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<p>This paper uses a survey-based approach to test alternative methods of channeling 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 the 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 - we show for the UK that a match-based system is likely to be more effective at increasing money going to charities. </p>
Authors
Research Associate University of Nottingham
Kim is Professor of Economics and Public Policy and Head of the School of Economics at the University of Nottingham.
Research Associate University of Bristol
Sarah is a Research Associate at the IFS and Head of the Department of Economics at the University of Bristol with interest in applied microeconomics.
Working Paper details
- DOI
- 10.1920/wp.ifs.2010.1007
- Publisher
- IFS
Suggested citation
Scharf, K and Smith, S. (2010). The price elasticity of charitable giving: does the form of tax relief matter?. London: IFS. Available at: https://ifs.org.uk/publications/price-elasticity-charitable-giving-does-form-tax-relief-matter (accessed: 9 May 2024).
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