Andrew Watt
Tax breaks are not the only reason why Americans give more to charity, he tells Sophie Hudson
Hidden away in the "notes on charts" section of the green paper sits the following passage: "Countries differ widely in their cultural approaches to giving. For example, in the US there are substantial tax breaks for donating money." These tax breaks are widely regarded as one of the main reasons for the comparatively high level of giving in the US.
In International Comparisons of Charitable Giving 2006, published by the Charities Aid Foundation, the US stood out at the top of the list, giving 1.67 per cent of GDP. The UK was listed as the next most generous country at 0.73 per cent.
Andrew Watt, who was once the head of policy at the Institute of Fundraising in the UK and now works in the US as vice-president of international development at the Association of Fundraising Professionals, believes the difference cannot be attributed only to the existence of tax breaks.
"It's a social expectation to give in the US," he says. "You are born into a culture where you expect and feel obliged to give time and money. The state does not get involved as much - it's seen as the obligation of the individual citizen to combat social problems."
Nevertheless, he admits the tax breaks enable more strategic giving in the US, where all charitable donations, including gifts in kind (with some subject to limitations), are deductible from federal income tax at the full rate.
American citizens can also gain tax advantages by donating a portion of their retirement funds.
Another important incentive, which Watt says he pushed to be introduced in the UK, is something known as 'estate planning', which includes financial tools such as lifetime legacies.
"People here see the tax incentives as leveraging their giving," says Watt. "They see them as added value to the charity. But the main incentive to give to charity is not the tax deductions."
So if the UK tax system was transplanted into the US, would the amount that is given start to evaporate?
According to Watt, it probably wouldn't. "It might result in slightly lower donations because of the lack of leverage, but I'd still expect the same level of engagement in giving as there is now," he says.
