How effective is the charitable deduction in the Netherlands? Did the ‘Law on Giving’ (‘Geefwet’), introduced in 2012 and including a multiplier for donations to cultural nonprofit organizations, effectively enhance charitable giving to arts and culture? This is the focus of a study conducted at the Center for Philanthropic Studies at VU Amsterdam in 2015 and 2016, funded by the Ministry of Education, Culture and Science. The research is conducted by René Bekkers, Saskia Franssen, and Elly Mariani. The final report was published in June 2016. A summary in English is here.
The first publication from this research project was a chapter in the Giving in the Netherlands 2015 book (in Dutch), in which the changes in giving by households, high net worth households and corporations were mapped from 2011 to 2013:
- Bekkers, R., Mariani, E.E. & Franssen, S.F. (2015). Special: De multiplier in de Geefwet en het geefgedrag aan cultuur. Pp. 217 – 236 in: Bekkers, R., Schuyt, T.N.M., & Gouwenberg, B.M. (Eds.). Geven in Nederland 2015: Giften, Sponsoring, Legaten en Vrijwilligerswerk. Amsterdam: Reed Business.
In short: donations to culture have not increased in 2013. A higher proportion of wealthy households donated to culture in 2013 than in previous years, but the amounts donated have declined. The tax reform is not very well known.
These results were published on April 23, 2015, on the National Day of Philanthropy – the presentation can be downloaded here.
A second paper in Dutch summarized these findings:
- Bekkers, R. & Franssen, S.F. (2015). De Geefwet en donaties aan cultuur in Nederland. Pp. 16-19 in: Boekman 103. Amsterdam: Boekman.
The final report was published in June 2016. A summary in English is here.
A bit of history
The charitable deduction was introduced in 1952 and costs the state several hundred million Euros of foregone income tax per year. In 2009, the Ministry of Finance had the tax authorities evaluate the deduction, concluding that the ‘effect of the deduction could not be proven’. Subsequently, an advisory commission scrutinizing income tax deductions called the findings a ‘negative evaluation’ and recommended cutting the deduction to simplify the income tax. The minister of Finance passed on this advice to parliament. Read comments on the negative evaluation in this article and also in this article (both in Dutch).
Despite the recommendation, however, the charitable deduction was retained in the new income tax for 2012. The charitable deduction fits in the social responsibility philosophy of the new cabinet. The philosophy was put into action in a ‘convenant’ with the philanthropic sector, signed on June 21, 2011. The agreement is described in English here. In addition, a new ‘Law on Giving’ was announced, which has passed parliament and has taken effect as of January 1, 2012. Details about the law can be found here (in Dutch). A description in English is available here. The new law includes a ‘multiplier’, specifically for donations to culture and the arts by households (1.25, or a quarter) and corporations (1.50). The multiplier increases the level of deduction for donations to organisations officially registered as charitable causes – in the sector of arts and culture, that is. Here you can read more about the rules for cultural deductions.
Back in 2011 I wrote an article with my colleague Elly Mariani for the WPNR, a Dutch journal for notaries on the behavioral effects of the Law on Giving. The article is available here (in Dutch). You can find the appendix to the article ‘Gedragseffecten van de Geefwet’ here. Read more on the legal aspects of the deduction in this article by Sigrid Hemels. Thus far, the debate in the Netherlands has not profited much from a reading of the international literature. Here is a nice blogpost from my UK colleague Sarah Smith at Bristol University.
The new study investigates the potential effects among donors as well as among fundraising nonprofits. By looking at changes in corporate and household giving since the introduction of the multiplier for donations to cultural nonprofits we investigate whether total giving has increased, and whether substitution to cultural donations may have occurred. To investigate these changes, we use data from the past two waves of the Giving in the Netherlands Panel Survey. By looking at changes in behavior of cultural nonprofits we investigate whether organizations have responded to the enhanced deductability of cultural donations by more intensive fundraising activity and whether they have advertised the new law in their communications with donors. More detailed information about the study among cultural nonprofits is available on a separate website (in Dutch).
- Bekkers, R. & Mariani, E. (2012). ‘Gedragseffecten van de Geefwet.’ Weekblad voor Privaatrecht, Notariaat en Registratie, 143 (6917): 133-139.
- Bekkers, R. (2010). ‘Giftenaftrek in Nederland: evaluatiemethoden en hun interpretatie’. Weekblad Fiscaal Recht, 139 (6873): 1140‐1148.
- Bekkers, R. & Mariani, E. (2009). Is the charitable deduction in the Netherlands treasury efficient? Paper presented at the Economics of Charitable Giving conference, Mannheim, October 8-9, 2009.
- Bekkers, R. & Mariani, E. (2009). ‘Het gebruik van de giftenaftrek in Nederland, 1977-2007’. Pp. 176-185 in: Schuyt, T.N.M., Gouwenberg, B.M. & Bekkers, R. (Eds.). In: Geven in Nederland 2009: Giften, Sponsoring, Legaten en Vrijwilligerswerk. Amsterdam: Reed Business.