Budget 2021 a chance to avert ‘perfect storm’ facing charities

Charities have lost an estimated €50 million in donations in recent years because of tax relief rules that have “hampered” large contributions, a philanthropic foundation has said.

Community Foundation Ireland has appealed for Budget 2021 to be used to support charities and community organisations facing a surge in demand but a huge fall in donations because of the Covid-19 pandemic.

The foundation, which disburses private donations into grants for charities and community groups, is calling for the removal of the administrative burden of tax relief for donations of €5,000 or more.

In a pre-budget submission, it is also asking for a reduction in the capital gains tax on donations from inheritance, with a percentage reduction on tax to match the legacy donation.

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“The Covid-19 pandemic has created a perfect storm for the charity, community and voluntary sectors with hugely increased demands for services and supports coinciding with a drop in donations, gifts and funding,” said Denise Charlton, Community Foundation Ireland’s chief executive.

The budget is an opportunity for Government to introduce “imaginative measures” which will address long-term sustainability and planning for charities by encouraging larger donations and will “nurture philanthropy, gift giving and legacies”.

Ms Charlton said less than 1 per cent of donations are more than €5,000. “Efforts to boost this have been hampered by a tax-relief regime which is not delivering for either charities or their larger donors, with money intended to benefit communities instead going on taxes. The estimated loss is €50million since the current measures [were] introduced in 2013.”

Under the rules, a charity can claim tax relief on any donation above €250 but the foundation is asking that tax relief on donations more than €5,000 should go to the donor, which it believes would encourage more and larger donations.

What is the submission?

The foundation also says legacies “are largely an untapped resource for Irish charities” compared to other jurisdictions, particularly the United Kingdom.

The submission states that “a euro-for-euro arrangement could see a 10 per cent legacy donation to charity matched with a 10 per cent cut on capital acquisitions tax, so beneficiaries from an estate are not left unduly out of pocket. Introducing this measure not only incentivises legacy giving but will increase awareness by making it part of the will making and inheritance process.”

The foundation also recommends that any tax incentive introduced could be reviewed after four years to assess its effectiveness.

Foundation chairman Mike Gaffney said it was "time now for Government to take overdue steps" to address the collapse in funding for organisations facing a surge in demand.