Skip to main content Skip to navigation

The Price of Elasticity of Charitable Giving: Does the Form of Tax Relief Matter?

The Price of Elasticity of Charitable Giving: Does the Form of Tax Relief Matter?

03/2010 Kim Scharf and Sarah Smith
behavioural economics and wellbeing, working papers
International Tax and Public Finance
https://doi.org/10.1007/s10797-014-9306-3

03/2010 Kim Scharf and Sarah Smith

This paper uses a survey-based approach to test alternative methods of channelling tax relief to donors – as a tax rebate for the donor or as a matched payment to the receiving charity. On accounting grounds these two are equivalent but, in line with earlier experimental studies, we find that gross donations are significantly more responsive to a match change than to a rebate change. We show that the difference can largely be explained by t he fact that a majority of donors do not adjust their nominal donations in response to a change in subsidy. This evidence adds to the growing empirical literature suggesting that consumers may not react to tax changes. In the case of tax subsidies for donations, this has implications for policy design – for the UK a match-based system is likely to be more effective at increasing money going to charities.

Behavioural Economics and Wellbeing

International Tax and Public Finance

https://doi.org/10.1007/s10797-014-9306-3