More giving or more givers? The effects of tax incentives on charitable donations in the UK

Research output: Contribution to journalArticlepeer-review

Authors

Colleges, School and Institutes

External organisations

  • CUNEF
  • University of Oxford
  • University of Warwick

Abstract

This paper estimates the effects of tax incentives on charitable contributions in the UK, using the universe of self-assessment income tax returns between 2005 and 2013. We exploit variation from a large reform in 2010 to estimate intensive- and extensive-margin tax-price elasticities of giving. Using a predicted-tax-rate instrument for the price of giving relative to consumption, we find an intensive-margin elasticity of about − 0.2 and an extensive-margin elasticity of − 0.1, yielding a total elasticity of about − 0.3. To further explore the extensive-margin response, we propose a model with a fixed cost of declaring donations and obtain a structural estimate of that cost of around £47. We also study the welfare effects of tax incentives, extending the theoretical literature to allow for extensive-margin giving and for a fixed cost of declaring donations. Taking into account these factors, there is a case for increasing the subsidy on charitable giving in the UK.

Bibliographic note

Publisher Copyright: © 2019 Copyright: Copyright 2020 Elsevier B.V., All rights reserved.

Details

Original languageEnglish
Article number104114
JournalJournal of Public Economics
Volume183
Publication statusPublished - Mar 2020

Keywords

  • Charitable donations, Incentive effects of taxation

ASJC Scopus subject areas