Charity Tax: good on Nick & Dave for realising there’s a difference between tax avoidance and philanthropy

by Stephen Tall on April 19, 2012

[Cliche alert/] A week is a long time in politics [/cliche], but it was 7 days ago I suggested there were signs of encouragement the Coalition would start to see sense on the misguided Charity Tax — and both Nick Clegg and David Cameron have signalled they’re willing to think again.

Here’s Nick in the Telegraph:

Nick Clegg made clear the Government was preparing to climb down when he met rich philanthropists at a private reception in Whitehall on Tuesday evening. The Deputy Prime Minister told them that the Government had been “beaten around the head and neck” and wanted to encourage them to start giving again. …

It is understood that the outline deal was agreed at a meeting with Prime Minister David Cameron earlier on Tuesday. The compromise proposal could be announced next month when Mr Cameron is due to address philanthropists before the start of a planned consultation. Discussions are now going on in Whitehall about how the arrangement might work. The most likely option is to create a separate limit on charitable donations of, say, 50 per cent of a person’s income, bringing the UK into line with America.

Mr Clegg is understood to have told the reception that he wanted time to take a “cool look” at the plans. He said: “You have been beating us around the head and neck. We need a cool look to understand it properly and hopefully get back to Britain being a great place to give.”

And here’s David Cameron in the Indy:

David Cameron today gave a strong hint that he is ready to water down a controversial cap on tax relief for charitable giving, saying he was ready to listen to critics and take time to “get it right”. The Prime Minister said he wanted to see more philanthropic giving to charities – something which a Treasury minister conceded would fall under the plans announced by Chancellor George Osborne in the Budget. …

Chief Secretary to the Treasury Danny Alexander said there were “attractions” in the US system, which caps relief on donations to some charities at 50%. This was one of the options reported today to be under consideration by the Chancellor. The Financial Times said Mr Osborne was also looking at the possibility of allowing donors to roll over unused tax reliefs to future years if they are used for gifts to good causes.

Given Nick Clegg’s laudable ‘Tycoon Tax’ — which unintentionally triggered the ‘Charity Tax’ debacle — was borrowed from the USA, it seems apt the Government should look at borrowing a bit more from across the pond by recognising there’s a big difference between tax avoidance measures which make the wealthy wealthier, and gifts to charity which always cost the wealthy money.