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

Author

Listed:
  • Miguel Almunia
  • Irem Guceri
  • Ben Lockwood
  • Kimberley Ann Scharf
  • Benjamin Lockwood
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.

Suggested Citation

  • Miguel Almunia & Irem Guceri & Ben Lockwood & Kimberley Ann Scharf & Benjamin Lockwood, 2019. "More Giving or More Givers? The Effects of Tax Incentives on Charitable Donations in the UK," CESifo Working Paper Series 7820, CESifo.
    • Handle: RePEc:ces:ceswps:_7820
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    charitable giving; tax incentives; welfare;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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