Gross Domestic Philanthropy: An international analysis of GDP, tax and giving

Pie Chart by John Cooper via Flickr

The proportion of GDP we donate – Image: “Pie Chart” by John Cooper via Flickr

Comparing charitable contributions as a proportion of GDP challenges assumptions

 

On February 2nd the Charities Aid Foundation (CAF) published a paper which compares the amount given to charitable causes by individuals as a proportion of Gross Domestic Product (GDP) in 24 countries. It reveals that, of the countries reviewed, the USA gives away the largest portion of its GDP to charity, followed by New Zealand, Canada, and the UK.

 

Gross Domestic Philanthropy: An international analysis of GDP, tax and giving – an updated and expanded version of a similar study in 2006 – uses available data on giving to not only rank nations on their relative generosity but also to examine whether, as many assume, there is a relationship between fiscal policy and generosity.

Charitable giving by individuals as a % of GDP

Charitable giving by individuals as a % of GDP

The report looks at measures including overall tax burden, top tax rate, average income tax, corporation tax, government expenditure as a percentage of GDP and employer social security charges. Strikingly, it finds no correlation across the sample of nations which represents over half of the world’s population and 75% of the global economy. The one exception seems to be employer social security charges which appeared to show a moderate correlation with charitable giving in the 24 sample nations. This may be a spurious correlation but more research is needed to explore any potential relationship.

 

Charitable giving has been and continues to be the subject of much political positioning in the UK and around the world. That is understandable as charitable giving is motivated by an emotional connection and charities represent the institutional manifestation of a civil society that represents the myriad causes about which we, as a people care. However, for politicians and the politically minded among us, the ideal relationship between the state and charities is routinely seen through the prism of ideology.

 

For those who are proponents of a small state and lower taxes, charities and charitable giving will necessarily rise as the heavy hand of government recedes from the civic space leading to a flowering of charitable giving as people identify needs and use their increased disposable income to fill the gaps in streamlined government services. For proponents of a comprehensive and generous welfare state, the fair distribution of resources will enable more of us to engage in charitable activity in solidarity with those in need in this country and abroad. The reality however, according to our research, is that neither appears to be evidenced in the data.

 

There is no correlation between government spending, income tax or corporation tax and the proportion of GDP spent by individuals across the 24 nations that we studied. Therefore, either both of the above political arguments are counterbalancing in society, or as seems more likely, they don’t represent a golden set of bullets explaining differences in charitable giving.

 

Effect of taxation on amounts given

Effect of taxation on amounts given

 

I have written before about the problematic assumption that a smaller state might necessitate a larger civil society. In our study we see nations such as New Zealand, Italy, the Netherlands and the UK which have a tax take which is higher than the median for the 26 nations in our study give significantly above the median amount to charity as a proportion of GDP. Similarly, nations like Mexico, Ireland, Switzerland and China – all nations with a lower tax take and government spending than the median – give significantly less than the median in our study to charity as a proportion of GDP.

 

However, this does not in any way mean that the size of the state and the services it provides does not have an effect on giving. If public need were diminished to such a point that there were fewer causes to give to or if taxes were so high as to effectively remove all discretionary income then giving would inevitably fall. However, the factors which motivate people to give, and influence how much they give, are incredibly complex and the idea that the size of government might stand above all other facts has been damaged by this study.

 

The Future World Giving project and its reports (links to the right) have tried to identify what can be done to motivate generosity around the world and if there is one central finding it might be that we attempt to simplify our conception of what constitutes an enabling environment for giving at our peril. Culture and tradition, religiosity, political history, the rule of law, trust in institutions and the regulation of charities, the legal environment for civil society activism, tax incentives for giving and the ease by which donors can give tax effectively  are just some of the factors effecting the propensity of people to give internationally.

 

If we want to facilitate the development of a culture of giving across the globe then we will all need to leave our assumptions and political bias behind or else risk wasting time and energy in fixating on the size and shape of government.  Governments which are truly committed to encouraging giving to a well regulated but independent civil society are likely to succeed. Those which seek to suppress civil society – as is sadly increasingly the case – are also likely to achieve that most pyrrhic of victories.

 

 

Adam Pickering

 

 

3 responses to “Gross Domestic Philanthropy: An international analysis of GDP, tax and giving

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    • Hi there. I have wondered that myself. A quick comparison against GNI coefficient suggests not but I would like to have data on giving for more countries in order to rule it out.

      Countries like China and Mexico are amongst the most unequal whilst the UK, Italy and the Republic of Korea have surprisingly low GNI coefficients so, with the list of countries above at least, there seems to be no apparent relationship.

      More data needed but your hypothesis certainly merits further investigation before it is ruled out.

      Thanks for commenting!

      Like

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