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Amend taxation to encourage giving

President George Abela and Mrs Abela at last year’s fundraising marathon L-Istrina, which collected over €3 million in aid of the Community Chest Fund. Photo: Matthew Mirabelli

President George Abela and Mrs Abela at last year’s fundraising marathon L-Istrina, which collected over €3 million in aid of the Community Chest Fund. Photo: Matthew Mirabelli

Following the furore over the spirit of giving during the end-of-year festivities, philantropy subsides to its normal level. It cannot but be so, especially once magnificent peaks are reached as was done at the close of 2013, with a record contribution to the Community Chest Fund. That does not mean to say that no more giving is done during the year.

The Maltese people are nothing if not kindhearted. True, we live a contradiction... for egoism and disregard for others in areas like the environment are also prevalent characteristics.

That point is captured by the age-old image of housewives sweeping rubbish away from the pavement outside their house which they have meticulously scrubbed and into the middle of the street, no man’s land. Still there can be no gainsaying that we have our heart in the right place. Acts of charity take place on a daily basis. There are scores of small or big charitable organisations which can only exist because of the stream of donations, in money or in kind, that are made to them.

Id-Dar tal-Providenza is perhaps the main magnificent example. There are many others, including small ones which make their continued existence relative to the tasks they perform a veritable miracle.

The giving attitude is seen among individuals and households. But it does not stop there, it is also very evident in the business sector. Good governance nowadays lays stress on social responsibility.

Companies cannot abide by the principle of not letting the left hand know what the right hand is doing. They list their social contribtion in their report to shareholders and thereby the public.

It has become, in fact, a matter of pride to be able to say that a business operation is meeting its social responsibilities with vigour. There is, of course, implied advertising in all this, which sours the point somewhat since charity should exist for its own sake, and not to gain a return. But reality is what it is: better excessive demonstration of doing good than parsimonious behaviour.

This aspect of reporting by business enterprises leads to a relevant question: how does the income tax regime provide for charitable contributions and for the setting up of charitable foundations? The reply is not easy to detail.

Provisions exist but not as explicitly as can be. Also, in most cases, tax exemption can only be granted with the approval of the minister responsible for taxation.

This is a cumbersome process which does little to encourage the practice of giving with reasonable incentives. It is an issue that bears looking into. At the end of the day exemptions reduce tax revenue and have to be made up from other sources. On the other hand, it is true to say that, were it not for widespread philantropy in the final analysis, the government would have to spend considerably more on welfare.

It has become, in fact, a matter of pride to be able to say that a business operation is meeting its social responsibilities with vigour

The net effect of encouraging serious charitable contributions, if it is worked out, is likely to approxiumate a zero-sum result.

In the months ahead the government is likely to be putting forward amendments to the income tax acts. It would not be amiss if the experts were to look at the exemption provisions to make them clearer and less bureaucratic, nor if the opportunity was taken to introduce a streamlined exemption regime to encourage giving.

This would not be a throwback to provisions that existed in the past, and were not infrequently abused of. The tax authorities will have learned from experience and will be tightening up tax evasion provisions while also looking at the margin where tax avoidance is barely distinguishable from evasion. That was clearly spelled out in the 2014 Budget speech.

Exemptions could be made subject to transparency require­ments. Capping could also be considered, though it would not be desirable.

Such an approach to giving should arouse interest among the business community, which could make its own proposals on how best to do all this. Social responsibility should not be a requirement which can be easily satisfied. Encouraging business organisations to allocate a proportion of their profits to charitable causes would sharpen their desire and effort to be efficient.

It is a point worth discussing, preferably in anticipation of the presentation of tax amendments, though proposals at the committee stage can also be made.

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