The OECD has recently released a report which comments on the tax treatment of philanthropic entities and charitable donations in 40 countries across the globe.
Acknowledging that in some countries, the non-profit sector accounts for up to 5% of GDP, the report recognises the need for the right balance to be maintained by jurisdictions Governments, to ensure the integrity of the tax system is retained while at the same time supporting the philanthropic sector existing within their communities.
The report concludes with the following recommendations for Government policy makers:
- Reassess the activities eligible for tax support and ensure that favourable treatment is limited to those areas consistent with underlying policy goals
- Consider providing tax credits rather than deductions and fiscal caps to ensure that tax support does not disproportionately benefit higher income taxpayers
- Reassess the extent of tax exemptions for commercial income of philanthropic entities to minimise the risk of putting for-profit businesses at a competitive disadvantage
- Reduce the complexity of tax laws that disproportionately affect low-income donors and smaller philanthropic entities
- Improve oversight and boost transparency to safeguard public trust in the sector and ensure that tax concessions used to boost philanthropy are not abused through tax avoidance and evasion schemes
- Reassess restrictions currently imposed on cross-border philanthropic activity.
If you would like to read more, a full copy of the report can be obtained from the OECD’s website.