Tax Incentives for Cross-border Giving in an Era of Philanthropic Globalization: A Comparative Perspective

• Author: Natalie Silver & Renate Buijze
• Position: Lecturer, University of Sydney Law School/Researcher, Erasmus School of Law, Erasmus University Rotterdam
• Pages: 109-150

Tax Incentives for Cross-Border

Giving in an Era of Philanthropic

Globalization: A Comparative

Perspective

Natalie Silver* and Renate Buijze**

e 21st century has ushered in an era of philanthropic globalization marked by a

signif‌icant rise in international charitable giving. At the same time, cross-border

philanthropy has raised legitimate f‌iscal and regulatory concerns for government. To

understand how donor countries have responded to this changed global philanthropic

landscape, we use comparative tax methodology to develop a spectrum of approaches

to the tax treatment of cross-border giving and apply tax policy criteria to critically

evaluate the divergent approaches of Australia and the Netherlands, located at opposing

ends of the spectrum. Findings from the comparative analysis reveal that in the current

global environment for philanthropy there is a strong case to be made for allowing tax

deductible donations to cross borders.

* University of Sydney Law School.

** Erasmus School of Law, Erasmus University Rotterdam.

We are grateful to Sigrid Hemels and Myles McGregor-Lowndes for their

valuable comments on earlier drafts of this paper.

110

Silver & Buijze, Tax Incentives for Cross-Border Giving

I. I

II. C T M A I A T T T T

O C-B D

III. D A S O A T T T T O C-

B D

IV. E T D A U T P C

A. Descriptive Country Comparison

1. Australia

i. Tax Incentives for Cross-Border Donations

ii. Regulatory Measures Governing Cross-Border

Charitable Activities

2. e Netherlands

i. Tax Incentives for Cross-Border Donations

ii. Regulatory Measures Governing Cross-Border

Charitable Activities

B. Identif‌ication of Similarities and Dif‌ferences

1. Tax Incentives for Cross-Border Donations

2. Regulatory Measures Governing Cross-Border Charitable

Activities

C. Evaluation

1. Ef‌f‌iciency

2. Equity

3. Simplicity

4. Policy Consistency

5. Sustainability

V. C

I. Introduction

Almost every member of the Organisation for Economic Co-operation

and Development (“OECD”) Development Assistance Committee

(“DAC”)1 has tax incentives to encourage domestic philanthropy. ese

tax incentives, typically in the form of a tax deduction or tax credit, have

1. e DAC of the OECD is an international forum of the major countries

that provide aid, online: OECD .

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the potential to lower the price of giving, increasing both the amount

donated to nonprof‌it organizations2 and the number of donors.3 Until

quite recently, these tax incentives generally did not extend to cross-

border philanthropy4 notwithstanding their signif‌icance for nonprof‌its

engaged in international charitable activities. e transformation of the

global philanthropic landscape in the 21st century, marked by a rise in

both the amount of international giving and the form that giving takes,5

has forced donor countries to consider the provision of tax incentives for

cross-border donations. As national boundaries around philanthropy have

started to blur, governments are struggling to maintain an appropriate

balance between protecting the interests of the f‌iscal state (including the

2. e term ‘nonprof‌it organization’ (“NPO”) will be used throughout

this paper to refer to ‘not-for-prof‌it organization’, ‘non-governmental

organization’ (“NGO”) and ‘charities’ (a subset of NPOs that have been

acknowledged by the state as meeting either the common law or statutory

def‌inition of charity depending on the jurisdiction).

3. See e.g. John Simon, Harvey Dale & Laura Chisolm, “e Federal Tax

Treatment of Charitable Organisations” in Walter Powell & Richard

Steinberg, eds, e Non Prof‌it Sector: A Research Handbook, 2d (New

Haven: Yale University Press, 2006) 267 at 272; Joseph Cordes, “Re-

inking the Deduction for Charitable Contributions: Evaluating the

Ef‌fects of Def‌icit-Reduction Proposals” (2011) 64:4 National Tax Journal

1001 at 1003; Charles Clotfelter, Federal Tax Policy and Charitable Giving

(Chicago: University of Chicago Press, 1985) at 281; Roger Colinvaux,

Brian Galle & Eugene Steuerle, Evaluating the Charitable Deduction and

Proposed Reforms (Washington: e Urban Institute, 2012) at 9.

4. Def‌ined as a charitable gift from a donor in one jurisdiction to a recipient

in another. is term will be used throughout this article interchangeably

with ‘international philanthropy’ and ‘international giving’.

5. In the two decades from 1997 to 2017, private philanthropic f‌lows for

development grew from approximately USD $7.1 billion to USD $40.9

billion. See “Grants by Private Agencies and NGOs” (2019), online:

OECD

DOI: <10.1787/a42ccf0e-en>. e Hudson Institute estimates that in

2014 private philanthropy from DAC donors to developing countries

was as high as USD $63.7 billion. See Center for Global Prosperity, e

Index of Global Philanthropy and Remittances 2016 (Washington: Hudson

Institute, 2016) at 6.