The Routledge Handbook of Taxation and Philanthropy

Henry Peter, Giedre Lideikyte Huber, Henry Peter, Giedre Lideikyte Huber

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000514247
• Edition: 1
• Topic: Business
• Subtopic: Nonprofit Organizations & Charities
• Index: Business

The Routledge Handbook of Taxation and Philanthropy ventures into a territory that is still widely unexplored. It contains 30 academic contributions that aim to provide a better understanding of whether, why, and how philanthropic initiatives, understood as voluntary contributions for the common good, can and should be fostered by states through tax incentives. The topic has been addressed from a multidisciplinary and multicultural perspective – covering neuroeconomics, sociology, political science, psychology, affective sciences, philosophy, behavioral economy, and law – because of its global and multifaceted nature. It also contains the OECD report on Taxation and Philanthropy released in November 2020, which was prepared in this context as a result of a collaboration with the Geneva Centre for Philanthropy of the University of Geneva.

The book is divided into four sections, exploring, respectively, the justification of tax incentives for philanthropy, theoretical and empirical insights about taxes, efficiency and donor behavior in that context, and tax incentives for cross-border philanthropy and for hybrid entities and social entrepreneurship. It is believed that this volume will be a landmark yet only the beginning of a journey in which a lot remains to be studied, learned, and said.

Part I

Justification of tax incentives for philanthropy insights

1

The proper relationship of private philanthropy and the liberal democratic state

The inquiry and the inquirers as the answer

Rob Atkinson

DOI: 10.4324/9781003139201-3

Introduction: back to which future, forward in which tradition?

In public affairs, as in the humbler departments of human life, questions of ends and questions of means inevitably intersect. Disputes as to the former commonly produce more sparks than light, and more heat than either. If a man affirms that his heart leaps up at the spectacle either of a society in which the common good is defined by the decisions of a totalitarian bureaucracy, or of one – like, to mention only one example – the England of a century ago, where, in the unceasing struggle of individuals for personal gain, a conception of the common good cannot easily find a foothold, it may readily be admitted that no logic exists which can prove these exhilarating palpitations either right or wrong. One cannot argue with the choice of a soul.

(Tawney, 1964)

Beware of false prophets, who come to you in sheep’s clothing but are ravenous wolves. You will know them by their fruits. Are grapes gathered from thorns, or figs from thistles? In the same way, every good tree bears good fruit, but the bad tree bears bad fruit.

(Matthew 7:15–17)

Taxation and Philanthropy (OECD, 2020), jointly produced by the OECD Centre for Tax Policy and Administration and the University of Geneva Centre for Philanthropy, surveys and assesses the tax policies that member states, donee states, and others might want to use to encourage both private philanthropic organizations and donations to those organizations from private individuals and for-profit entities. The point of this chapter is to identify and unpack several apparent paradoxes in the Report’s position, admittedly in an apparently paradoxical way. I argue that the Report is, in several important respects, at odds with the basic mission of the OECD itself; I mean that deep criticism in the most friendly possible way, and I mean to explain why. This chapter offers not just friendly amendments but a comradely salute (or at least a word, with a wink, to the wise who would set global policy for the good of all humankind).

The Report’s most basic proposal poses the deepest paradox: A collaborative report by two public institutions, one a consortium of liberal democratic states and the other an old and renowned state university, suggests to states that they may want to use their fiscal systems to encourage non-state institutions to do the philanthropic work that states themselves have done and to do that work financed by voluntary contributions rather than by the state’s own method of finance, taxing and spending. In both respects, the financing and the delivering of public services, the Report’s cosponsors seem to suggest ways of doing philanthropy better than their own. They seem to propose, if not quite to preach, something very different from what they practice, what both the OECD and public universities have always practiced: tax-financed, state-delivered works for the common good.

The collection of essays published along with the Report poses a second, and almost equally deep, paradox: The wisdom of a policy to be recommended to democratic nations is to be assessed not by submission to the voters of those nations, or even to their elected leaders, but by academics and civil servants, agents of meritocraticly elitist, and thus implicitly undemocratic, institutions. This anthology thus has a distinct ring to it: “inside the Beltway,” in the idiom of the United States; “over there in Brussels,” in that of the United Kingdom.

Unpacking those two paradoxes – the paradox of the Report’s recommendations and the paradox of this volume’s commentary on those recommendations – produces a double paradox of its own. On the one hand, this chapter offers the strongest possible praise for the Report; on the other hand, it raises a very deep qualification. Compounding, perhaps more than doubling, that paradox, it spends far more time on the qualification than on the praise. Its praise is not faint, and the very opposite of damning, but that praise may seem overshadowed by its heavy qualification.

This is the praise: The joint Report is a really fine example of the ethos of the Marshall Planners, the OECD’s long-standing tradition of collaboration between career civil servants and mainstream academics in addressing major issues of public concern. This is the qualification: The Report might have gone further in advancing that very tradition. At the end, the praise and the qualification are not at odds; if they are not essentially the same, they demonstrably derive from the same source, the ethos of the original Marshall Planners. The proper answer to the relationship of the modern state and private philanthropy is for both to serve the two related goals of the Marshall Plan: at the very least, the maintenance of peace as the minimal condition of human flourishing; at the very best, the active promotion of those conditions that encourage human flourishing itself, an essential collaboration of modern states and traditional universities to advance the fullest possible realization of the core of philanthropy: the love of humankind.

Those truly Good Shepherds, the original Marshall Planners, knew very well the wolves that were at the door of the nations of Europe and Asia, the victorious allies as well as the defeated Axis, in the ruins of World War II. On the one hand loomed a new and emboldened species of totalitarian bureaucracy, Soviet and Chinese Communism, in place of the old and defeated species, Nazism and Fascism. This was the first alternative to the ethos of the Marshall Plan that R. H. Tawney mentioned in our first epigraph. Thanks in no small part to the Marshall Plan, Stalinism and Maoism, like Nazism and Fascism, have slunk back to their lairs.

On the other hand, the second alternative that Tawney identified is still very much with us, even among us: equating the common good with either aggregate consumer satisfaction or unexamined popular political preference. As the Marshall Planners knew from the most painful possible experience, the market’s “invisible hand” can, in the wrong hands, dangerously misdirect economic gains to the few, even as demagogues can distort the political preferences of the many. These are the false prophets, the wolves in sheep’s clothing, that the very Gospels warn us about. And here we have yet another paradox, itself both deep and double, that we must unpack: These false prophets approach us in the very garb of both philanthropy and philosophy themselves; they preach a gospel all their own, often grounded in the best universities. We, like the Marshall Planners, must know them by their fruits: Who best advances the vision of universal human flourishing embraced by the victorious allies, East and West?

Only when we have unpacked all these paradoxes – the paradoxes of the Report’s proposals and the paradoxes of my friendly criticism – can we properly appreciate a final paradox. This last one lies at the intersection of the other two. On the one hand, I imagine that, for their part, the co-producers of the Report and the sponsors of this symposium, the OECD and the University of Geneva, not only anticipated my criticisms but also embraced them – all before I had even written them down. On the other hand, I cannot fault them for not raising these objections themselves; I must salute them for the very great wisdom of their forbearance. Unpacking this final paradox is perhaps this chapter’s ultimate homage to the Reports’ authors and this symposium’s sponsors. It is a salute that is more a whisper (with a wink): Well done, good and faithful fellow laborers in the vineyards of the Marshall Planners (and perhaps – a matter I must leave to still other fellow laborers – the Master Planner).

To unpack all these paradoxes, we must situate the Report in three related contexts. Part I examines the debate on the effectiveness of taxation as a means of promoting private philanthropy, Part II takes up the theory of private philanthropy’s function, and Part III traces the historical links between private philanthropy and the ethos of the Marshall Planners.

This chapter’s conclusion is the paradox of its subtitle: The inquiry and the inquirers are the answer. The question that the OECD and the University of Geneva pose can only be answered, in the ethos of the original Marshall Planners and traditional academics, by exactly the kind of inquiry they have invited us to join them in undertaking. As the work of the OECD and its academic partners has long demonstrated, the role of private philanthropy in advancing the ethos of the Marshall Planners has always been decidedly secondary and, ironically, sometimes not only unhelpful but actively opposed. If the work of global humanitarianism must depend, in a dark time, on handouts from the wealthy, virtuous or vicious, we can nonetheless hope for a brighter day, a day that seems already to be dawning.

I Situating the report in tax theory: are tax favors effective in encouraging private philanthropy?

The basic position of the Report is that states may want to support private philanthropy by means of favorable tax treatment. Much of the Report is taken up with evaluating whether various forms of favorable tax treatment are effective means of advancing that end, private philanthropy. Plausibly enough, the Report begins with an effort to identify what the end to be advanced, private philanthropy, actually is. It next proceeds to a deta...