Charity tax and the charity fatigue

The observant consumer will have realised that many large corporations have voluntarily opted into an informal “charity tax” agreement, in which some of their revenue is channelled into community projects. This includes banks, who typically fund arts and sports, and, especially for local banks, invest in local community projects. Local community outreach is also popular with smaller airlines. Supermarkets donate money to various causes, and research into diseases is a popular cause for technology companies (presumably because medical research requires plenty of hardware, and they get free advertising that way, too, or, if you will, recoup some of their donations through added sales).

Apple likes breast cancer, and Sandisk apparently now promotes Alzheimer’s (they sell memory – I’m sure you can see the logic…) But let’s take another look at those other ones – the banks, the supermarkets. I have a few questions that I think will be interesting to answer:

  1. What do they get out of it?
  2. How much do they donate, what proportion is this of their revenue and profits, and how can the consumer find out?
  3. Where does the money come from?
  4. Who decides what is a chariy, and what does this mean?
  5. What happens to consumer choice, and does the charity tax constitute unfair bundling of products?

The companies get publicity and a clean image – no matter how much general pollution they put out, their public image could come to be more closely associated with the causes they support. Perhaps this is why a lot of companies have steered clear of supporting environmental charities – keep the consumers’ attention away from any contentious issues if you can.

As Valerie points out in the post cited above, the amount of money given to charities may be negligible, and additional conditions may be imposed in the small print to limit a company’s donations to charity. When companies do clearly state how much money is being donated (for instance, where the charitable activity is to give prize money to someone who has done great charitable things), they do not usually state what proportion of their revenue this constitutes – or of their profits, for that matter (don’t misread this as my saying that money given to charity is profits, which it is not – I’m only interested in how the two compare). This information may or may not be attainable by the consumer, but requires additional effort. For companies that are not publicly listed, it may not be possible to find out. In addition to this, although charities may inform their donors how their money was used, this information, again, may not trickle through to the consumer. (Not to mention that the way charities account for their money is not necessarily representative of how it was really used; it’s the same game as tax money: While governments may say that the road tax was used to improve traffic systems, and the tobacco tax for healthcare, the truth is that it all goes into one big bucket, and *some* of it comes out the other side – assuming that the government isn’t getting deeper into debt!)

Where does the money come from? This one is easy to answer. It comes from the consumer. Yes, ladies and gentlemen, from your blood, sweat and tears! So shouldn’t you have a right to know what happens with it? Or, hold on, shouldn’t you be allowed to decide?

Who decides what is and isn’t a charity anyway? Wikipedia has a good amount of information about this if you’d like to learn about the specifics of any one country. That said, charities usually are intended to be non-profit, for one or several of a given list of purposes (so as to exclude, for instance, terrorist organisations), and need to give an account of their finances. In exchange, they and donations made to them can be exempt from certain taxes. Interestingly, in the UK, charities are often instituted as limited liability corporations. So the main differences between a charity and a commercial entity come down to: charities make no profits, some, most, or all of a charity’s income is not in return for goods and services, and charities do not themselves pay tax, for the most part.

So perhaps there is some legitimacy to the way most charities operate, although the general public probably also expects them to uphold high moral standards, such as not giving companies a halo for petty donations. But just as your supermarket is forced to find a charity to give money to if its main competitor gains market share because consumers approve of it having done so, so charities also compete for donors. And that competition is fierce and apparently doesn’t allow for an ethical stance on haloes – and keep in mind, charities also get free advertising when they go on the Sandisk box or the British European in-flight magazine. And they compete for public attention – your blood, sweat and tears are limited, right?

So given how much of your spending may already be given to charity, do you really feel like donating separately? Do you perhaps feel that you deserve to hang those certificates in your home office, rather than the supermarket’s? Would you rather buy charity-free products, and choose your charities yourself? Perhaps you work in a cosmetics laboratory and get harrassed by animal rights activists. How do you feel about your money going into their pockets? Perhaps you’re a researcher in evolution, and some of your money goes towrds Christian charities that oppose evolution? Or you work on cancer, but your supermarket greatly donates to Alzheimer’s, driving up prices for laboratory supplies you now can’t afford. Perhaps you’re Muslim, and your money goes to Christian schools without your explicit consent. (I don’t want to add fuel to that particular fire, I think if people said fewer bad things to each other, it would be for the better of everyone, but I wanted to include the example…)

Do you feel it’s right that you have to buy Windows to use a current version of Microsoft Office, the quasi-standard in office applications? No? Then maybe you’d rather buy your broom without giving money to artherosclerosis research.

I think I’ve established a sound argument here for a call to not bundle charity expenditure with consumer products and services. What is more interesting is why consumers haven’t complained so far. The main challenge for people who donate to charity is that everybody else is a free rider as far as the donor is concerned. Unless their neighbour has a certificate on his wall, he’s probably benefitting from their money with no return. As we’re gradually coming to understand that there is no reward in the afterlife for those who give to charity, this becomes meaningful. If your charity is tilled at the supermarket, unless you want to shop at smaller independent stores, you can’t really evade this particular tax – you eliminate the free riders. Perhaps this is what motivates people’s giving this power to supermarkets – it’s really malice ultimately: “if I’m to donate, I’ll have everyone else donate as well; that satisfies me.” We’re all in it together, we’re all paying our dues. Just like a good tax should be. But in the midst of all that, we’ve stopped caring who the money goes to.

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