Should charities pay any tax?

How seriously should we take calls to scrap all taxes on charities? Should we do the same for businesses that do good? (Originally posted on Linked In)

When I see a senior person from charity finance arguing that charities should be exempt from all taxes I’m tempted to reach one of two conclusions: either the Chair of the Charity Tax Group, John Hemming, has forgotten what taxes (and charities) are for or he’s simply setting an Aunt Sally running to see how many salute it, if I may mix my metaphors.

Whilst mansplaining the first option I hope I can do justice to the intellectual challenge of the second.

People and companies pay tax in order to do good. Such ‘good’ comes from funding common action to address common social and other problems: a service to help us when we’re sick, to educate our children or to address poverty and social exclusion through the benefit system, for example. Whilst we can all agree that ‘the defence of the nation’ should be included we may disagree on how that’s best achieved. Meanwhile, no one can sensibly argue that we’re spending too much on social services or elderly care.

Taxation redistributes wealth and few would disagree that the richest should contribute more than those less able to (though to what extent is always good for a pub debate).

Charities enjoy several tax advantages in exchange for delivering ‘public benefit’. There’s controversy over what this means, especially where independent schools are involved. The comedian (and economist) Simon Evans recently drew attention to the absurdity of Gift Aid: the more you give to charity the more the state subsidises your giving – using money that might otherwise be used for ‘doing good’.

This slightly irrational position sees a shift of resources from organised, focused intervention at scale by the public sector and in the public interest towards chaotic, diversified investment in… lots of stuff, delivered by a host of myriad charities. Little wonder some senior people on the left are reported to be sceptical of charities as service providers – in any situation.

But not me. I think it’s right for charities to bring innovation, local expertise, caring values and alternative ways of delivering services into the public domain and right that Government partners with them in that delivery. Whilst charities should never be the vassals of government, should always have access to funding from independent sources too, professional partnerships between charities and the state frequently make great contributions to society.

I’m also in favour of businesses doing good, as I outline in my book ‘The Company Citizen’. Companies have a duty to behave responsibly in respect of community, stakeholders and the environment, and there’s a long term business case for them to be proactive in doing so. In fact, we need them to address climate change, food poverty, resource management on the international scale that only companies can.

Some argue that companies who do good should be rewarded with tax reductions; this idea should get very short shrift. After years of cuts in public spending we can see that we should not be spending taxpayers’ money in ways which aren’t focused on need. Companies that cut their carbon footprint will save money in the long term and gain a business advantage from doing so, they don’t need a tax cut to achieve that.

So we’re left with a rather uncomfortable feeling that maybe taxpayers shouldn’t be subsidising charities as much as they do, let alone singling them out for tax cuts. But charities aren’t companies and they can’t gain from ‘doing good’, which is a cost for them, not a net benefit.

Actually, other than Gift Aid and the VAT issue there’s no wholesale subsidy of charity operations, despite what recent commentators on various Oxfam issues have implied; most taxpayers’ money that goes to charities goes straight into services for those they help, often the poorest and most excluded members of society at home or abroad.

The best thing is to quietly park the ‘scrap the tax on charities’ agenda, Mr Hemming. I suggest you do so!

The ex-Minister and his Trumpian ‘Facts’

As a former MP, Tom responds to the former Charities’ minister’s attack on Oxfam – and on charities generally.

Did Rob Wilson learn nothing as the Charities’ Minister?

I never thought I’d do it. I registered as an online Daily Telegraph reader so that I could absorb the thoughts of Rob Wilson, the former charities minister who lost his Reading seat at the last election. Had the commentators quoted him correctly? Unfortunately, they had. To dismiss Oxfam as he does, as a ‘left wing pressure group’ who therefore cannot have their views taken seriously, not only lacks evidence but is wholly irrational. That he learned so little in his time in office is a poor reflection on my former profession as a Parliamentarian.

Let me first pay tribute to some very sensible Conservative supporters and members, who play key roles in many major charities. They will feel offended by the implications in Wilson’s words that passionate support for a campaign or cause is somehow unworthy. The charity world needs Conservative activists just as much as it needs passionate and conscientious people of other hues. As a serial charity chair myself, and a lifetime Labour Party member, let me assure him that I’m very aware of the need for charities to behave in ways that are not seen to be Party-political. That doesn’t mean we can’t make a case.

Not only are lefties in my position aware of our legal duties but we actually agree that charities should not behave in overtly party political ways. When I chaired the All Party Parliamentary Group on Charities I never expected them to roll over, I expected them to challenge government. In part, that’s what charities are for! We want people of all political views to share charities’ commitment to social and economic justice and join our campaigns and activities. Or perhaps Wilson believes that ‘social and economic justice’ can only be a leftwing idea? Nonsense.

Nor, Mr Wilson, do charities campaign for ‘state handouts’ as if they had a divine right to exist. State handouts, as you may have noticed, are emergency measures which are not sustainable in the long term; there’s nothing charities would like more than to not have to ask for money – not for themselves, but for their beneficiaries. The idea implicit in Wilson’s view, that having more money circulating in their economy cannot be any part of a solution to people’s poverty, is simply bizarre.

This leads to my most serious concern about the former minister’s position: his Trumpian engagement with facts. I used to chair an international development charity (not Oxfam) and I know that no charity is more committed to ‘the market’ in its operations than is Oxfam. A decade ago I watched the journey of the international organisation of which Oxfam UK is a part. They realised – and then committed to the idea – that developing effective and efficient markets is the most sustainable way of helping people with next to nothing become economically viable in places like Africa. They moved away from a focus on ‘aid’, short term alleviation of the symptoms of poverty, towards ‘development’, the honing of processes to help the poorest people help themselves. That is not communism, Rob, it is not a ‘failed left-wing economic model’ as you claim: it is the fair and inclusive operation of a market economy.

Thank goodness the rumours that predicted Rob Wilson’s next career move to be the Charity Commission were wrong. Charities, led by a politically and otherwise diverse group of people, need partnerships and friendships with Government (and political parties) but they must always be critical friends.

That’s a lesson this former minister clearly never learned.