1. Introduction

Philanthropy plays an important role in most countries, providing support for a wide range of private activities and initiatives in support of the public good. This differentiates the sector from government initiatives (i.e., public action for the public good) and profit-based initiatives (i.e., private action for the private good). The use of the tax system as a means of supporting philanthropy is widespread. In addition to government grants and the contracting of services to philanthropic entities (“direct support”), governments typically support philanthropy (“indirectly”) in two ways, by providing: tax incentives for giving to philanthropic entities; and (full or partial) exemptions of philanthropic entities from various taxes.

In many cases these tax preferences have been in place, unaltered, for many years despite changing social conditions. For example, when income tax exemptions for philanthropic entities were introduced in many countries around the beginning of the 20th century, there were relatively few eligible entities and most of their income was in the form of donations. Over time, the sector has grown, often in response to out-sourcing by governments of welfare and other services, and many philanthropic entities now rely significantly on self-generated income, including business and investment income. There have also been significant developments in research on the optimal design of tax incentives for giving that highlight, for example, a range of efficiency and distributional concerns. Furthermore, the increasing prevalence of large philanthropic foundations has placed greater focus on the degree of influence of large donors on the use of taxpayer funds. Finally, the global nature of many of the challenges facing the world such as environmental, medical research, and public health concerns (such as the COVID-19 pandemic), raises questions regarding the appropriate tax treatment of cross-border giving.

In light of these developments, a reassessment of the tax rules in place in many countries may be warranted. To aid such reassessment, this report provides a detailed review of the taxation of philanthropic entities and philanthropic giving in 40 OECD member and participating countries, and highlights potential reform options for countries to consider. The report draws heavily on country responses to a questionnaire on Taxation and Philanthropy (“the questionnaire”) by country delegates to Working Party No. 2 on Tax Policy Analysis and Tax Statistics of the OECD’s Committee on Fiscal Affairs.

This introductory chapter provides a range of background information on the philanthropic sector to aid the analysis to follow. It first discusses the exact meaning of philanthropy adopted in this report. It then highlights a number of key aspects of the philanthropic sector, before discussing the size of the philanthropic sector both in terms of the number of philanthropic entities and the total amount of giving to the philanthropic sector. Finally, the chapter provides an outline of the structure of the report to follow.

The term “philanthropy” does not have a universally accepted meaning. The term derives from the Greek “philanthropia” meaning “love of humanity” or “love of gods for humanity”. Various attempts have been made to define the term. Dictionary definitions include “the gratuitous transfer of funds or other property for altruistic purposes”.1

Scholars from different disciplines have also sought to define the term, referencing various concepts such as the “voluntary” aspect of philanthropy, the notion of “generosity” or concern for others, or the application of private resources for public purposes. For example, philanthropy has been described as:

  • voluntary giving, and voluntary association, primarily for the benefit of others; (Payton, 1988[1]) or

  • the voluntary giving and receiving of time and money, aimed (however imperfectly) towards the needs of charity and the interests of all in a better quality of life; (Van Til, 1990[2]) or

  • the use of personal wealth and skills to benefit specific public causes. (Anheier, 2005[3])

All of these ‘definitions’ are concerned with the act of giving, but the term philanthropy is also used in other contexts. For example, philanthropy has been defined as being ‘one form of income of non-profit entities’ (Salamon and Anheier, 1992[4]), equating philanthropy with donations and moving the focus from the act of giving to the recipient entities. The term is also sometimes used to refer to the entities themselves, with one researcher noting that the term ‘typically applies to philanthropic foundations and similar institutions’ (Anheier, 2005[3]).

Another definition is: ‘The planned and structured giving of money, time, information, goods and services, influence and voice to improve the wellbeing of humanity and the community’ (Philanthropy Australia[5]). This definition is narrower in that it emphasises planned and structured giving, but also notes different types of gifts and includes the notion of community. It has also been said that ‘being a philanthropist is synonymous with the largesse of rich individual donors’ (Anheier and Leat, 2006[6]). But generally the term is considered broad enough to cover all giving.

Despite the divergent uses of the term, there are some common threads: philanthropy is concerned with ‘giving’, and with ‘worthy’ and ‘public’, rather than private, causes. Several definitions refer to giving time as well as money. There is also a reference to ‘altruism’ or concern for others in some of the definitions, but this is not generally part of any definition that specifies which entities or activities qualify for tax relief. Indeed, some entities exist for the benefit of their members rather than for the broader public benefit e.g. a disability support group. The focus then, is on ‘gifting’ – the making of voluntary contributions without expectation of return; and on identification of appropriate worthy causes or purposes. This identification of ‘worthy purposes’ is likely to differ between jurisdictions and is an important part of the tax framework in this area.

In some common law countries, the term ‘charity’ is often used to refer to the act of giving or to the entities that either enable or carry out activities. Although the terms charity and philanthropy are sometimes used interchangeably, they do not necessarily have the same meaning. While charity and philanthropy both seek to accomplish the same outcome – to address needs and make the world a better place – the method that philanthropic entities and charitable entities each use to reach that outcome is different. Whereas charity refers to the direct relief of suffering and social problems, philanthropy systematically seeks out root causes of these issues and endeavours to find a solution (Anheier and Toepler, 2010[7]). This distinction has been significant in the emergence of modern philanthropic foundations, particularly in the United States.

This report will use the terms philanthropic giving and philanthropic entities, respectively, to refer to:

  • the act of giving by individuals and corporations, to philanthropic entities with worthy purposes, and

  • entities that are engaged in activities in pursuit of those purposes, including by providing funds to other entities.

Although philanthropy has a long history, the idea of a philanthropic sector or ‘third sector’ beyond the realms of the state and the market is of fairly recent origin, certainly post-World War 2. This relatively recent recognition of the sector as having an economic and political presence may explain why there is limited research into the sector as such, with the notable exception being in the United States.2 More recently other countries have undertaken research, and there have been a number of comparative world-wide studies3 that have identified common characteristics and helped to inform decision-makers. The notion of a distinct sector remains a perplexing concept in modern political and social discourse, as it covers a tremendous diversity of institutions and behaviours.

It is difficult to compare philanthropic sectors across countries for a number of reasons. First, each country will have its own historical, economic and political background that will influence the size and scope of the sector. This has been described as the ‘social origins’ theory that considers inter alia, how and why welfare states took on different forms (Anheier and Salamon, 1996[8]). The theory suggests an inverse relationship between the extent of government social welfare spending and the size of the non-profit sector. This research identifies countries as having one of four characterisations:

  • ‘liberal states’ – where democratic government developed before the welfare state. The welfare state may be limited but available to the ‘deserving poor’. These countries are likely to have a larger philanthropic sector;

  • ‘social-democratic states’ – where the working class gained power and pushed for a universal welfare state. As a result of the high level of welfare, these countries tend to have smaller philanthropic sectors;

  • ‘corporatist states’ – where the welfare state developed under the control of non-democratic states that later became democratic. These countries tend to have low welfare and large philanthropic sectors;

  • ‘statist states’ – where a country’s elites are in control of the public good provision, and this leads to both low government spending on social welfare and a small philanthropic sector.4

The theory also suggests that there will be differences across countries in the predominant types of non-profits, shaped by historical development and class relations. Other country specific issues may include the role of religion in the development of the country, including in the development of philanthropic traditions. Economic development may also be significant both in terms of needy recipients and in the accumulation of the financial ability to provide welfare and for citizens to be able to contribute by way of philanthropy.

Other factors that may make comparisons difficult include notions of ‘legal families’, that is whether the country has a common law or civil law tradition. Common law countries tend to adopt the notion of ‘charity’ that dates from the Preamble to a Statute of Elizabeth of 1601,5 as the basis for identifying worthy purposes and activities. Civil law countries will not be constrained by these notions but may have strong traditions of freedom of association and organising for workers’ rights. The German non-profit sector has, for example, been influenced by the principle of ‘subsidiarity’ that gives priority to private over public action in many areas such as health and social services. The principle of ‘self-administration’ also gives independence to many public institutions and both of these features make it difficult to identify the non-profit or philanthropic sector as such. (Salamon and Anheier, 1992[4])

Given this diversity, identifying the philanthropic sector in a country for the purposes of comparison means identifying characteristics that are essential. The Johns Hopkins University Comparative Non-profit Sector Project (JHU Project) (Salamon, Sokolowski and List, 2003[9])6 developed a set of factors to identify non-profit entities that they suggested could be applied across jurisdictions for the purpose of carrying out comparisons of the ‘non-profit sector’:

  • voluntary – the voluntariness of those participating and of the entity acting is one of the factors that sets these activities apart from government;

  • self-governing – not directed by government or others as to how to act;

  • private – that is, not part of government. The Project notes that in some countries there may a blurring of the line between private and public activity;

  • non-profit distributing – although these entities may make profits or generate a surplus, they are not formed for the purpose of profit making. The non-distribution requirement distinguishes these entities from for-profit entities;

  • formal, that is institutionalised to some extent. This would preclude individual acts of philanthropy or assistance to another individual.7

This report separates philanthropic activity into three dimensions: Giving; funds; and Public Benefit Organisations (PBOs). Each of these activities has different tax implications.

An important source of funds for philanthropic entities is donations. Philanthropic giving occurs at an individual or corporate level, typically in the form of gifts to funds or PBOs directly, and in the case of individual giving, it may also be in the form of bequests. Individuals may also contribute time or services i.e. volunteering. Businesses may also provide services on a pro bono basis.

Funds are entities such as grant-making foundations (or ‘fundaçions’) and trusts that hold assets with which they provide support in the form of grants to PBOs to advance a worthy purpose. This report uses the term ‘funds’ to refer to intermediaries that provide support to PBOs.

Public Benefit Organisation or ‘PBO’ is the term used in this report to refer to entities that carry out the worthy purposes. However, the distinction between funds and PBOs is not always clear cut, for example, in some countries PBOs do not exclusively work directly with beneficiaries. Many jurisdictions use the term ‘charity’ to refer to these types of entities. PBOs can be distinguished from funds as they work directly with beneficiaries. There are two matters that are specific to PBOs – the fact that they obtain monies to carry out their worthy purpose from philanthropy – both directly and in the form of grants from funds, but also from government and from self-funded sources, including commercial activities. Secondly, PBOs can take a variety of legal forms. This may have significance for tax purposes e.g. if it is a condition of relief that an entity take a particular form.

In general, philanthropic entities may adopt, or be regarded as having, various legal forms. Some jurisdictions may exclude some legal forms from eligibility such as partnerships, political parties or government entities. Forms that may be adopted include:

  • unincorporated associations – a number of people coming together to pursue a common purpose. Generally, these associations are not treated as having legal personality, although some form of registration process may confer legal status in certain jurisdictions. In civil law countries, the right to form associations is often enshrined in the Constitution;

  • incorporated entities – the adoption of separate legal form e.g. corporations. Some jurisdictions also offer a special form of incorporation for charitable or philanthropic entities. Some jurisdictions may offer a modified form of incorporation to allow for the non-distribution requirement;

  • foundations – may be either grant-making or operating foundations. This report uses the term ‘funds’ to refer to grant-making foundations. Foundations may take a variety of legal forms;

  • trusts – a legal device used in common law countries to denote the separation of the legal rights to the (trust) property from the enjoyment of that property. The holding of trust property in this way ensures that the holder (the trustee) must comply with high standards in dealing with the property. The trust is commonly used for establishing foundations or other funds and denotes a setting aside of monies for the philanthropic purpose;

  • co-operatives or mutual entities – are also associations of persons that come together for a common purpose, although they may also have a special form of incorporation. A non-profit co-operative e.g. a child-care co-operative, where the parents run a child care centre but do not distribute any surplus (a ‘non-distributing co-operative’), may qualify as part of the philanthropic sector in some countries. Other countries may consider such co-operatives or mutual entities as providing more than an insubstantial benefit to private interests (e.g. the parents of the children being cared for) and therefore would not consider them a philanthropic entity. Co-operatives that distribute profits to members (‘distributing co-operatives’) will typically be taxed under special provisions. Generally, non-distributing co-operatives will not be taxed under specialist co-operative tax provisions;

  • other – there may be other types of entities e.g. religious orders that do not fit into the other categories.

Whatever legal form is adopted; most jurisdictions will treat the entity as a corporation for tax purposes. The legal form may however be relevant for matters such as regulation and for other legal obligations.

The results of the Taxation and Philanthropy questionnaire highlight significant variety in terms of the size and scope of the philanthropic sector. Table 1.1 presents the approximate number of philanthropic entities that were eligible for some form of preferential tax treatment in 2018 (for the 27 countries that provided data).8 The Table also contains the respective populations, expressed in millions.

What these numbers show is that there are a significant number of entities that are eligible for tax concessions, although the number of entities varies widely between countries.

The number of philanthropic entities in a country is, of course, only one measure of the size and significance of the sector in a country. Other measures include the economic contribution, the size of the workforce and, uniquely to the sector, the number of people volunteering. Reliable data on these measures across countries is notoriously difficult to estimate. Despite the limitations of measuring the contribution of the philanthropic sector, the JHU Project surveyed 35 countries in the period 1995 to 2002 and found that using expenditures as a proxy for economic contribution, the sector accounted for USD 1.3 trillion, or 5.1% of combined Gross Domestic Product (GDP) (Salamon, Sokolowski and List, 2003[9]). The JHU Project also looked at the size of the workforce and found that there were 39.5 million full-time equivalent (FTE) workers, including 21.8 million paid workers and 12.6 FTE volunteers representing 4.4% of the economically active population. Further, they found that 190 million people were volunteers across the 35 countries surveyed. More recently, in 2013 the JHU project estimated for a smaller sample of 15 countries (drawing on data from 2002-2009) that the sector’s economic contribution was 4.5% of GDP (Salamon et al., 2013[10]).

The significance of philanthropy can also be seen in the level of donations to philanthropic entities, which is presented in Table 1.2. Data availability, and comparability, is however imperfect. In particular, not all countries were able to provide the total annual amount of donations to PBOs and funds in 2018, and, in some countries, only the amount of donations eligible for preferential tax treatment is available. Nevertheless, the questionnaire responses highlight that the amount of philanthropic giving varies widely across countries and that there is a significant amount of giving to philanthropic entities that gets the benefit of preferential tax treatment.

The data provided does not, of course, reveal the total amount of giving in a country. It does not reflect, for example, giving to entities that are not eligible recipients. In Australia, giving to religious entities is not deductible, but nevertheless approximately 30% of annual giving is to a religious entity (Charities Aid Foundation, 2019[11]). The data will also not include giving where the donor has not claimed the tax relief. This may be inadvertent, or where giving falls below relevant thresholds, but there are also cases where donors choose not to access tax relief as a means of retaining greater control of the spending.9

Research by the Charities Aid Foundation in 2016, compared giving as a percentage of GDP for 24 countries using surveys and publicly available data. Table 1.3 shows the results for countries that are included in the questionnaire. It should be noted however that the results are not necessarily confined to giving that received subsidies and preferential tax treatment.

Another finding of the JHU Project is that philanthropic giving is significant but not the main source of revenue for philanthropic entities. The composition of the sources of revenue, namely which proportion of revenue is from philanthropy, from fee income and from government, also varies widely. According to the JHU Project, the classification they adopted refers to philanthropic giving, which includes individual giving, corporate giving and foundation giving (grants); fees, which includes private payments for goods and services, membership dues, and investment income; and government or public sector support, which includes grants, contracts, and payments from all levels of government. The results for countries in our survey are in Table 1.4.

The data shows that philanthropic giving is not the most significant source of funding for any country. Beyond that, it is not possible to say whether self-funding or government support is the most significant as the results vary substantially by type of philanthropic entity and country. Furthermore, averages can be misleading. In the United States, for example, non-profit schools, colleges and hospitals receive substantial revenues from tuition, fees and some government grants, reducing the average percentage from donations. Other types of philanthropic entities, however, such as food banks and other social welfare organisations depend much more on donations. It is also not possible to say whether there is any causal relationship – that is, whether entities turn to self-funding because the other sources of revenue are in decline, or whether the receipt of government funding means the entity has less need to generate its own income or to engage in fundraising. One issue that has generated significant literature is whether the receipt of government grants by non-profits has a crowding-out effect i.e. whether the receipt of such funding means that philanthropy is discouraged. This is considered in Chapter 2.

The rest of this report is structured as follows. Chapter 2 investigates the various arguments both for and against the provision of tax concessions for philanthropic entities, and the provision of tax incentives for philanthropic giving.

Chapter 3 examines the tax treatment of philanthropic entities across OECD member and selected participating countries, starting with the qualification process for entities to become recognised PBOs or funds, including worthy purpose, public benefit, and not-for-profit requirements, followed by an overview of the administrative application and regulatory process. The chapter then analyses the different forms of tax relief that philanthropic entities benefit from. Finally, the chapter highlights the potential risk of tax avoidance and evasion schemes involving philanthropic entities and the anti-abuse policies countries have put in place as a result.

Chapter 4 examines the tax treatment of donors and philanthropic giving across OECD member and selected participating countries. It first considers the tax design of incentives for giving by individuals, and then countries’ tax incentives for corporate giving. It also highlights the potential risk of tax avoidance and evasion and the anti-abuse policies countries have put in place as a result.

Chapter 5 considers the taxation of cross-border philanthropy. It first considers tax incentives for giving: both donations and bequests; and also considers how gift and inheritance taxes apply and how capital gains tax might apply where the gift is non-cash. It then considers the tax treatment of philanthropic entities that operate across borders, examining whether tax relief is extended to foreign philanthropic entities operating domestically, and the tax treatment of domestic PBOs operating across borders. Finally, it considers the tax treatment of international grant-making by funds.

Chapter 6 brings together the key insights from the preceding chapters and discusses their tax policy implications. It highlights the importance of countries ensuring that the design of their tax incentives for philanthropic giving are consistent with their underlying policy goals. It also suggests that countries reassess the merits of providing tax exemptions for the commercial income of philanthropic entities, at least insofar as this income is unrelated to the entity’s worthy purpose. More broadly, the chapter finds scope for countries to both reduce the complexity and improve the oversight of their concessionary regimes for philanthropic entities and philanthropic giving. Finally, in light of the increasingly global nature of many policy challenges – such as environmental and public health concerns (including the COVID-19 pandemic) – it suggests countries reassess the restrictions commonly imposed on access to tax concessions for cross-border philanthropy.


[13] Anheier et al. (2020), The Non-profit Sector: A Research Handbook, Yale University Press, London.

[3] Anheier, H. (2005), A Dictionary of Civil Society, Philanthropy and the Non-profit Sector, Routledge, London.

[6] Anheier, H. and D. Leat (2006), Creative Philanthropy: Toward a New Philanthropy for the Twenty-First Century, Routledge, London.

[8] Anheier, H. and L. Salamon (1996), “The Social Origin of Civil Society: Explaining the Non-profit Sector Cross-Nationally”, International Journal of Voluntary and Nonprofit Organizations, Vol. 9, pp. 213–248.

[7] Anheier, H. and S. Toepler (2010), International Encyclopedia of Civil Society, Springer Publishing, New York.

[11] Charities Aid Foundation (2019), Australia Giving 2019, https://www.cafonline.org/docs/default-source/about-us-publications/caf-australia-giving-report-2019-16master.pdf?sfvrsn=65e49940_2.

[5] Philanthropy Australia (n.d.), “Glossary”, https://www.philanthropy.org.au/tools-resources/glossary/#P.

[1] Payton, R. (1988), Philanthropy: Voluntary action for the public good, Macmillan Publishing, London.

[4] Salamon, L. and H. Anheier (1992), “In search of the non-profit sector I: The question of definitions”, International Journal of Voluntary and Non-profit Organisations, Vol. 3, pp. 125–151.

[12] Salamon, L., S. Sokolowski and H. Anheiner (2000), Social Origins of Civil Society: An Overview, Johns Hopkins Comparative Nonprofit Sector Project, Johns Hopkins University, Baltimore.

[9] Salamon, L., S. Sokolowski and R. List (2003), Global Civil Society: An Overview, Johns Hopkins Comparative Nonprofit Sector Project, Johns Hopkins University, Baltimore.

[10] Salamon, L. S. Sokolowski, M. Haddock and H.Tice (2013), “The State of Global Civil Society and Volunteering: Latest findings from the implementation of the UN Nonprofit Handbook”, Comparative Nonprofit Sector Working Papers, No. 49, Johns Hopkins University.

[2] Van Til, J. (1990), Defining Philanthropy, Jossey Bass, San Francisco.


← 1. Merriam-Webster Dictionary (online).

← 2. See, for example, the work of the Johns Hopkins University Comparative Non-profit Sector Project and the University of Indiana’s Lilly Family School of Philanthropy.

← 3. See for example, the Comparative Non-profit Sector Project at The Johns Hopkins University: http://ccss.jhu.edu/research-projects/comparative-nonprofit-sector-project/

← 4. More recently one of the original authors has questioned the utility of the theory (Anheier et al., 2020[13]).

← 5. The Preamble set out a range of (mostly) secular purposes that could be supported. The classification of ‘charity’ into four heads arises from the case of Commissioners for Special Purposes of Income Tax v Pemsel (1891) AC 531.

← 6. JHU launched this project in the 1990s to gather systematically a body of internationally comparative data on community service organisations (CSOs), philanthropy, and volunteerism. The Project operates in more than 45 countries, spanning all of the world’s continents and most of its major religious and cultural traditions. The Project has produced a rich body of comparative data, the Johns Hopkins Global Civil Society Index, several books, and more than 60 published working papers written or edited by Project staff, mostly with indigenous authors. More information about the JHU Project is available at: http://ccss.jhu.edu/research-projects/comparative-nonprofit-sector-project/

← 7. Ibid.

← 8. In the last years, the Italian philanthropic sector has been involved in a wide reform that aims to simplify philanthropic businesses and encourage public giving. The reform, approved by the Italian Parliament in 2017 (legislative decree 117/2017), is not yet entirely in force, because some technical ministerial decrees are still missing. In particular, as regards the fiscal aspects of the reform, an authorisation of the European Commission is necessary to allow the implementation of a preferential regime, according to the European Union State-aid rules.

← 9. See, for example, the Chan Zuckerberg Initiative which is structured as an LLC rather than a traditional foundation: https://chanzuckerberg.com

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