To enable a diverse and thriving civil society, tax deductible charitable contributions should be introduced

By Dr. Gwamaka Kifukwe

In recent years, there has been a growing appreciation that business (and the private sector more generally) can and should have a greater role to play in a society’s well-being and progress. The traditional view that “the only thing that matters is the bottom line” ultimately still applies, however there is a growing appreciation regarding just how that bottom line is met. As a result, economic activities and organisations can no longer be viewed as separable from broader society. Globally has been most evident in concerns regarding environmental protection and abusive labour practices. These concerns have been on the rise since the 1970s and are increasingly part of our thinking around fairness and equality.Donations Accepted

One example of this is the growth of CSR – Corporate Social Responsibility. Ostensibly, this concept treats a business or company as a ‘citizen’, complete with responsibilities to the community within-which it operates. This has ranged from charitable donations, to ‘community days’ among others. However, to truly mobilise the skills and competencies contained within the private sphere, more needs to be done.

One approach that has been adopted in some parts of the world is to make social and charitable contributions tax deductible. Embracing this could be vital in supporting, not only socio-welfare initiatives (ranging from scholarships and volunteer programmes to the provision of medical support), but may also be used to support research institutions, the arts (theatre, music, crafts-men and -women, painters, dance, etc.), museums, etc., that form part of the richness of a society. The range of possibilities can only be viewed as a win-win for all stakeholders. The growing interaction can lead to new business ideas, to skills transfer, to increased awareness of broader issues and concerns beyond the silos within-which people find themselves in.

In addition, by enabling the private sector to choose how and where its contributions go, we encourage a sense of community based on solidarity (charitable contributions) by unlocking private generosity, rather than just on government obligation (taxes).

Operationalising this is, in principle, relatively simple:

  1. Social-welfare projects, social enterprises, charities, and other non-profit organisations register with the government and are vetted for their social impact potential, and alignment with government policy objectives.
  2. A private organisation will provide contributions to an approved charity and file the same amount with the government revenue or taxation authority.
  3. Following inspection and verification, this amount is deducted from the taxes owed to the government revenue or taxation authority.

This cannot and should not replace government-managed initiatives (which in turn could also be listed as eligible options for tax-deductible contributions). Rather, this should be viewed as complimentary to the broader societal aspirations entrusted to government. In the framework outlined above, all major actors (civil society, private, and public sectors) are involved, which prevents the rise of ‘philanthropists-as-kings’ and created parallel governance structures.

The approach encourages creative problem solving to social needs on the part of the communities themselves. This in turn tends to lead to more localised or sector-specific solutions. Some of these solutions are highly experimental, which discourages public financing due to a high risk of failure. Another benefit to government is that the burden for identifying and monitoring interventions is lessened, while the choice of organisations that are supported through this mechanism provides signals about what is both appreciated, and where interventions are yielding results.

For this to work, not only would a change in policy to allow tax-deductible contributions be required but also regulation of the sector, and mechanisms for registering and vetting eligible non-profit organisations. Tax and revenue authorities would need to coordinate with authorities responsible for regulating the non-profit sector, as well as with regional authorities and local governments to follow-up on the effective use of contributions. The administration involved should be streamlined and kept simple to avoid rendering this route unfeasible because of an over-burdening bureaucracy.

As African businesses are beginning to really spread their wings and take off, perhaps it is time for how we in Africa relate to the private sector, and how we incorporate them into our development visions and aspirations. There is already a growing number of home-grown philanthropists treading new grounds, but these are few and far between – by permitting tax deductible contributions, all Africans (and African businesses) can better contribute to our collective welfare and transformation.

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