel, uh, so we don't need to complicate it further. So let's stick to income for now. And actually, you have to go, you know, almost 50 years on from 1799 to 1842 until you get a permanent version of uh income tax introduced under Robert Peel as the Prime Minister. And actually, uh charitable organizations were exempt from the outset, so they didn't have to pay uh any income tax, but donors weren't exempt, so there weren't any tax reliefs on donations um uh to uh charitable organizations, the organizations themselves were exempt from income tax, but income tax had to be paid by the donors before they made any donations, and there wasn't any way of getting that back. Well, in fact. That is true of living donors, but one of the uh super sneaky loopholes here was that if you were dead, actually that didn't apply because there were no death duties or estate taxes back then, so charitable legacies were in effect tax-free. So actually, charities that were set up by bequest um and had an endowment were absolutely fine, and so you know, those sorts of charities which relied on gifts from bequests um or legacies were at a significant advantage uh compared to those that had to rely on donations from the living. And that brings us to, well, let's fast forward for a moment. So at a point in the 19th century, this becomes quite a big issue because William Gladstone, who became a very famous politician and and prime minister, multiple-time prime minister of the UK, he became quite bothered about this uh point, uh, mostly because he was more broadly very bothered about um inherited wealth anyway. So he noticed this anomaly when it came to um charity the the treatment of charities in the tax system and he tried to address it. I guess the unfortunate thing in a way is that you know what he could have done is say, oh, look, there's this unfair tax treatment where charities that uh rely on donations from the living uh are at a disadvantage compared to those uh that rely on bequests because those are not taxed. So we could extend tax relief to donations from the living. He didn't do that, he did the exact opposite. He suggested that they should scrap charitable tax relief for charities altogether so that there was a level playing field, but one in which uh all charities were taxed regardless of where their income had come from. So in 1863, Gladstone made this proposal that charities should pay income tax. Uh, and actually, you know, understandably and unsurprisingly, this caused absolute uproar in the charity sector. Um, and amazingly, the charities of London mobilised an incredible deputation, so a sort of group of the great and the good of London society, many of whom were philanthropists and patrons of these organizations, to basically march to Gladstone's office. Um, and this deputation was so amazing in sort of scale and nature that there was a incredible write-up in the Times newspaper from eighteen sixty-three, um, and it says Yesterday the Chancellor of the Exchequer was visited by what in common parlance is called a deputation, but the name, as he himself remarked, was totally unsuited to what was really a gathering of all the leading personages of the state to protest against his scheme. There have been deputations which have filled a room, and others that have extended into the passage and out at the front door, but a deputation which overflowed over a street and blocked up a neighbourhood testifies to an earnestness seldom met with in matters of this kind. So, you know, this really Gladstone, you know, generally his political radar was pretty good and he was, you know, quite effective at getting the things that he wanted through, but he really, you know, had no chance at all here. The the scale and the sort of ferocity of the response, I think, took him somewhat by surprise. Um then a few days later you get this write-up in the Times saying, with a sound though tardy judgment, the government has resolved to withdraw the proposal for subjecting public charities to the income tax. Not all the rhetoric of Mr. Gladstone, and never did he argue an untenable proposition with more courage and with more eloquence could have given such a scheme a chance of success. So, you know, it was essentially dead in the water because there were so many, you know, vested interests and powerful people aligned against it. But it goes to show that this question of you know whether or not charities should be taxed and how donations to them should be taxed has come to the forefront of political debate at you know at least once before, and actually I might talk in a moment about how that's happened in much more recent memory, certainly within my career. So that you know, this is interesting as a precedent in terms of the reaction uh you know, of the fact that there sometimes people you know notice that there's something slightly odd and not quite settled about the question of how we deal with donations to charity in the tax system. I think it's also interesting because it shows one of the other truisms, which is that when you start to try and address any of these uh these perceived issues or to try and make changes to the tax treatment of donations, you will often get a very angry response from the charity sector and you know donors to that charity sector to calls for reform. Um, even if those calls of reform are made with the best of intentions of making the system as a whole more efficient or effective or getting more donations in, people tend to be quite defensive and resistant to those calls for change, which are again I think will be interesting when we talk about uh some of what's going on in the US at the moment, for instance. But let's just pause for a moment, because although I think this is an interesting bit of you know historical insight about what happens when you try to fiddle around with taxation on charities, the point to make, I guess, is that this is actually about taxing charities, so whether or not to apply income tax to the charities as organizations, not it's not actually directly about donations, although it is relevant because the starting point, as I've said, is a kind of concern that the treatment of living donors and dead donors was um was kind of unequal and unfair. And the thing to say here is that although I've I've said already, you know, there there wasn't uh tax relief on donations at this point, there was actually in practice a workaround in the UK from 1814 to onwards when the first uh permanent income tax was introduced. But it I guess it kind of had the status of a handshake deal or a gentleman's agreement rather than something that was written down properly uh anywhere. Essentially, what you would do is you would make a covenant, so a kind of legally binding agreement that you as a donor would hand over a gift to charity, and you know, therefore your income tax liability could be handed over at the same time because of this legally binding document. And obviously at that point, because the charity itself didn't pay income tax, it would, you know, that income tax liability would magically disappear in a in a puff of smoke. So effectively you were giving donations um that were tax uh exempt. Um now obviously that only worked for people who had the wherewithal to make these covenants with uh with charities, and that meant a sort of small handful of extremely wealthy people. So this was absolutely not something that was open to the general public by any means. But knowing that that system was was in place and in place for quite a long time, for about 80 years, the the key turning point comes in 1922 then, and this this is important in the history of charitable tax reliefs in the UK, but also I think is quite an important point more broadly for the whole history of of this debate, because it brings you know to the forefront quite a few of the elements that we've uh already kind of uh identified so far. The point is that both in the case of charities where these covenants have been made, but also more broadly, because you could make covenants not just to charities, you could make them to um members of your own family, for instance, or to other types of organizations. There was a concern that this had become an area that was absolutely right, uh ripe with uh abuses, and that people were taking advantage of these sorts of covenants um to make gifts, certainly to avoid um uh taxes of various kinds, so they would sort of hand over um money and set up a covenant with a member of their family for a short period of time. Uh, so certainly if that member of their family um was younger or female and so they didn't have any income tax liability, and then that income tax liability would disappear, and then somehow magically the money would find its way back to the donor. So there was a real desire to kind of close this loophole. Um and by the early 20th century, as I say, in 1922, the government had decided to take action. So in the Finance Act of 1922, there was an effort to close this loophole around deeds of covenant, and the proposal that the government made was not to do away with them altogether, and for various reasons that might have been sort of politically unsalable, but essentially to say, uh, well, if you know, if this is a genuine covenant rather than just a sort of you know a simple wheeze to to try and get out of paying income tax, then surely this is you know a proper long-term agreement. And so wouldn't it be fair to say that you know these things needed to be made for some minimum period of time to be uh legitimate? And the proposal was that a deed of covenant would only be valid if it was made for um seven years or more. Um so any deed of covenant made for for less than six than six years or less would no longer be deemed um deemed valid. Um but the the thing is almost by implication that gave legitimacy to something which up until then had only had the status of a sort of handshake deal or gentleman's agreement, which was that by implication now, seven-year deeds of covenant were legally valid, and and this is the first time in law that that it had been written down that there was a way of a donor getting uh tax relief on their donations. Now, it's often been argued, well, I say often, in the few places where anyone has bothered to sit around and discuss the history of why tax reliefs on charity uh were introduced in the UK, which I would imagine I've probably read pretty much all of them, um, it's usually argued that this was actually a mistake. Um, and that's certainly the you know the way in which I kind of have told this story um for quite a while, and certainly in the first book I wrote, I told it that way. So, you know, to take a classic example, um uh in um in David Owen's book um on English philanthropy 1660 to 1960, he says um that it was no part of the government's intention to grant such a favour to donors. On the contrary, the concession was the wholly unforeseen result of a provision in the Revenue Act of 1922 designed to plug certain leaks in the flow of tax money. This had to do with the use of deeds of covenant, promises to pay for a specified term of years a sum of money out of an individual's income. It was an established principle that for tax purposes such sums could be deducted from the covenanter's income and added to that of the covenantee. The tax, in other words, would be paid by the recipient rather than by the giver. By the early 1920s there was concern lest this device develop into a mechanism for tax avention, and so into the Finance Act of 1922 was written a provision denying recognition to any covenant of less than six years. Presumably this meant that one for more than six years was valid. And so and others have noticed, so Chesterman in um in his book on charities, trusts, and social welfare, um he says, you know, the relief accorded to income covenants in favour of charities arose in the 1920s, more it would appear by accident than by design. So all of these people seem to say, well, actually, you know, the government was trying to close a loophole in one place and wasn't really thinking about charities, and actually, sort of almost by accident, they created the first uh official charitable tax relief. But I actually I'm not quite sure that's the right story, and I won't get into this too much because it's probably testing everybody's patience a bit, but I I've done some actual primary research here for once, and I will probably try and write this up at some point into a paper. But if you if you look at the the Hansard, so the UK parliamentary record for the relevant debates around the 1922 finance bill, you can see that actually the question of what's going to happen to charitable donations definitely does come up. So you've got Lord Robert Cecil, for instance, so he he says at one point he says, Look, I w I would like to know what this paragraph means. I'm a little puzzled by it. Is it intended to stop some kind of evasion of the tax? Suppose a man makes a grant to a charity and undertakes to pay for three, four, or five years so much a year, is that still to be counted as part of his income? It's very hard if that is to be done. If a man makes the grant for more than six years, it would not be counted as part of his income. Why is it part of his income if made for less than six years? So he's questioning, you know, this specific decision to set the boundary at seven years. And in response to Robert Horne says, Charitable gifts should be made after a man has performed his ordinary obligations. It's not enough for a man to give, say, ten thousand pounds in charity, if in fact five thousand pounds of that has been taken from the government. Undoubtedly it is taken from the government. The ordinary person's gifts to charity are those which he makes after paying his income tax, so obviously acknowledging the fact that this system of covenants is only really available to the very rich. And he goes, and Horn goes on to say, he's not entitled to deduct from the amount of his income what he gives in charity before he pays income tax. He pays income tax as a citizen of the country, and what he gives in charity he deprives himself of. That is the only charitable gift worth having, or at any rate the only one which should be commended. And others disagree with this in the course of it, and then Horn goes on to say, you know, it seems to me that under ordinary principles what I say is obvious. It's necessary then to fix some point of time. I don't say that six years is the best, it might be two or three or four years, but it must be fixed somewhere. We assume that if a man makes a gift for more than six years, that implies a more settled intention, than if it's for only five years, of putting the fund beyond his own power. We might have made it ten or fifteen years, and it may be said if we'd made it twenty years it would be still clearer. In initiating this legislation we took what we thought was a reasonable period sufficient to reveal a settled intention. It's possible to make an appeal on the ground of charity, and the noble lord has put the best possible case, but a man might, by a revocable deed for a short period of time, make gifts where really there were certain obligations or claims, thereby depriving the state of revenue to which it was entitled. It was of cases of that class we intended to strike and not any special cases of gifts for charity, although I do not think it is possible to make special exemptions in favour of charity. So excuse the the long quote read out there, but I think what's in there is really important because I think it very clearly shows that actually the, you know, they were perfectly aware of these issues, and they made quite a conscious decision both to include charities in it and deliberately to set the level at uh seven years and and upwards rather than at something lower or higher than that. So they weren't unaware of this. I mean, in any case, the important point is this happened, uh, and that is where the you know the official start of charitable tax reliefs um on donations uh comes in the UK. Um, and then interestingly, I guess the the the other thing to say about this is that at that point, obviously, because of the nature of the way this worked, you had to make a covenant with a particular institution or organization. So that meant you could only get tax relief on donations to that one institution or organization, which might be seen as quite narrow, because people might want to make multiple different types of uh donations to different organizations. So actually, in that very same year in 1922, the uh Liverpool Council of Social Services, um, so it pioneered a new, it basically realized their lawyer, who was quite canny, thought, hang on a minute, we ourselves are a charity, but we're a sort of intermediary charity. Could we take advantage of this new system, allow somebody to set up a covenant with us, a seven-year deed of covenant, to give us money, but then we would agree that we would then pass on the money to multiple different organisations, and that is what they went on and did. And then that system was taken up at a national scale by the National Council for Social Service in 1924, so two years later, and that became uh known as the Charities Department of the NCSS. Eventually it became known as the Charities Fund, and then in 1974 it was spun off as the Charities Aid Foundation, which is where I used to work for quite a while. So that the interesting point there to me, uh whether you find it interesting or not, is you know, that's more a point for debate, is that essentially to me that is a donor advised fund. And so arguably, and this is a point that I would argue, and again I might try and uh write this down somewhere at some point, that the donor advised fund or the DAF was not invented as is often claimed in New York in 1929, it was actually invented in Liverpool in 1922. So, you know, again, to me that's an interesting and fun fact, but then maybe that just shows that I need to uh get out more. It's important to say that, you know, just a couple of things about this. They they established the principle that that was legal, and and the Liverpool Council for Social Services did it first, and then the National Council for Social Services. It was not universally popular. Um so there's an interesting nugget from a 1926 um from the executive papers of the National Council for Social Service, where they include um a quote from uh a paper called The Confessions of a Capitalist by Sir Ernest uh JP Benn, um and he says, you know, in what I'd imagine is a very gruff voice, saying, We are busy encouraging the habit of legal tax evasion in a way that will cost us very dearly in the future. It is a regrettable thing from this point of view that the National Council of Social Service, a body with the highest motives, should be able to issue a circular containing elaborate instructions to taxpayers as to modes and methods whereby they can so arrange matters as to double their subscriptions to charities at the expense of the exchequer. And it wasn't uh just individuals like Sir Ernest JP Ben who were annoyed. Um actually the National Council for Social Services were taken to court by the Commissioners for Income Tax who basically thought that you know they were trying to find a way that there were holes in this scheme so that they, you know, they weren't able to allow these kind of generalized deeds of covenant. And they took the NCS to uh to court on the grounds that they didn't have a sufficient qualifying charitable purpose, so you know they couldn't claim that they were enough of a charity to be an eligible recipient of a seven-year deed of covenant. Um and the NCSS lost that case, but then they won it on appeal, and then they had to weather further attacks um in the future as well, including um one from Winston Churchill when he was um uh Chancellor of the Exchequer. So in his history of the National Council for Voluntary Organizations, which is what the NCSS um later became, um Justin Davis Smith writes, um in 1927 the Conservative Chancellor of the Exchequer, Winston Churchill, put forward proposals to amend the Act to deal with this anomaly. The Council acted swiftly. In what amounted to its first major political campaign, letters were sent to all members of parliament outlining the damage such change would cause. So you know, again, which is an interesting thing because it goes to show that very quickly when tax reliefs on you know donations are threatened, there's a often a pretty serious mobilization of those organizations that will be affected by it. And then things quietened down a little bit, obviously. Um, and then in uh just the immediate post-war period under the Labour government, um, there was the the other big change which has been quite important in sort of shaping the nature of tax reliefs in the UK. So in the Finance Act of 1947, um the change to the law meant that surtax, so the sort of extra bit of tax on those with higher incomes, was no longer eligible under a deed of covenant. So essentially you could offset your basic rate of income tax, but not the rest of it, um, which is interesting because essentially that explains why the UK's gift aid system operates at you know in two different ways according to whether you're talking about basic or higher rate. And we do have this very weird hybrid system, but it's due to that particular uh kind of historical quirk rather than any conscious decision, because nobody would consciously decide to design a system of the complexity of gift aid in its current form, I don't think. And then in the UK uh case, the the system of deeds of covenant uh was the main tax relief of charity for um I mean at least 65 years. Um and then eventually, I think because the system was seen as um both a bit clunky and legalistic, and also because it was only open to those um who were giving larger amounts of of money, there was a desire to make the system simpler and to democratize it to some extent. So gift aid, which is the current system, was introduced in 1990. Um initially there was a lower limit on that. Um and I mention this because I think this is important in terms of uh the questions about designs of tax incentives that we'll come on to in a minute. And initially it was own gift aid was only um for cash gifts of £600 or more, which was a pretty high bar at that point in time. Um, but fairly quickly it was lowered to £400 in 1992, £250 in 1993, and then in 2000, under the Labour government, the lower limits on gift aid was abolished uh altogether. And I just want to say quickly, you know, that's been a very UK-centric version of the history of tax reliefs, but I think hopefully shows how these things tend to uh kind of evolve in various different ways, and how understanding the context in which they evolved is often very important in understanding why they've been uh why the choices that have been made have been made and why those tax reliefs look like they do. In the US, the story is a very different one. Um so in the US the charitable deduction was introduced in nineteen seventeen, so um bit bit earlier than in the UK. But it was part of legislation that was specifically designed to raise revenue to support US involvement in World War One. The income tax had actually only been introduced two years earlier in the US, so in 1915, and there was a worry that the the massively rising rates of income tax, so um they went up, for instance, from 15 to 67% within a couple of years in the case of the top rate, that that would mean that people would suddenly just stop giving altogether. And the government had, you know, it felt it had a vested interest in in maintaining levels of charitable giving because they needed that to support the the war effort alongside the money that the government itself was spending. So to some extent, you know, the introduction of the deduction there was very pragmatic rather than reflecting any sort of deep-seated principle. So the um the Filer Commission, uh, the Commission on Private Giving and Public Needs, I mentioned earlier, which was the sort of mid-70s uh big look at the US non-profit and kind of philanthropy system. Looking at this history, it said, you know, the charitable deduction was enacted not only or even primarily as a matter of tax philosophy, but because of hard practical considerations. And uh the economist Nick Dequette, who's done a really great paper on the history of the charitable uh deduction in the US, so he says, you know, the Congress added a deduction for gifts to charitable organizations, not to encourage the wealthy to give their fortunes away, which the most influential and richest men were already doing, but to not discourage their continued giving in light of a larger tax bill. So he said, you know, they argued for the change not because they thought it was wise public policy to change the price of charitable contributions via a subsidy, but because of worries that reduced after-tax income of the very rich would end their philanthropy, shifting burdens the philanthropists had been carrying onto the backs of a wartime government. So in a way it doesn't this story doesn't quite fit any of our three theoretical bases cleanly, but it goes to show that actually those sort of pragmatic considerations dictated, you know, uh doing something at a particular point in time and establishing a system in a particular way. And once those decisions are made, actually it's quite hard to go back and sort of revise them or to revise the system in light of you know having thought a bit more about the principles. And in the case of the charitable deduction, that's remained broadly untouched, really, apart from a few minor tweaks ever since. I mean, the most notable point is the 1969 Tax Act um did make some changes to the way in which the charitable deduction applied to different kinds of non-profits and introduced sort of limits, but but fundamentally the system has remained the same ever since. Um, and so I think again, that's maybe the sort of abiding lesson of looking at this this historical background. And that brings us on to the final section, which is where I want to look at the question of how you go about structuring tax breaks on giving and you know why there are some debates about that right now. So stay tuned for that. Okay, so having looked at the theory behind tax breaks on philanthropy and the history of them, what I want to do now is look at some of the key choices that need to be made when it actually comes to introducing tax breaks in practice and why there are such lively debates about some of this today. So the first choice, the most fundamental maybe, is whether you're gonna offer tax breaks on philanthropy in the form of a deduction, whether you're gonna do it in the form of a credit, or whether there's gonna be some sort of hybrid. So a deduction essentially is the model that they have in the US, where you know what you do is you say to people, right, well, take the amount that you've donated to eligible charities or nonprofits, take that off your income before we calculate your tax. So it's just deducted from your tactible your taxable income. And obviously, you have to do that through some form of um uh tax return rather than it being a sort of deduction at source thing. Other places have a credit-based model, so what they do there is they offer you rather than a deduction from your taxable income, they will offer you a credit against your tax bill based on some portion of the value of donation. So, say for instance, you've donated $1,000 to charity and uh it's a 50% um uh tax relief, you would get $500, which doesn't come off your taxable income, so it's not affected by your tax rate. Regardless of your tax rate, that is then money that you can take off the amount that you owe on your tax bill. And then the UK has this weird hybrid Frankenstein type system where we have almost a credit-based system on the basic rate of tax, although it's not even really quite a credit system, it's more like a matching system because what happens in the UK case, as many of you might know or you might not know, is that a donor can uh make a declaration that they have paid sufficient uh tax uh on their income, and then if through the gift aid system, the uh charity to which they've made the donation can then claim back the money that that donor would have paid in in basic rate tax on the donation, the donor themselves doesn't get any of that money, the benefit goes directly to the charity in the form of a repayment from the government. The weird thing about the UK system, well, one of the many, many weird things is is that as we've already said, that's how the basic rate of tax is treated, but the uh the higher rate of tax, so the the additional rates above that, are treated in a way more similarly to the US system, where they are essentially a deduction. So through self-assessment tax, you can additionally declare your charitable donations and your marginal rate of tax will be taken off your tax bill. So essentially it's it's very, very complicated. I think the thing to say here is you know, the choice about which of these things to use is really important. And I want to see like what what are the reasons that you might choose one or the other of these? Well, firstly, I guess to say if you're using the if you're relying on the tax base rationale that we discussed earlier, so essentially saying, well, you know, you need to uh take donations out of someone's tax base before calculating how much tax they have to pay, because it's money that they've given away, so it's not income. To me, that pretty much dictates that you have to use um a deduction system, because it's sort of it'd be an odd thing to say, well, you know, that's money you've never had, it's not part of your income, but we'll still tax it anyway, and then we'll give you a percentage tax credit on it. If if you're if you believe in an ideological sense that that money is not part of the tax base, you should just allow people to remove it from their own personal tax liability. So essentially you should have a hundred percent uh tax deduction system, which nowhere has actually. So maybe that suggests that nobody is really relying on the tax base rationale to justify uh tax relief on giving. But if you use a different basis, then you know the option of which of these things you you take is open. Now, what are the pros and cons of of the different choices? Well, a deduction system like the US one definitely you know, things that go in its favour, it's relatively simple, it's quite straightforward to understand and to some extent to administer, and it offers a direct incentive to the donor. Um, so actually, if if the purpose of offering tax incentives on giving is to um uh to kind of encourage people to to give or to give more, then maybe this is a more effective way of doing it. The the downsides of this are firstly that there's something that's called the upside-down effect, which is essentially if you if you use a deduction-based system, those who are paying more in tax, so the higher rates of tax, actually the deduction is worth more to them. So it's arguably quite regressive rather than progressive. It also relies on uh filling in a tax return. So in the US, for instance, actually the charitable deduction is only open to what they call itemizing taxpayers, so people who you know itemize all of their different elements of income and deductions on their tax bill. So historically, you know, that has always tended to be those who have a reason to be itemizing anyway, which is often homeowners because you can uh itemize mortgage interest payments. So it tends to skew towards those on higher income. So it's long been argued that actually the charitable deduction is, you know, tends to be something that is more likely to be of benefit to those um on higher incomes. And actually, that situation has got even worse more recently because the other thing is that there is what is known as the um the standard deduction, which is sort of bundle-together tax deduction that everyone can take through their tax return, where all kinds of different things are sort of put together and you don't break them out into different itemized elements, you just take one overall uh deduction that kind of reflects a sort of averaged-out version of what most people take for each of those different areas, including charitable giving. So if you take the standard deduction, you can't also take the separate um charitable deduction. And one of the things that's happened recently in the last few years is that in the 2017, the Tax Cuts and Jobs Act was introduced under um uh Donald Trump as president, um, and that increased the rate of the standard deduction that was available. So actually, the number of people who were likely to take that rather than the charitable deduction increased significantly. And so actually, between 2017 and 2018, um the the percentage of people filling in tax returns who who took the charitable deduction dropped from 24%, which is already relatively low, it has to be said, but it dropped down to 8.5%, so a 64% drop. Um so you know, actually a lot of people now are starting to question whether the charitable deduction is fit for purpose because so few people are taking advantage of it. And and you know, there are questions about, you know, in pragmatic terms, is it useful anymore? But also in terms of concerns about equity and justice, is it sort of unfairly benefiting a very small number of donors? Um, and there was an interesting uh op-ed the other day in the Chronicle of Flansby with somebody arguing that actually as a result of these concerns the US should shift to a totally different model. Um the argument there was that it should be one based on a matching system more like gift aid, um, which is really interesting, although as we've said here, there are kind of both pros and cons to gift aid as well. In terms of pros and cons, obviously we've said, as well as a deduction, you know, one of the other big options is to take a sort of credit-based system. What are the pros and cons of this? Well, one is clearly that it's more equitable because it, you know, the value of it doesn't vary dependent on your personal tax rate. One of the downsides of it, I guess, is that there might be less incentive for the individual donor because it has less value, although it still has um, you know, there still is an incentive to the individual because it's money off their tax break. It's also potentially slightly harder to administer and requires more in the form of uh administration. Um so you know that might be why fewer countries have that sort of system. There aren't that many credit-based systems around the world. And then again, just to say, you know, as we've said, gift aid is odd in that actually, in effect, it's a matching system rather than a credit or deduction. And the good thing about that is that it again it's relatively equitable, um, at least the basic rate bit is because everybody's getting the same rate. It's not that equitable overall because people paying the higher rate can get an additional personal benefit. It's good for non-profits and they have a kind of direct vested uh interest or kind of you know skin in the game because it's it's they who get the money and are kind of involved in making the claim. Um, but as a result, it is also administratively extremely complicated. Um, and you know, maybe that is uh a downside, particularly in the context of a UK tax system that as a whole is incredibly complicated already. Okay, well let's assume that you've decided you're having a system of tax relief on donations and you know why, and you made a decision about whether you want a deduction uh or a credit based system. The question then uh is about whether or not you want to limit that that tax relief in any way, in terms of either setting a flaw, so you know, a level below which donations are not eligible, or a cap, you know, levels a bit uh above which people are not able to take um any more tax relief, whether that's as a sort of set uh value or whether it's as a proportion of the donor's income, you know, those are kind of choices to be made. So, as I say, in terms of uh a lower limit, it might be some minimum qualifying amount. And and usually that the argument for doing that is you know something to do with acknowledging the administrative cost of the system and saying you know it's only sort of worth it for a certain value of donations. Um and we've seen that was the case initially with um gift aid, certainly, and it was the case, I believe, with the system in Canada and in some other places. But I think you know it probably runs counter to the the prevailing sense at the moment of trying to democratize philanthropy and might be seen as unfair. So I think if you're introducing a tax relief now, it would probably be quite a bad look to to set it you know as something that was only available to people giving you know moderate or even large donations. I think in terms of the looking at the other end, at the upper limit, the point here is that, you know, unless you're taking the tax-based rationale, as we've said, where really it only makes sense then to allow full tax deduction for kind of theoretical reasons. If you're using any of the other uh rationales to justify offering tax breaks, there's no reason that you need to offer a hundred percent tax relief because you as a government essentially are offering some form of subsidy, whether that's for the direct provision of public goods or whether it's for you know the uh in recognition of the kind of value of plurality within within civil society. But how valuable you think that is and what level you set that subsidy as is up to you. So you might choose to offer a hundred percent subsidy and give people full tax relief, but you might not. You might offer to offer to do it at 50% as they do in America, 50% of adjusted gross income, or 40% or even 20% or something else. And you know, actually the UK, it turns out is extremely unusual in having 100% tax relief. And I think the, you know, and we'll see in a moment that this has actually become an issue at points in the past where people have tried to clump down on that and haven't done so successfully, but I think it still is a live debate to some extent. I think the question of well, what level do you set that policy at is is dictated by a mixture of policy aims and pragmatics. So, you know, what what is the the policy aim here? Are you trying to incentivize non-givers to give in the first place, or are you trying to reward existing givers? You know, that might make a difference as to whether or not you choose to impose a flaw or not, because certainly if you're trying to incentivize non-givers, you probably don't want to have any barriers to entry, really. Whereas if you're trying to reward existing givers, particularly you know, if you're trying to reward existing givers who've already given significant amounts, maybe it makes more sense to introduce a flaw. So I think you know, there the the question about where you you set uh those limits uh comes down to what you as a policymaker are trying to do. And I think that applies to caps as well. You know, if you are choosing to offer a subsidy for some reason or another, you balance that against, well, you know, what is the the value of that subsidy from our point of view versus the cost of offering it, and then you kind of set the cap appropriately at that point. So another decision that you might make in some places is uh about which organizations or cause areas are eligible for receiving uh tax relief on donations. Now it's worth saying, I guess this maybe to US listeners, this doesn't really make that much sense because in the US the the non-profit designation, so the 501c3 status is a tax designation. So eligibility for tax relief is sort of definitional of what it means to be a non-profit in in that sense. But in in other places, there is a distinction between the two. You can be a registered non-profit or a legal charity, but you cannot be eligible for tax relief, either because in say in the UK you just haven't registered separately for gift aid, although you know you certainly can do that. So it's you know, in most cases, you're not going to get turned down for eligibility for gift aid if you are um a registered charity. But in some places that's not the case. So in Australia, for instance, um the organizations currently that are eligible for tax relief on donations is a subset of the wider non-profit sector. So there's a sort of distinction between organisations that are allowed to have non-profit or charitable status and those that the government has deemed are eligible for tax relief on donations to them. And you know, that and in other places, tax breaks on donations can be limited to a relatively narrow portion of wider civil society that's very clearly in line with government priorities. So it might be very specific cause areas or even kind of particular types of institutions or particular named institutions. Um, so that is a you know another choice that needs to be made. A further choice is you know, from the point of view of the donor, what kinds of assets can you get tax relief on? Again, we've obviously been talking primarily about gifts of cash here and about income tax, but it's worth saying, you know, there are all kinds of other assets out there, and often, you know, particularly when you're talking about philanthropy and people with larger amounts of uh of money, you know, they often operate in different types of assets rather than cash, and they don't have sort of straightforward incomes, and they often don't necessarily pay income tax, they're more likely to pay other forms of tax like capital gains tax. And so, you know, there are other options available, um, whether that is gifts of stocks and shares, or whether it's gifts of property, or whether it's gifts of works of art. Again, as a policymaker, you need to decide whether you want those things to be eligible for tax relief, and if so, whether that's going to operate through the same system. In the UK, we you know, we actually have a separate system for those kinds of gifts that looks a lot more like the US system than gift aid is, and is actually remarkably generous because certainly in the case of stocks and shares, you can get relief from capital gains tax that you might have otherwise paid on those assets, and you can also offset the fair market value against your income. So it's an extremely tax-effective way of giving. Um, but there are also, I think, quite a lot of question marks around things like valuation and abuse in these areas, um, particularly for, I mean, I guess things where maybe there's more subjectivity or more question marks around um works of art and things like that, where obviously there are established mechanisms for valuing them and there's sort of fair market valuations, but you know, some would argue that the scope for getting these things uh valued at a sort of you know in an inflated way in order to be able to take advantage of tax reliefs is it's easier to do that than when you're talking about straightforward cash where the financial value is very clear. And that also raises the point that, you know, what about new forms of assets that are emerging? So let's not go down the rabbit hole of talking about you know digital assets and cryptocurrencies, but actually there's a whole interesting debate over the last few years about how those should be dealt with within the tax system and you know whether gifts of those kinds of uh digital assets should operate more like stocks and shares and on a sort of fair market value system like that, and whether we have you know currently well enough established mechanisms for establishing that that well that fair market value, particularly when you're talking about smaller cryptocurrencies. So I think there are all kinds of question marks there as well. And then it's also just say there are kind of that's most of the different types of assets, but there are also other types of gifts you might think about. So in again to take the UK system, because we really do have the most complicated uh system out there, you can also claim gift aid on things like uh entry fees to museums and galleries, but then there's a I won't go into the details of it, but there's a complicated system by where this has to be um deemed to be uh you know, there has to be an element of that price that is a voluntary donation in order for it to be eligible. So there's this sort of complicated you know board or explainer that's often put up to tell people that if they want to claim gift aid on their entry fee to museum, they need to give this amount, and if they don't, then they pay less. But it's you know it's not actually always clear how you can do that. And it's obviously something that has been done with the best of intentions from a policy point of view to benefit you know arts and cultural museum uh institutions and museums, but it it really does make the system extraordinarily complicated. And so those are some of the choices that we need to make, and I guess you know the the thing that underlies all of those and that dictates some of those choices, as we've kind of alluded to already, is what is the policy aim and is this an effective way of achieving that policy aim? So, from a policymaker's point of view, the fundamental question here is is this form of relief an effective means of achieving my policy aim? And obviously that then depends on what the policy aim is, and also to some extent what the rationale for tax relief on donations as a mechanism is. And you know, I think the question of what the policy aims for um wanting to encourage philanthropy are is not straightforward. I mean, yeah, yes, in some cases it might be we just think giving is nice and we'd like more of it, but actually I think there are all kinds of other reasons. You know, in some cases it will be taking pressure off public finances, in others it might be more of an interest in uh fostering a pluralistic civil society. I think there will also be, you know, within that, you know, what what they're actually trying to do in terms of encouraging or supporting giving could mean lots of different things. You know, it could be that you want to get more people giving, so get a higher proportion of the population giving in the first place. It could be that you want to get people giving more, so you know, trying to support and encourage those who've already started giving to give more generously. It might be that you want to get people to give to specific causes or geographic areas, although that is, you know, can be somewhat controversial. And the question then is, you know, to what extent is tax relief on donations an effective method of achieving any of those things? And I guess in all of them, you then there's various questions you need to ask, you know, depending on what your policy aim is, you need to say, well, you know, does offering a tax break in this particular form offer an incentive for anyone who hasn't currently started giving to do so? You know, and does it not present barriers? And you know, that then maybe leads to a decision about things like um whether or not to set a floor um on eligible donations, as we've said. Another question would be does it offer an incentive for those already giving to give more, or does it just increase the value of their donations? So they give the same amount, but you know, the government is essentially kind of topping it up, and is is that a good use of public money? You know, a question would be what administrative burden does it put both on donors and on the recipient organisations? Another one would be, well, if if the aim is overtly to subsidize public goods in line with government priorities, is this a treasury efficient way of doing that? You know, actually, are you purchasing those public goods in a way that is is effective and efficient, or are you getting more for your money than you would otherwise do if you just spent that money directly in the form of public spending? Or if you're not, so say you are offering a tax incentive for delivering some public good, but you actually realise that you know you're getting at best a pound's worth of value for a pound's worth of subsidy, or even getting you know 50p's worth of public uh val public good uh for uh a pound's worth of subsidy? Is there some additional value that you see in allowing goods to be delivered through voluntary means or through supportive philanthropy? Is giving people individual agency, does that have value? Does allowing you know people to sort of decentralize choice about public goods to some extent, does that have value? Or would it be better for the state just to kind of take all of this stuff back in-house and do it itself? And then I guess the final question is, you know, which we uh touched on a little bit around uh digital assets a moment ago. Whatever choices we've made about how to offer tax incentives on giving, are they future-proof? So those are some of the sort of choices and the key questions that need to be asked if you're thinking about instituting tax incentives for charitable donations. I just wanted to round off by mentioning a few different places in which you know some of these questions and others have come to the fore in recent years and why there are sort of some quite live uh current debates about charitable tax relief. So let's take the US first. Um so I've kind of touched a little bit on this already, but just to say that there's a lot of debate at the moment about the charitable deduction and whether or not it needs reform, both in light of the the figures around the impact that the Tax Cuts and Jobs Act has had, and you know, the way in which that's exacerbated concerns about that relief already only being used by a small number of wealthier donors, and also the kind of increasing focus on uh equ concerns about equity and justice within philanthropy, actually thinking about whether the US needs to look to institute a more democratic and fair version of tax relief for donations. Um and as I say, there are various proposals, uh, if not on the table at the moment, certainly being kind of bandied around and gaining some traction, including you know instituting uh a credit-based system or a sort of matching system that looks more similar to what we have here in the the UK. It will be really interesting to see when it whether any of that kind of filters through into actual policy making. I I think as I've said throughout this, the challenge in a way is that fundamental reform to the way in which tax relief uh on donations operates, even if it makes sense from a sort of theoretical point of view or kind of you know gives a sounder um justification to tax reliefs or kind of fits better with the ideological beliefs of um you know government that happens to be in power at that part that uh moment in time. The challenge is once a system has been established, there will almost always be people and organizations that lose out if you make changes to that system, and they are likely to fight very hard against those those changes. So there's often a lot of vested interest in defending the status quo, even among organisations and people who might you know broadly agree with your your kind of uh overall aims in terms of making society and you know and philanthropy more just and more equitable as a whole, you know, if that's going to mean that you as a charity or a non-profit just end up with less money, it's quite hard to be entirely sanguine about that. And I guess that goes to a sort of broader question about the overall impact of of some of these changes, which is you know, in some cases, are we balancing uh a desire to make the system fairer or to meet the requirements of the of justice against the pragmatism of getting more money in? And if a system you know is unfair because it unfairly benefits those on higher incomes or with more wealth, is is it worth changing that system if it's going to result in less money overall making its way to charities? Or you know, is is that uh an acceptable cost for making the system more equitable and fair, or should we be slightly more pragmatic about it and kind of you know accept that that actually the overriding policy aim for for all of this is to get more money into the the non-profit sector? You know, I don't know exactly what the the answer to that is, and it's gonna be for each person, for each policymaker to kind of decide for themselves, and also it's always sort of hard to know exactly what the impact of these things is going to be, because certainly when any suggested any proposal to make changes to uh you know the current systems of tax incentives on uh on giving, there are all sorts of claims and counterclaims about you know what impact this will won't have on donations and on charitable organizations. And I say that as someone who has you know in the past been involved in policy roles where I have been the one making those claims or or counterclaims, so I know that um all too well. So I think there are other questions as well. So some of them link to um what we said at the end of the section just before about future proofing, we mentioned there about uh whether or not you know how you might treat something like digital assets. I think there are also interesting questions at the moment about how whether there are other types of organizations that should be eligible for tax relief. So in the context where we're increasingly seeing that people are giving in a variety of different ways, so whether that's through sort of crowdfunding or individual peer-to-peer donations or to sort of informal groups using online platforms, does it make sense to extend existing uh charitable tax reliefs to allow those sorts of donations to get tax relief as well? You know, or is there you know the justification on which we have have uh based the fact that we offer those incentives, does it only allow that those that meet some requirements of having a particular legal form should be the eligible recipients of it? And again, this goes to the question of well, what are we trying to achieve by offering these tax incentives? And if it is to boost generosity as a whole, then you know, if people are giving in different ways, do we need to adapt in response to that? Or, you know, if our aim is to promote one particular model of uh civil society organization in the form of some kind of registered charity or non-profit, is you know, then does it still make sense to attach tax reliefs uh only to donations to those types of organizations? There are also interesting questions that sometimes come up in proposals about whether tax reliefs need to be more targeted to produce certain kinds of outcomes rather than being you know broad-based and and kind of uh for all donations. In some cases, you know, I've heard things like you know, tax relief on donations should be uh linked to measures of impact, so only donations to organizations that meet certain sort of minimum requirements of delivering social impact should be eligible, which is you know, I'm uh uncomfortable about for various reasons, because you know there are, I think there are issues with becoming overly reliant on um particular measures or conceptions of value, and you know, there's always a danger that things get counted as externalities, you know, by one person, whereas actually for somebody else they are the thing that has value. But it you know, I think it is an interesting idea, particularly if your policy aim is to make philanthropy more effective or better uh you know, in some sense. I think there are also, in terms of that question of effectiveness or targeting, there have been proposals in the past, certainly in the UK, to link gift aids to um certainly specific geographic areas or to make the rates differential. So there might be an increased incentive to make donations to organisations operating in places where there are these so-called charity deserts, so where there is not a lot of voluntary provision as a way of overcoming the fact that you know the the philanthropy landscape as a whole tends to be kind of patchy and unequally distributed. I think it is difficult in a way to use taxation and certainly tax relief on on donations as the mechanism for doing that, because that then puts the onus on the state to you know almost pick winners or decide about where it would be better for people to spend or to not spend their their um their charitable monies, um, which is not to say it's impossible, but I think you just need to be very careful about doing that, because like anything that sort of imperils the basic principle of you know uh philanthropic donations essentially being a voluntary choice on the part of the individual to give away their money for the public good, you just need to be careful, I think, if you're going to do anything that that might uh kind of conflict with that or undermine it. And then there are other sort of more practical discussions um around whether you can make existing systems just work better, um, you know, both so that they cost less from the point of view of the government and from the point of view of um donors or recipient organizations, um, and you know, reduce the administrative burden and cut red tape, um, and often that is you know argued to be something that can be done through digitisation or utilising technology. And in in the case of the UK and gift aid, because of the nature of the system um and the fact that uh certainly the basic rate operates on the principle that the recipient organization can claim back um uh the money that a donor has paid uh on uh on money that they've donated, as long as they've made a declaration and you know they're able to produce the appropriate paperwork. As a result, there is a whole debate about uh so-called unclaimed gift aid, because there are calculations made about the amount of money that is given in donations by people who have paid enough tax that they could um that did gift aid could be claimed on those donations, but for whatever reason, either because they haven't made a declaration or you know it just hasn't been captured properly, the charity is unable to claim that money. Um, and so part of the interest here in digitization and the use of technology is about maximising the value of the system as it is and allowing all of the potentially available gift aid tax relief to make its way into the the charity sector. Um so yeah I think there are kind of you know all sorts of different ways in which people are interested in either kind of fundamentally changing uh the nature of tax reliefs on donations, which as I've said is uh often you know extraordinarily difficult because you will run up against uh people who have you know an interest in maintaining the current system, even if it is imperfect, or in tinkering with those existing systems to make them work better, but then obviously you know doing so in a way that doesn't bring with it unintended consequences. But in any case, I guess my parting thought on all of this is that in the context where we are seeing a lot more interest in what policymakers can do to encourage and support cultures of philanthropy, I think the role of tax incentives within that is really important because often they're seen, I think, as one of the most obvious kind of concrete levers that that policymakers or government can pull in order to incentivize giving. So I think unpicking some of the questions about what the theoretical basis for offering tax relief for philanthropic uh donations is, what that means in terms of the choices that policymakers make um when it comes to designing and implementing those tax reliefs, and what that means, you know, with a view to the future about how you might need to adapt in light of sort of you know changing economic environment and the changing nature of the non-profit sector. I think all of those things are really important, and my concern is that often they're just sort of assumed or taken as re and certainly you know the question of how we justify tax reliefs for charitable donations, I think is one that is often uh very sort of poorly thought through and argued, and it's such an important starting point for all of the rest of these debates that I would really be uh really like it if there was a lot more kind of clear consideration of these questions by uh policymakers. Okay, well that brings us to the uh close of this episode. Um I hope you've found that interesting and not uh overly dense or technical. I've tried to keep it at a level where it's you know accessible and uh hopefully interesting. Um if you want to read any more, I'll put some links in the show notes to uh bits that relate to things that I've specifically mentioned. If you're interested more broadly in issues around uh philanthropy and civil society, do check out the website at whyphilanthropymatters.com. You can find articles uh there and sort of short guides, all the back episodes of this podcast, links to other things that I've been doing. Um you can also get a link to sign up for our monthly newsletter where we curate lots of interesting stories about philanthropy and civil society that we've seen on the web and elsewhere. Uh, if you want to follow me on social media, please do that. Uh, I'm experimenting a bit more with Blue Sky, so please come and join me there. 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