Charities would be better off financially if the UK remained in the European Union, according to Damian Hinds, the Exchequer Secretary to the Treasury.
At the Charity Tax Group annual conference in London yesterday, Hinds was asked by Jane Crumpton-Taylor, director of finance and administration at World Horse Welfare, how departure from the EU might affect charity tax regulations.
Hinds said it was still unknown what specific tax regulations, such as the VAT system, would look like in the event of the UK voting to leave the EU on 23 June.
But he said the level of donations was dependent on the UK’s economic fortunes and the Treasury’s view was that the UK would be worse off if it left the EU.
"The government view is that we will be stronger, safer and better off by staying in the EU," he said.
"You rely, as a sector, on donations from individuals, and you rely on contributions and help from companies. In return, individuals and companies rely for their economic wellbeing on economic growth.
"We know that the trade relationships we have as a result of being in the EU have a big impact on economic growth. The Treasury produced its own analysis that demonstrated there would probably be an annual loss of something like 6 per cent of GDP after 15 years if the UK were to leave the EU.
"Talking percentages, GDP and 15 years hence – it all sounds a little bit in the middle distance. But that has a real impact on the ability of individuals to contribute to charities and a real impact on the health of our economy. So we think we’re better staying in."
A recent Treasury analysis of the impact of leaving the EU estimated that the UK would be worse off by £4,300 a year per household.
It said tax receipts would fall by £36bn because of the impact on gross domestic product and, depending on the type of trade deal the UK would reach with the EU if it left, the UK was between 3.4 per cent and 9.5 per cent of GDP better off in the EU.
In response to another question from Crumpton-Taylor on how charities could be affected by any tax transparency policies that might be introduced after the Panama papers leak, Hinds said that although he did not want any "unintended consequences for charities, a blanket exemption could ultimately damage the sector".
He said: "Obviously we don’t want there to be any unintended consequences from anything that comes forward that disadvantages this sector. Obviously, the vast majority of people involved with charities are not involved in these things that governments legitimately want to curb.
"But I think it is also true that having a blanket exemption for charities wouldn’t help us, but I don’t think it would help you either. There would then be a danger that charitable would become a target for people who seek to do these things we want to curb. That could start to undermine confidence in the charitable sector itself."