In the last UK budget the chancellor of the exchequer, George Osborne, announced that he was planning to put a cap on tax deductible donations to charities.  He alleged that there was evidence that some rich people with the help of their accountants were using certain charities as a tax dodge.  Shortly after this news broke responsible charities were rolling over each other to warn that their income and therefore charitable activities could be seriously affected by this new blanket proposal.

I like this debate because there are so many aspects to it.  Why do we pay tax?  Why can't we choose what our tax is spent on?  Are non-profit organisations possibly providing better value for money than the state can?

Having been brought up in the Netherlands, but having lived in the UK now for some 20 years, I am acutely aware of the difference in national attitudes towards taxation.  The two nations have in common a protestant history that places a high value on contributing to society, and doing something good with one's money.  But the medieval origins of taxation are quite different.  In the simplest terms, the English were asked to fork out money to pay for their monarchs' foreign wars, and the Dutch were asked to pay up to build dikes against the water and to keep them in a good state of repairs.  I suspect that the two nations' quite different attitudes to taxation goes back all the way to these ancient origins.

Taxation for many centuries was not seen as the panacea for all of society's ills, and only grudgingly accepted for special purposes.  The contemporary welfare state with its high taxation levels is a relatively new phenomenon.  I don't want to debate here the merits of high or low taxation societies, but I think it's only realistic to note that the state has an interest in promoting its own importance and so justify its size.

I think we need to see George Osborne's planned clampdown on gifts to charities in this light. This intervention would not have occurred if there hadn't been the 2008 bursting of the credit bubble, and the subsequent squeeze on government income (and increased demand on its services).  The charities and the state have become competitors for the same money stream. The chancellor himself admitted that there are only a few known "dodgy charities", and those could be dealt with in a much simpler way than to overthrow the whole charitable giving framework.

But what if we assume that most charities do essential work that otherwise in a civilised society would have to be undertaken by the state, probably at higher cost and with less job satisfaction?  And what if we dream a bit, and envision a society where people tax themselves voluntarily, and lots of functions of the state are taken care of in different, less top-down ways?

Before you say: that sounds like David Cameron's "Big Society" idea, do remember that people on the left also have often argued that they should be able to target their tax money, i.e pacifists and anti-militarists have long argued that their taxes should not be used for the army.  So the desire to have a say and direct one's money to goals that the donor finds worthwhile has floated around on both sides of the political spectrum.

And tax experts know that to a large extent taxation is already voluntary, for better or for worse.  The UK income tax rate of 83% in the 1970s was abolished not because it was ethically unsound, but because it was counter-productive and didn't work.  The same doubts exist about the 50% income tax rate.  Large corporations, whether one likes it or not, have a certain freedom to base their operations where they can make money and remain competitive. Because of this the Inland Revenue reasons with and sometimes cajoles large companies rather than using enforcement through tribunals and courts.  Again: in practice there is an element of voluntarism already existent within the corporations tax system.

Whilst we are still some way off from a voluntary society with voluntary contributions,  I do believe that the future is voluntary.  For this reason alone I believe that the UK government's attempt to get their hand on more of the money given to charities is counter-productive and out of step with the times.


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