While tax reliefs aren’t currently seen to be a major driver for philanthropy in Germany, Astrid von Soosten, board member of the German Fundraising Association (DFRV) and Head of Ressource Development at the European Molecular Biology Laboratory discusses their importance and explores what improvements could be made.
[Fundraising Europe] What tax reliefs are currently available for people that give to charity in Germany?
[Astrid von Soosten] It’s quite a simple system here. Basically, taxpayers get tax relief of around 20% on every Euro donated. This applies to donations to any organisations with nonprofit status, including foundations – which form a huge part of the German nonprofit sector. There are some rules that apply depending on your rate of income tax of course, but the tax break applies to almost anything that donors give; cash, property or other assets.
And how do people tend to give?
Most people give at a relatively low level, but the market is changing and it is one of our most pressing needs to involve more people in philanthropic giving. Altogether the number of donors has been shrinking over the last few years. At the same time, the amount donated by major donors has increased. While at roughly 5 billion Euros, the total sum donated has remained more or less unchanged, but it is increasingly the result of a smaller number of larger gifts.
There are many factors to consider here. Giving to disaster appeals for major catastrophes can have a big effect on our national giving figures. For example, in years when there isn’t a major disaster appeal, overall donations may go down. The refugee appeal meant a massive peak of donations in 2015 – our highest ever year for donations. There was no appeal of the same size and scale in 2016 and, although donations were still very high - our second highest year, the amount given was lower than in 2015.
Obviously, when it’s a German catastrophe such as the floods from a few years ago, everybody rallies around; government and individual supporters alike. But, for the most part, people tend to give to causes that aren’t that well supported by government.
What is the impact of tax reliefs on people's giving habits?
I don’t believe that tax relief alone motivates people to give, it is seen as an added benefit. The relief won’t necessarily inspire the initial decision to donate, but at the same time there are some people – particularly major donors – who may not give without it.
The tax benefit is a perk that may make the decision to donate easier but these potential donors are already convinced of the cause they want to support. In areas where fundraising is still developing, for example, higher education and the sciences, the tax relief may help to get over the hump, but it isn’t the motivating factor to give.
People are also often more inclined to give when they can make out a direct impact such as a matching gift or when what they give can trigger some other support or action.
With that in mind, how do you think tax reliefs could help inspire philanthropy?
As it stands, I’m not sure whether the current system of tax reliefs inspires a philanthropic culture. It helps, but we would need some changes to the system to make a real difference. For example, if you could take away 100% of your donation from your taxable income (up to a set sum), as they can in the US, I think that would make a significant difference for donors. Similarly, if people could get the same rate of tax relief as their income tax bracket that would be stronger incentive, particularly for higher rate taxpayers paying 42-45%.
Also, if people had more choices around what they could do with their tax payments, this would be beneficial. In some countries, you have the option of dedicating some of the tax you have to pay to special causes. Although this would probably incur quite a significant administrative burden, it could be a whole new giving channel and help grow a philanthropic mindset. If it is not an option to change the taxation scheme such a system might make people happier about their tax payments.
There are a range of ways that the wider tax framework influences people’s decisions to donate. I’ve heard high income earners say that they would never make a donation because they are taxed so highly. Having already paid their taxes, they don’t see why they should add on any more. Of course, the fact that taxes are high in Germany is not the charities’ fault but people make the connection anyway.
What do you think is the most important factor in building a philanthropic culture?
I think one has to fight against the notion that everything is the responsibility of the government. While our social systems are much appreciated, they do get to their limits and civil society is needed to resolve things. Essentially government and nonprofits must go hand in hand to deal with these issues. If it’s a civil society matter, we’re all in it together.
The one thing that government could do is to state explicitly and firmly that civil society is something that we all have a role in. It’s not society versus the government. We all need to do what we can to help resolve societal issues.
About Astrid von Soosten
Astrid von Soosten, CFRE, is responsible for philanthropic income and fundraising at EMBL. Her 20 years of fundraising experience cover the entire spectrum of education. In her previous position she served as Senior Director of Development at the University of California, Santa Cruz.
Originally from Germany, she aims to use her significant expertise gained working for organisations on both sides of the Atlantic to grow the culture of giving in Europe.