My letter, published in the New Zealand Listener, about the value of volunteer work, and the potential value of tax-deductible status to that work -
Thanks for the recent article on the donations made by the very wealthy (“And the giver is
…”, May 17). The donor’s largesse is a return to one of the better
Victorian sensibilities: the generally understood moral imperative for
the most fortunate to aid those least fortunate. Good on them and long
may it continue.
I spend about a day a week doing volunteer work for a local charity. I
drive, move furniture, take photos for them, fix and make things. The
work has given me a far better understanding of people, and watching the
way many deal with real adversity has taught me humility. Hundreds of
people freely give far more of their time than I do for no better
reasons than their belief that it’s the right thing to do and they can’t
afford to donate money.
What about recognising their valuable labour the same way donations
are recognised: with tax credits. This is done in some places; many
areas in the US give their volunteer firefighters tax credits because
they recognise the number of lives and value of the property protected
by the “vollies” is considerable.
It could be of great value to New Zealand to open the conversation
about tax credits for long-term volunteers in non-profit, socially
beneficial institutions because of the financial and societal benefits
of increasing volunteer rates for organisations that are expert at
getting maximum value from money, while they foster learning new skills
and greater social involvement.
David Cohen
(Dunedin North, Dunedin)
Interesting concept, however the beauty of the New Zealand tax system is its simplicity compared to other jurisdictions. I *think* something like 70% of Kiwi's don't need to (and don't) file tax returns at all, relying on the PAYE system and their employers to "get it close enough" not to worry about.
ReplyDeleteRolling out tax credits for volunteers could lead to significant compliance costs in terms of IRD processing and auditing. Could also get into a wacky situation where tax-aggressive non-profits (yes, they exist) offer to compensate paid employees via a mix of paid time, and "donated" time. As in, work 30 hours a week for us and "donate" 10 hours and get a hefty tax credit for 1/4 of the total wage time. We've already seen an issue with non-profits in Wellington offering free car parks to executive employees, and not remitting Fringe Benefit Taxes to the IRD because charities are exempt from the FBT rules. This has effectively turned into tax-free compensation for aggressive charities / executives.
A bigger question would be raised about valuation of services provided. In an extreme case, if a general contractor builds a building for a charity, it might cost $50, but the market rate for the building might be $100. Does the contractor get a tax rebate for $50 or $100 (or somewhere in between) ?
I believe Little League had its charitable status pulled (in Canada) somewhere around 2008 for this reason. The organization offered donation receipts to sporting goods manufacturers for donated goods. Example: $600 baseball bat which cost the sporting goods store $250 was being receipted at $600. After a 33% tax receipt, the sporting goods store receipts a cash windfall of $333 . . . or managed to dispose of an otherwise unsellable bat for an $83 cash gain.
Long story short, rules would need to be established, and then policed - which has been proven troublesome - and increases compliance costs. Again, in the US the volunteer firefighters would be filing annual returns anyway, as part of the some 250 million tax returns that the IRS has to manage annually.
Your contribution is very much appreciated as it raises both the quality of the debate as well as very valid questions about the how and why, and what constitutes, charity.
ReplyDeleteWas actually thinking about the role for organisations aimed at social benefit for the wider population rather than a special interest group like a sports team or a pub charity. Organisations like Habitat for Humanity, The Salvation Army and such, and only for people providing hands-on work - sweat as proof of participation - at said organisations. Professional services, goods supplied and such would need to be rated differently, and in many cases this comes as a branded sponsorship agreement between recipient and donor. And can you seriously pay $600 for a Baseball bat?
In my simple-minded world, the (say) Salvation Army's volunteers might receive a simple voucher to say they donated x hours in a year, and the tax department could then set up regulations for how much those hours are actually worth in the form of a tax credit. It would not be useful to apply it to (say) volunteer referees for kids rugby as that is serving a special interest group.
It does, however, require some value judgements about what constitutes social value and that's I would see as the challenge: charitable-status organisations attempting to qualify as socially desirable, even when their benefit to the wider citizenry is suspect - at best.
As a post scriptum - the hours donated would be at adult minimum wage.
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