I move amendment No. 27:
In page 24, subsection (1), line 7, to delete "applies;" and substitute "applies or any body established in the State for the sole purpose of raising funds for such an institution;".
This is a technical amendment.
SECTION 14.
Amendment agreed to.
Amendments Nos. 28, 58, 66 and 66a are related and may be discussed together.
I move amendment No. 28:
In page 24, subsection (1), line 22, after "project" to insert "or to a registered charity".
The Minister tabled an amendment to the Finance Act, 1996, granting tax relief to charities whose operations relate to foreign activities. As the Minister probably anticipated at the time, whereas it was welcomed by the charities involved it brought down a torrent of abuse on top of his head from Irish charities who want a level playing pitch. I am sure the Minister and his Department have been lobbied incessantly from all the Irish charities who formed themselves into a body called the Irish charities tax reform group. Both last year and this year they put forward sensible amendments and have costed them adequately. I believe they have convinced people in the Department of Finance — and perhaps even the Minister — that he could proceed down this route. I move this amendment on their behalf. If one can encourage people to give to charities by allowing a tax break and that results in an increased amount of money being given to charities, it will have financial implications for the State and I do not think there will be a great loss to the Exchequer. That is the reason I tabled these particular amendments.
Amendment No. 58 is in response to the same representations to which Deputy McCreevy referred. Although I readily concede it could be drafted better, the same principle applies. There is a strong case for making significant donations to specified charities subject to tax relief. The purpose of my amendment would be to make donations allowable for total relief but the Minister could specify that it would be a percentage relief.
The Department of Finance has traditionally taken a narrow view of charitable and philanthropic donations. We do not need to go as far as they have in America where the President's underwear is set out in a schedule and a value is put on each sock he donates to the local Society of St. Vincent de Paul, but surely we can have a system whereby people can receive some tax relief in respect of charitable donations. I would look to the corporate sector in particular. Corporations would be much more munificent to charities if they received a little encouragement from the State.
The Department might take on board the fact that many charities are in receipt of public expenditure, if it is not paid through one pocket, it will be paid through another. I remember the first year the Society of St. Vincent de Paul received money from the State. I was surprised because I thought it was a culture leak that a charity was getting a wad of money from the Exchequer. I thought the same fellows in the Department of Finance who are against this amendment would probably be against giving money to a charity on the basis that this would diminish public support for charities.
Virtually every charity of significant size is now receiving State assistance. In that context, it makes sense to revert to some Victorian values and encourage people to make direct payments to the charities rather than have the money go through the Exchequer to be given out again. If the Minister opted for tax relief on charitable donations, especially in the corporate area, he would be surprised by the beneficial consequences. I know there is relief for donations to foreign aid or famine relief and specified measures for donations to scientific projects in schools and UNESCO projects but these are ringfenced little islands in departmental thinking.
The term "charitable purposes" is vague. Virtually every school, for instance, has a charitable purpose and the concept could get out of control, but some charities should be specified. A specified charity — what I had in mind is expressed badly here — would have to reach a certain threshold of importance, transparency and value for money, that is, its administrative expenses would have to be sufficiently low. There is much proposed legislation in the pipeline to regulate charities and make their expenses more transparent. One could create a category of approved charities to which corporate Ireland could contribute.
Take the Society of St. Vincent de Paul, for instance. If its accounts are audited and it complies with all the various criteria, what would be wrong with one of Ireland's large companies giving it £1 million and getting credit for 20 or 30 per cent of it? In the last analysis as there is so much direct State subsidy to charitable bodies such as the Society of St. Vincent de Paul, the MS Society of Ireland, the Cheshire Homes, every year to fulfil necessary functions, bodies which are in receipt of State subsidy to a significant extent should also be eligible for tax subsidised charitable donations by corporate bodies.
I join with my colleagues' plea that the Minister consider this request by the Irish charities tax reform group. The Minister will be aware that the members of that group are among the most highly respected charities in the country, such as the Society of St. Vincent de Paul, aid cancer treatment, ISPCC, the Simon Community, etc. As he is aware that they provide services which should be provided by the State nobody could argue that the introduction of a scheme would do any harm in real terms. It could only be of benefit to the people who benefit from the services of these societies.
The operations of the Society of St. Vincent de Paul are run on a budget of £15 million per annum, which is considerable. It maintains that if there was tax relief for corporate donations, it could receive up to £12 million more which could be used in an effective and efficient manner to benefit those whom it helps.
These charities have lost out to those which benefit from tax relief for donations to foreign aid. I have nothing against donations to foreign aid because the people of countries which benefit from Irish charity need it badly, but the Minister should acknowledge the excellent work which is being done by many charities in Ireland and look seriously at their request for this benefit.
I recognise the strength of sentiment and widespread cross-party support for this principle. When I introduced the provision for Third World charities in 1995, I was advised strongly by people within the governmental system that if I were to open up this Pandora's box the pressure from domestic charities would be inexorable and there would be a substantial loss of tax revenue, even in relation to the Third World charities. Approximately 15,000 people availed of the Third World charities relief in the 1995-6 year and the gross amount donated was £468,000. The cost, in terms of tax forgone, was of the order of £173,000.
That is much less than the amount the Minister anticipated.
It is.
I mention that because people have not bothered to send in their claims.
They are the figures.
The charity claimed back tax where donors gave their RSI number. I anticipated that the figure would have been much higher irrespective of the prudent overcalculation by the Department of Finance.
Domestic charities, with one or two exceptions, have not promoted it because they were unwilling to get into a competitive situation. The Revenue Commissioners register charities as being eligible for tax relief without forming any view as to the merits or purpose for which they were established. Accordingly, there are approximately 7,000 charities of which 3,000 are active. Nothing is surer to bring the dormant charities back into activity than some form of tax relief.
Are these the CHY exemption figures which the Revenue Commissioners have on file? Tax exemption is dependent on proving certain things.
Any registered charity can seek to claim tax relief and we just assist——
Does this concern the figure of 3,000?
I would not go for that.
The definition of charities includes bodies of benefit to the community, those promoting the advancement of education and religion, those concerned with the relief of poverty, sporting bodies and others bodies such as agriculture and friendly societies.
Three amendments have been tabled in the names of Deputies Sargent, McCreevy and McDowell. The biggest problem is explicitly stated in the amendment tabled by Deputy McDowell, which addresses the issue more comprehensively then the others. It recognises that there is no qua regulation of charities, although there is recognition. The amendment uses the phrase “specified charity” and the suggestion is that they should be evaluated in some manner by the Minister for Finance. That places the Department in a regulatory role regarding charities, a function outside its ambit.
The total amount of money given by the national lottery or the Exchequer to the bodies under discussion including the Society of St. Vincent de Paul is in excess of £200 million. This is to help the voluntary sector assist in the provision of health, community, welfare, etc. services through such groups as Rehab.
Members are aware that the Costello committee, which provided advice on this matter, produced a report which Minister of State, Deputy Burton, is examining. We need an update from the Costello advisory body to see how we can move from a total of 7,000 charities, of which 3,000 are active, to the body of established and active charities which are to the forefront as household names. In advance of this it is simply not possible to introduce legislation because we do not know where it would lead. Despite the wisdom of its officials, the Department of Finance is not in a position to define a qualifying charity. This is a fact rather than a cop out.
Finally, I wish to indicate the order of magnitude as distinct from the cost which Deputy McDowell's amendment would result in if enacted. Assuming 1,000 companies donated large sums, the full year cost for corporation tax would be in the region of £15 to £18 million at the standard rate. This is based on the Deputy's figure of a maximum of £5,000 per individual and £50,000 per company. It was further assumed that 50,000 individuals, equalling 5 per cent of income tax payers, would donate an average of £500 per annum, amounting to a full year cost of £9 million. This is an indication of the order of magnitude, amounting to £25 million. The figure could be twice this or, more likely, based on the our experience with third world charities, considerably less. The real problem, however, is that there is no means of regulation and I do not propose to accept the amendment.
I did not expect the Minister to accept the amendment because the thought processes have not been brought bear on the issue. However, there has also been a long standing culture against such measures, chiefly because it is administratively very difficult to implement. The problems are amplified to the point where Ministers are scared away from it. This happened to the current Minister in relation to the Third World. The figures now being issued are slightly frightening.
Because of modern technology in the Revenue Commissioners it was demonstrated to me that it was possible for Goal or Concern to simply send a tape to the Revenue Commissioners at the end of the year with all donations. All the commissioners had to do was put the tape into the system and confirm, on the basis of RSI numbers, that Joe Bloggs had made a donation of £500. There is little or no administrative constraint now.
I accept that. However, if there is a real appetite to do this, as there should be, it will be done. It is not a matter of politicians playing Santa Claus. If there was, following a post-Costello review arrangement, an echelon of charities which had a certain turnover and administrative structures which complied with value for money criteria of low administration expenses in comparison to turnover, it would be possible to provide that they be in receipt of State funding either directly or through health boards as an additional control mechanism. This would make it possible for the State to say whether Mrs. X's home, for example, was included on the basis of funding. A category of 50 or 100 charities could be created, with the IT mentioned by the Minister making it easy for taxpayers to find out who was supporting them.
If the effect of making donations tax deductible, either in whole or in part, diverted money to these charities, it would be possible for the State to identify the amount received under this system and allude to it when further assistance was sought. This would give the State leverage and moral authority to say the charity is a good cause and that resources through tax relief have been provided to them. This is taking a positive view from the stand point of the Exchequer. It could be said to a charity successful in collecting tax subsidised corporate donations that they have done very well and should not ask for more, that there are other more deserving charities which are not receiving similar assistance. I imagine that the Society of St. Vincent de Paul would do very well out of this. The Minister would, however, have to quantify the additionality which would have to be dealt with in relation to tax differentials.
Would that obviate the need for £5 million at Christmas time?
One could say that, or one could give Rehab £3 million next year rather than the Society of St. Vincent de Paul. The Society of St. Vincent de Paul would not like to hear that, but the Minister is going to be in a position at some stage when a charity will demand they receive the same level of support as the Society of St. Vincent de Paul on the basis that they are doing similar work. The MS Society might demand that the Minister give them money. The Minister could be in a position to say that he knows, from records in the Department of Finance or generated by the Revenue Commissioners, that the society received £3 million of tax subsidised donations in the previous year. He would then be in a position to tell a charity, with some degree of authority, that they have already been given a boost through tax subsidies on donations.
This is not all bad news from the Exchequer's point of view. It is far better for the Exchequer to encourage people to support charities by offering tax incentives similar to those which apply in SFADCo. This could be achieved through the establishment of qualifying criteria by the Commissioners of Charitable Donations and Bequests. Under a new regime, charities would have to conform to certain minimum requirements and the Minister could make it a requirement for them to receive Exchequer funding of a threshold nature. This would ensure that a dead tortoises' society or a donkeys' sanctuary would not end up receiving money which was not intended for them.
There are three different arguments in operation here. The Irish charities tax reform group have a good case for seeking equity between themselves and other charities. They should be treated equally. For the Department of Finance to issue figures outlining a cost of £25 million, for example, to achieve this is to take a very narrow viewpoint. Deputy McDowell has touched on some of those issues.
I am in favour of the Department of Finance ensuring some form of control on expenditure in this area. When a company or an individual donates money to charity they are giving it away from themselves to others. Many of the tax measures in successive Finance Bills have sought to close off avoidance procedures in order that people would not give money to purposes which would benefit them directly; the establishment of trust funds and scholarship schemes for example. We have no gripe with such measures as they ensure that there is a level playing pitch in relation to the payment of taxes. When people give money to a charity in a bona fide manner, they receive no particular benefit for so doing excepting perhaps some publicity in the case of donations made by a company.
One cannot view the issue narrowly in terms of a cost base. I have advocated for some years that there should be more strict regulations in place in the area of charity organisations. If the Minister were to take this particular route, responsibility could be spread over a number of Departments and the Department of Finance would not have sole responsibility in this area. In my view, there should be a designated organisation with responsibility for all charities, be they small or large. If a group were to seek a licence to run a fund-raising event in a local area, there should be a simple form which could be registered with such a body outlining the amount of money collected and the purposes for which it was used. Politicians are constantly faced with requests for money for charitable causes; one cannot even stop at traffic lights without having a bucket shaken in one's face.
It has come to my attention recently that it is usually wealthy people with no dependants who give considerable amounts of money to charitable organisations. They do this via accountants, solicitors and so on. No organisation has responsibility for following up on these kinds of donations. The people who are responsible for looking after this aspect of a person's affairs are faced with a terrible dilemma as there is no body to which they are accountable. I agree with the Minister that it should fall to the Department of Finance to regulate charities but they should take the initiative to form an interdepartmental group which would look into the possibility of forming a designated body with responsibility for this area. The Exchequer could save a considerable amount of money if this route were taken. I am in favour of the amendment for those reasons but I recognise the downside to what the Minister has said.
Deputy McCreevy has a made a number of the points I intended to make. This opportunity should be taken to initiate a proper debate in relation to the regulation of charities. Such a debate has been promised in the past but there is a feeling that nothing will happen in this regard. It does not just fall to the Department of Finance to take this issue on board; it would involve a number of Departments. This could be the spark of ignition to get some movement in this area, to define exactly what constitutes a charity and regulate its work. There is a valid case being made by the Irish charities group in relation to the way they are currently being treated and they have a very strong case for equality of treatment. I am aware of the pitfalls pointed out by the Minister and I know he is not being hardhearted about this issue.
I realise the Department of Finance must be prudent in their estimations and adopt a cautious approach when stipulating ceilings in this area. However, the number of people who would avail of these kinds of tax exemptions would not distort the Department's figures. The Department might allow a ceiling of £500, but in my view there are not many people who would make donations of the order of £500; far more people would be inclined to donate in the region of £50 to £100. I am not privy to the way in which companies operate in this regard but I feel that there would not be a large number of companies making very large donations. The Minister should try to ensure equity among charities in order to give them an opportunity to participate on a level playing pitch. That would be a worthwhile thing to do.
What is the position in the North of Ireland in relation to this issue? I recall somebody who worked with charities in the North saying to me that there is far more private money available in the North for charitable purposes than there is in the South. Would the Minister comment on that?
There are concessions available in Northern Ireland and the UK and I will get details of those for tomorrow's meeting. Deputy McDowell suggested that if citizens were in a position to decide what charities should receive money, a potential burden would be taken from the State in respect of the £200 million. I am not sure that would be the case as the organisers of charities would all make the case that they did not have sufficient money to do what they are currently doing. If this was not perceived as a net additional measure it would not be worthwhile. The promotional effort charities would have to put into generating income would be far more strenuous than simply knocking on the door of the relevant Department. It would not be worth it because the promotional effort required to generate an income would be far more strenuous than knocking on the door of the relevant Department and getting what is provided at present, which is the £2 million to which I referred.
The real operational problem against this measure at present is the regulatory one. When that is addressed it will be possible for a future committee of the Oireachtas to decide whether to go down this road. At that stage a view will have to be taken whether taxpayers' money in the form of tax income foregone should go to a charity that is not accountable to the Committee of Public Accounts in the same way as the Department of Social Welfare or the Department of Health. National lottery money is spent through the Estimates process while money spent via the lottery is accountable in the normal way through the Committee of Public Accounts. Even grants given, such as Christmas grants from the Department of Social Welfare to the Society of St. Vincent de Paul and Protestant Aid are accountable via the Department of Social Welfare.
Leaving aside the question of prioritisation of social need, which is a wider and deeper issue, the question of accountability within the Oireachtas system would have to be addressed. However, none of these issues can be effectively addressed until such time as there is a regulatory framework with regard to charities.
I have a number of reservations about the philosophy behind the proposal because of its uncritical nature as distinct from Third World charities, which go to countries that do not have basic social welfare systems. We spend approximately £4,000 million on our social welfare system and charity activity tends to be a top up to what is currently in place. In this instance we do not have the regulatory framework to administer a scheme, even if we agreed to it. The amendment is, therefore, premature.
I will withdraw the amendment on the basis that the matter will be considered again on Report Stage.
Amendment, by leave, withdrawn.
I move amendment No. 29:
In page 24, subsection (1), line 22, after "project" to insert "or a gift by an employer to a fund jointly managed by the employer and the employees in the furtherance of the development of the business".
Amendment put and declared lost.
I move amendment No. 30:
In page 25, subsection (2)(b)(i), line 5, to delete "amount" and substitute "amount,".
Amendment agreed to.
I move amendment No. 31:
In page 26, subsection (8), line 3, to delete "does not exceed £1,000" and substitute "is less than £1,000".
Amendment agreed to.
Section 14, as amended, agreed to.
The Select Committee adjourned at 6.35 p.m.