Hot issue: Will texts be an effective way of fundraising if VAT is removed?

Mobile phone companies have met with HM Revenue & Customs to discuss eliminating VAT on donations to charity by text, but other charges remain high.

YES - Roger Craven, managing director, mobile phone technology company Vir2

Giving by text offers two major advantages: convenience and spontaneity.

Virtually everyone owns a mobile phone, and young people especially are more likely to carry one than a debit or credit card. If someone decides to make a donation, they can do it quickly and easily.

Once VAT is removed, cost-effectiveness should not prove a problem. Although phone companies will still charge fees, it should be possible for charities to receive comfortably more than 80p in the pound on each donation. And networks may well cut margins as the market becomes more popular.

Charities can communicate with their donors easily by text and receive instant responses. It's a good way for charities to keep supporters up to date with activities and campaigns, and it's much cheaper and more effective than sending a letter.

The two ideas of fundraising and communications go hand in hand.

NO - Megan Pacey, director of policy and campaigns, Institute of Fundraising

Operator costs for SMS donations remain excessive and the technique provides a poor return on investment.

Most charities receive little more than 70p of the £1.50 that a donor is charged to make an SMS donation. While VAT exemption will make a small difference, real change will be achieved only when mobile phone operators reduce their rates. Until then, the potential of this fundraising mechanism will remain largely untapped.

There is a significant appetite in the sector to embrace text messaging, which could allow supporters to donate instantly. However, charities face continual scrutiny of their fundraising costs and the relative return on investment. As the situation stands, charities are understandably reluctant to accept these poor rates of return.

The institute continues to call on mobile phone companies to reduce their charges and to introduce a long-term reduced charging structure that will ensure that text giving becomes a mainstream donation mechanism.

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