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Lakshmi Mittal and Friends – give them a tax break to fix global poverty?

March 8, 2009

The Give & Take blog reports on a proposal in the UK to give favored tax status to donations given to charities helping to meet the UN’s Millennium Development Goals.  Those of you who have been following this blog know that I’m a sucker for tax news, so I was intrigued.

The Fortune Forum, a group of ultra-rich philanthropists – including South Asian steel magnate Lakshmi Mittal – claims that with extra tax breaks targeted to achieving the MDGs, more British donors would be inspired to give more than already are.

I’m always torn by this question of drawing distinctions based on the kind of charity receiving a donation. Venu have gone back and forth on this issue over the years, in fact.

On the one hand, donors to charities that are effective, efficient, and serve the public good arguably should receive privileged tax benefits when compared to donations given to other, perhaps less crucial or less impactful charitable projects.   The lines could be drawn based on whether the recipient organization provides services that taxpayers would otherwise have to fund by necessity – whether foreign aid or social services like food banks, for example.  In the UK proposal, the Fortune Forum is clearly making a policy argument that achieving the UN’s MDGs is an important priority for the British people and a tax subsidy from the government would help in its achievement.

However, as pointed out by a commentator at Give & Take, such distinctions could quickly become politicized and detract from giving overall.  In Guatemala, where I did some research on charitable giving, the nation’s Constitution gives privileged tax status to donations for elite categories such as universities and organizations in science & technology — as opposed to organizations serving poorer populations – like those in primary education or public health.

What do you all think?  Are Lakshmi Mittal and his friends justified?  Should they get an extra tax break for giving to the world’s poor?  Should the taxpayers of the UK subsidize their investments in achieving the strategic MDGs?  Or is this another case of government handouts to the wealthy?

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