April 15 (Bloomberg) -- Chancellor of the Exchequer George Osborne came under growing pressure from fellow Tories to revise plans to cap U.K. tax relief for high earners that charities and universities say will discourage donations.
The top fundraiser in Osborne’s and Prime Minister David Cameron’s Conservative Party, Stanley Fink, added his voice to criticism of the proposal, saying it would “put people off” giving large sums, the Sunday Times newspaper reported today. More than 40 leading philanthropists called the plan “confusing and dispiriting” in a letter to the Sunday Telegraph. Tory parliamentarians have also criticized the move.
Under proposals announced in last month’s budget, tax relief, including on charitable giving, will be capped at either 50,000 pounds ($80,000) a year or a quarter of an individual’s income, whichever is higher. The government says it’s part of a drive to cut tax avoidance and says a small number of wealthy people have used the system to avoid tax.
“It’s a mistake; it’s not the way to deal with the sort of problems you do get with charities,” David Davis, a former candidate for the Tory leadership, said on the “Andrew Marr Show” on BBC television today. He called it a “tax without friends.”
Another Conservative lawmaker, Zac Goldsmith, wrote in the Mail on Sunday newspaper that he was “ashamed” that Osborne had “spun a narrative in which philanthropists are now the enemy.”
Foreign Secretary William Hague said the government was looking at charities’ concerns, though he denied there would be a widespread impact.
“The vast majority of charitable donations are completely unaffected by this change,” he told Sky News television today. “This is only about people on very large incomes making very large charitable donations, and in some cases they have made them to charities that are abroad, that may not be what you or I would consider as a charity. So clearly this has to be tightened up.”
Cameron “said this week that we’d look very significantly at such concerns, and indeed the Treasury has said all along that they would listen to and they would work with charities and philanthropists to look at any impact on charities that rely on big donations,” Hague said. “They have started on that work, they have had some of the meetings on that already.”
The University of Oxford, the oldest in the English-speaking world, said last week it was concerned about the measure’s “potential impact in higher education, where the government’s own policy emphasizes the role of private and philanthropic investment rather than the public purse.”
Oxford has raised more than 1.25 billion pounds in its most recent fundraising drive.
Universities UK, the colleges’ umbrella organization, has written to Osborne and Business Secretary Vince Cable, who oversees higher education, about the plan.
The Charities Aid Foundation, which seeks to maximize charities’ fundraising, last week published a survey showing that 88 percent of 120 executives at institutions surveyed expect the proposals to have a “negative impact on the value of donations from major donors.” The government to reverse the plan, according to 78 percent of those surveyed.
Tory lawmakers opposed to the move predicted Osborne and Cameron would have to change course to deal with the widespread opposition.
“One way or another there will have to be a retreat,” Goldsmith wrote.
The government will “find another way of doing it,” Davis said. “They’ll change the way they assess the charities, not the tax.”
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