A taxing myth

I have been a fundraiser since 1988, when I joined Oxfam, and have worked in cultural fundraising since 1991. So the question of whether tax relief has an effect on donation levels is one which has been of professional interest to me for a very long time. In AP244, Javier Stanziola suggests that donation levels are significantly affected by tax relief on donations. He says there is a lot of research showing that this is the case but, probably for space reasons, he does not quote any. It is very difficult to isolate the effects of tax relief on donations because so many other factors are at work such as the general state of the economy, overall tax rates and new fundraising techniques, which is why we need to take with a very large pinch of salt Javier’s idea that the Labour Government’s new Gift Aid regulations early in their first term caused a drop in gift levels (correlation does not prove causation). There are studies which back both side of the argument but the most comprehensive research I have seen in this area is from Richard Steinberg, Associate Professor of Economics at Virginia State Polytechnic, who reviews 24 separate studies and concludes that giving is ‘price-inelastic’ as we economists call it, i.e. tax and giving rates are unconnected.

But really we should leave all that to the academics to fight out because it is simply not relevant to the big problem of arts fundraising which is a failure to invest adequately in fundraising. There is a very real problem that people in the arts in this country, and especially in the other European countries, often complain about the tax system as an excuse for not actually doing much fundraising! “If only the Government would give us the same tax relief as they have in the USA then we could fundraise more” they say, and then go off to cut budgets rather than invest in fundraising (the other big excuse, by the way, is “It won’t work here,” which I have heard said in every city in the UK and the rest of Europe where I have ever worked!). In her excellent article in AP236 Kara Larson, a US arts fundraiser, comprehensively exploded the myth about US tax relief on fundraising and several other myths for good measure. Why not take a look online?

So, my advice to all arts organisations is to forget about nasty tax rates (and all those other myths) and go out and actually invest in good fundraising. Forget all the excuses – if you don’t ask you don’t get!