Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207211 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7820
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper estimates the effects of tax incentives on charitable contributions in the UK, using the universe of self-assessment income tax returns between 2005 and 2013. We exploit variation from a large reform in 2010 to estimate intensive and extensive-margin tax-price elasticities of giving. Using a predicted-tax-rate instrument for the price of giving relative to consumption, we find an intensive-margin elasticity of about -0.2 and an extensive-margin elasticity of -0.1, yielding a total elasticity of about -0.3. To further explore the extensive-margin response, we propose a model with a fixed cost of declaring donations and obtain a structural estimate of that cost of around £47. We also study the welfare effects of tax incentives, extending the theoretical literature to allow for extensive-margin giving and for a fixed cost of declaring donations. Taking into account these factors, there is a case for increasing the subsidy on charitable giving in the UK.
Subjects: 
charitable giving
tax incentives
welfare
JEL: 
H24
H31
D64
Document Type: 
Working Paper
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