More Giving or More Givers? The Effects of Tax Incentives on charitable Donations in the UK

Almunia, Miguel, Guceri, Irem, Lockwood, Ben and Scharf, Kimberley (2019) More Giving or More Givers? The Effects of Tax Incentives on charitable Donations in the UK. Oxford University Centre for Business Taxation, Oxford.

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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 intensivemargin 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.

Item Type: Other Working Paper
Keywords: Oxford University Centre for Business Taxation
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation > CBT Working Papers
Date Deposited: 09 Sep 2019 08:22
Last Modified: 09 Sep 2019 08:22
Funders: n/a
URI: http://eureka.sbs.ox.ac.uk/id/eprint/7431

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