4:00—5:30 PM
CGD Europe
54 Wilton Road
London, UK, SW1V 1DE

CGD Europe Seminar: How Much Does Tax Relief Increase Charitable Donations? Evidence from UK Tax Records, London, UK

Kimberley Scharf, Professor of Economics, University of Warwick

Matt Collin, Research Fellow, CGD Europe

The UK tax system offers tax relief for contributions made to private charity. This relief, known as Gift Aid, is somewhat more complex than in other countries. In practice, it can be shown that Gift Aid is economically equivalent to a deduction for gifts made to charity, and that taxable deductions effectively lower the `price’ of giving to charity.

The aim of tax reliefs like Gift Aid is to encourage private giving, possibly to the extent that the deductions result in a greater amount given to charities than would have been raised through the foregone taxes.

To know whether this is true, we first need to know by exactly how much tax relief actually encourages giving. The key indicator that would shed light on this issue is the `price elasticity of giving,’ which tell us the ratio of a percentage change in giving and a percentage change in the price of that giving. If the price elasticity is greater than one in absolute value, then the UK government can forgo £1 in tax revenue and generate more than £1 in donations to charities. 

In this seminar, Kimberley Scharf, (University of Warwick), will present new work (with Miguel Alumnia and Ben Lockwood) on estimates of the price elasticity of giving in the UK. Utilising the entire universe of self-assessment Income Tax returns provided by the HMRC Datalab and covering nearly 70 million people over the 2004/05 to 2012/13 tax years, these estimates will be the first ever for the UK to use data on real taxpayer responses to Gift Aid. Professor Scharf will also present results on other important estimates, including frictions associated with non-price responses, differences in price effects across different types of taxpayers (gender, income); and how people react to different types of price incentives.

The CGD Europe Seminars bring some of the world's leading development scholars to discuss their new research and ideas. The presentations aim to meet an academic standard of quality, are at times technical, and retain a focus on a mixed audience of researchers and policymakers.

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