Changes to tax code for charities will cut relief claims of individuals
THE government is to reform the tax code for charitable donations next year in a move that could limit the amount of relief that can be claimed by individuals.
Under plans revealed by Finance Minister Michael Noonan yesterday, the government will "simplify" the tax relief programme on charitable donations.
Currently a person or corporation can make unlimited donations to nearly 2,000 approved charities and foundations and write the donation off against their tax bill.
However, the government's plans, which will come in at next year's Budget, will limit the amount of tax relief an individual can claim to €1m.
A consultation on the planned changes will conclude tomorrow, with submissions still being made by interested parties.
Among the other proposals by Mr Noonan are changes to the donations scheme so that the tax relief on individual donations would be paid directly to the charity, while a single rate of relief of around 30pc will be imposed regardless of whether the donor paid income tax at 20pc or 41pc.
In addition, Mr Noonan wants to remove the donations scheme from the scope of the "high earner's" restriction on tax relief. The regime around corporate donations will be unchanged.
A working group made up of officials from Finance, the Revenue Commissioners and the Irish Charities Tax Reform Group have been putting together possible changes to ease the administrative burden on the scheme for sometime.
In a statement, the minister said their proposals are designed to be revenue neutral, but some charities may be hit harder by the changes.
"I am cognisant that the changes proposed might not be beneficial for all of those bodies that currently receive charitable donations," he said.
"In order to ensure that all of those affected might have an input into the eventual policy decision in this matter, I have decided to engage in a public consultation process.
"Simplification of the (tax relief) scheme is one of the recommendations of the Forum on Philanthropy and Fundraising. Having considered the proposals made to me by the working group and the forum, I have decided to signal my intention to introduce changes to the tax-relief scheme from next year," he added.
Any change made to the tax-relief scheme for charitable donations is likely to be a contentious one.
Britain's Chancellor of the Exchequer George Osborne was savaged in March after he proposed capping the relief available on donations.
That move led to huge controversy and has added to the perception of a UK government out of touch with the country.
Last night Trocaire, one of the charities that will be affected by any changes, said it would be making a submission as part of the Irish Charity Tax Reform Group.