The boundaries of charity and tax

Introduction Any analysis of charity law involves an examination of boundaries. In particular, an analysis of the tax law of charity brings the boundaries of the state, the market and charity into sharp relief. In a market economy, individuals are in theory voluntary agents who may generate a return for their private benefit. However, a proportion of that market return – and especially of the profit from commerce – accrues to the public benefit because of tax law enacted in our liberal democratic ‘fiscal state’. Like market activities, charitable activities and donations are voluntary, but they are distinguished from market activities because they are for public benefit as determined by law, not for private benefit. Special concessions in tax law, including the exemption of charities from the income tax and the tax deduction for charitable giving, carve out charitable activities from the public sphere of the state. The tax law of charity thereby constitutes (together with other laws and norms) the boundaries of the state, charity and the market in a ‘jumbled mixed economy’ that changes over time.

It is by now a cliché that globalisation has caused national boundaries of states (and economies) to weaken or disappear, so that we come, in some ways, to see ourselves as global citizens. Traditionally, we have been used to thinking about tax law and tax concessions for charity within a national frame of analysis; the fiscal state is by definition nationally bounded. This national frame has been termed by political philosopher Nancy Fraser the ‘Keynesian-Westphalian frame’, referring both to the boundaries of the state at international law (the sovereign or ‘Westphalian’ state) and to the bounded economy of this state. The reference to its ‘Keynesian’ character incorporates an understanding of the fiscal state which relies on taxation to fund social welfare and which also plays an active role in the national economy.