Changes in Irish tax rules brought in in 2007 may be having the effect of reducing the amount of money which is donated to charity by high earners, according to a study undertaken by the Community Foundation for Ireland (CFI).
In 2007 donations which were granted tax relief totalled €3.35 million, but this figure fell by 35% to €2.4 million in 2009.
Announced in the 2006 Budget, the 2007 Finance Act introduced, with effect from 1 January 2007, measures to limit the use of certain tax reliefs and exemptions by high-income individuals, the 'High Earners Restriction'. Such individuals had in previous years substantially reduced their tax liabilities by the cumulative use of various tax incentive reliefs.
CFI said that while it was mostly in favour of the move by the Revenue Commissioners to restrict tax exemptions for wealthy people it was unfortunate that charitable donations were classified with commercial income.
It called for a distinction to be made between tax relief on commercial activities and charitable donations as "there can be no benefit to the donor in the case of charitable donations".
CFI acknowledges that the reduction in the level of charitable donations could be interpreted to mean that high earners in Ireland are being less charitable or that are now using other reliefs available to them. "The answer may be both", it said.
They have renewed their call, ahead of the Budget, for decoupling of the tax relief available to commercial activities and charitable donations to be agreed and implementing.