The Budget Review’s figures show that in financial 2010/11 the SA Revenue Service (Sars) lost a mere R118 million of potential revenue as a result of donations made by taxpayers. This figure was up from R111m the previous year, R107m in 2008/09 and just R84m in 2007/08.
The figures highlight one of two possibilities: that taxpayers are not very generous when it comes to making donations, or that the tax regime provides scant tax relief for donations.
Tax experts stress that the figures come nowhere close to giving an indication of the actual generosity of South Africans. “Because there are so few tax breaks, much philanthropy is done with after-tax money,” one expert remarked.
The Budget Review figure for 2013/14 is likely to be affected by Patrice Motsepe’s extremely generous proposal to give away half of the income generated from his family assets, but the extent of the impact will be impossible to quantify.
In contrast to the South African situation, in the US philanthropy is a thriving industry thanks largely to wide-ranging tax breaks.
This week’s Budget did have some good news for philanthropists and the public benefit organisations (PBOs) that depend on philanthropy. As the law currently stands, donations to PBOs are deductible up to 10 percent of an individual’s taxable income in the year that the donation is made.
Sars notes, in the Budget Review, that large donations have apparently been discouraged because donations in excess of the 10 percent limit cannot be carried forward.
“The government proposes to allow donations in excess of 10 percent of taxable income in any given year to be rolled over as allowable deductions in subsequent years,” the review says.
Shelagh Gastrow, the executive director of Inyathelo, has welcomed the proposal, stating: “It is likely to mean that where a donor is in a position to make a substantial contribution in one particular year, the tax benefits will be extended, thereby encouraging such contributions.”
Inyathelo is a non-profit organisation involved in developing a strong philanthropic movement.
Gastrow also welcomed the suggestion that consideration would be given to amending the rules governing the amount of reserves that must be distributed where PBOs provide funding to other PBOs.
“This could enhance their capacity to forward plan, to possibly build a capital base to secure their future sustainability and to guarantee ongoing support to the PBO sector by other PBOs, such as charitable trusts and philanthropic foundations.”