More giving or more givers? The effects of tax incentives on charitable donations in the UK

Almunia, Miguel; Guceri, Irem; Lockwood, Ben; Scharf, Kimberley

Abstract

This paper estimates the effects of tax incentives on charitable contributions in the UK, using the universe of self-assessment income tax returns between 2005 and 2013. We exploit variation from a large reform in 2010 to estimate intensive- and extensive-margin tax-price elasticities of giving. Using a predicted-tax-rate instrument for the price of giving relative to consumption, we find an intensive-margin elasticity of about − 0.2 and an extensive-margin elasticity of − 0.1, yielding a total elasticity of about − 0.3. To further explore the extensive-margin response, we propose a model with a fixed cost of declaring donations and obtain a structural estimate of that cost of around £47. We also study the welfare effects of tax incentives, extending the theoretical literature to allow for extensive-margin giving and for a fixed cost of declaring donations. Taking into account these factors, there is a case for increasing the subsidy on charitable giving in the UK.

Citation

Almunia, M., Guceri, I., Lockwood, B., & Scharf, K. (2020). More giving or more givers? The effects of tax incentives on charitable donations in the UK. Journal of Public Economics, 183, Article 104114. https://doi.org/10.1016/j.jpubeco.2019.104114

• Journal Article Type: Article
• Acceptance Date: Nov 26, 2019
• Online Publication Date: Feb 3, 2020
• Publication Date: 2020-03
• Deposit Date: Oct 29, 2024
• Publicly Available Date: Oct 30, 2024
• Journal: Journal of Public Economics
• Print ISSN: 0047-2727
• Electronic ISSN: 0047-2727
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 183
• Article Number: 104114
• DOI: https://doi.org/10.1016/j.jpubeco.2019.104114
• Keywords: Charitable donations, Incentive effects of taxation
• Public URL: https://nottingham-repository.worktribe.com/output/41136507
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0047272719301768?via%3Dihub
• Additional Information: This article is maintained by: Elsevier; Article Title: More giving or more givers? The effects of tax incentives on charitable donations in the UK; Journal Title: Journal of Public Economics; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.jpubeco.2019.104114; Content Type: article; Copyright: © 2019 Published by Elsevier B.V.