Budget 2021 and Finance Bill 2020 Submission

Budget 2021 and Finance Bill 2020 Submission

There are now over 10,000 registered charities in Ireland, providing vital services that wrap around what
is provided by the state, from health, housing, social support, investments in community supports,
mental health and environment and much more. For the most part these organisations are trying to
solve critical societal issues and are challenged each year to raise critical funding from donors.

As you are aware 2020 has been an incredibly difficult year for the charity sector. The COVID-19
pandemic and its impact on Irish society has delivered a shock to very many Irish charities and NGOs.
The damage to their capacity to generate income brings their ability to maintain existing supports and
services into question and, for many, it may threaten their very existence.

In order for these charities to survive, Budget 2021 needs to include practical measures which can
stimulate these organisations and encourage more giving.

VAT Compensation Scheme
Firstly, Cii would like to acknowledge and thank the Minister and the Department of Finance for their
support in creating the VAT Compensation Scheme for Charities. As you are aware, the scheme was
significantly oversubscribed in 2019 and the latest figures for 2020 show that the scheme has been
oversubscribed again this year, with charities set to receive only 10% of the amount applied for.

While we understand that the intention has been to review the scheme after a period of three years, Cii
requests that the Government review the scheme in advance of Budget 2021 with a view to increasing
the annual allocation to €20 million. At a time when charities are adapting and innovating their
fundraising strategies, it is an anomaly that the state is raising taxes from private fundraising activity.
Increasing the refund ceiling to €20m would be an acknowledgement of the contribution which charities
are making to raise additional funds and an encouragement for greater privately sourced fundraising by
the sector.

As a matter of urgency, we are calling on the Government to support the sector in requesting that the
€5m cap be reviewed.

Study on Impact of COVID-19 and new increased Stability Fund in 2021
In April this year, the sector called for a Stability Package for Charities, Social Enterprises & Community
and Voluntary Organisations. Indications at that time were that the deficit in fundraising could amount to
€450m over a 12-month period. For many organisations a return to fundraising is still not possible under
current guidelines.

Whilst Minister Ring announced details of the Stability Fund in June, we have not seen an in-depth analysis
on the financial impact of COVID-19 on the sector in 2020 and 2021. This study needs to incorporate the

wider government funding perspective and the collapse in fundraised and earned income as a result of
the COVID-19 pandemic. We believe Benefects is well placed to undertake this work.

On foot of this assessment, a further Stability Fund will be required in 2021 to support the charities sector.
We would also ask Government to review the existing eligibility criteria for the Stability Fund which
excludes overseas NGOs operating from Ireland and animal welfare charities.

Sustainable Funding
In order to plan adequately, charities need clarity on future government funding. We are calling on the
Government to introduce multi-annual funding arrangements to enable long term planning for both
service provision and staff recruitment and retention.

We are calling on the Government to accelerate the implementation of the Department of Rural and
Community Development’s Five-Year Strategy for the Sector - Sustainable, Inclusive and Empowered
Communities

The Strategy sets out specific actions to deliver on this objective which include:
   “Scope and develop a sustainable funding model to support the community and voluntary sector”.

Key elements to be considered include in developing the action plan include:
       “-a multi-annual funding approach…,
       - an appropriate cost-recovery model….. including costs of compliance and relevant overhead
       and administration cost

Ensure sustainable funding for HSE Section 39
Section 39 organisations deliver vital services across health, family support, social care and disability
services. Unsustainable pay and conditions for the staff of such organisations is a major issue that
threatens the ability of many organisations to retain staff and provide services. It is resulting in the
continued loss of experienced staff from these agencies and organisations with people leaving to pursue
more secure, stable, therefore, more attractive career opportunities.

Due to the nature of much of the work the sector delivers, it is critically important to have a motivated
and supported workforce to deliver much needed services.

Sustainable pay and terms and conditions for staff would greatly assist in retaining these fully qualified
staff.

We need a commitment from government to address these issues by creating a more equitable and fair
system for section 39 employees. This is needed if the sector is to continue to support and as often is the
case, replace the role of government in the provision of essential services to Irish society.

Innovation Grants
The Government has announced a range of supports for the private sector focused on increased
digitalisation of services and related training. However, no such schemes exist for the charity sector.

With so many organisations within the sector undertaking their work and providing their services online
there is an increased need for digital innovation supports. For many organisations they have had to invest
in technology and upskilling of staff to allow them to continue their work which has placed a further
additional burden on their organisation.

We are asking the Government to introduce a support scheme for charities to support the digitalisation
of services and the necessary training for staff. Such a scheme could be based on the €5.5 million COVID-
19 Online Retail Scheme announced in the July Stimulus package and administered by Enterprise Ireland.

Tax relief to Encourage Greater Charitable Giving

In order to support charities wishing to reduce their dependency on state funding, Cii actively works
with its members and the broader charity sector to improve their capacity to fundraise and to ensure
that Ireland has an enabling philanthropic environment.

To this end, we would welcome engagement with government to discuss a more favourable tax
environment to address three particular issues:
    1. To encourage and stimulate larger donations
    2. To stimulate legacy donations
    3. To review the Charitable Donation Scheme

    1. Larger Donations
While the Charitable Donation Scheme provides tax relief which benefits the charity recipient, there is
currently no specific tax incentive to encourage greater giving among high net worth individuals. Cii
believes that it is important to develop the next generation of philanthropists and reviewing the tax
infrastructure to encourage greater giving among this cohort is a positive step in developing Ireland’s
philanthropic community.

   2. Legacy Giving
While charitable donations/gifts are tax free, we believe that additional charitable giving could be
encouraged by incentivising some additional CAT relief for individuals.

A simple example of our suggestion is included below:

Mrs. Kelly’s estate is worth €1million. She leaves €500,000 to each of her two children. €310,000 is gifted
to each child tax free while the balance of €190,000 each is liable to Capital Acquisitions Tax (CAT). In this
instance, €62,700 each.

Cii proposes that where a will includes a donation of a minimum of €100,000 to a registered charity, a
reduced CAT rate of 28% would apply to beneficiaries. In the example above, if Mrs. Kelly instructed that
€100,000 be left to a charity of her choice, the remainder would benefit from a reduced CAT rate. Her two
children would now receive €450K each, their CAT liability of €140k each is reduced to 28%. Each child
would pay €39,200 and the charity would receive €100,000 as a gift.

Current rate
Amount of estate liable to CAT at 33% – €125,400.
Benefit to charity - none
Net benefit to children -€874,600

Reduced rate
Proposed tax - €78,400
Benefit to charity - €100,000
Net benefit to children -€821,400

    3. Charitable Donation Scheme
The Charitable Donation Scheme was reviewed in 2011-2012 and a significant and positive revision to
the operation of the scheme was introduced from January 2013. Cii now feel it is time to review the
success of the scheme, with particular reference to the threshold level (which remained unchanged at
€250) and the rate at which relief is given. We note that the 2009 Commission on Taxation suggested
that the threshold on eligibility of individual donations to charities be reduced from €250 to €100 and
we would welcome an opportunity to further engage with government on this issue.

Insurance Reform
Insurance costs and especially public liability costs have become an increasingly difficult area for many
charities. We note the commitment in the Programme for Government to prioritise insurance reform. Cii
would support the urgent implementation of measures which would see a recalibration of the Book of
Quantum to deliver modest awards for modest injuries. We would also support the provision of additional
resources to facilitate greater Garda action to discourage fraudulent or exaggerated claims.

Cii would also urge Government to use all options open to it to obtain a commitment from the insurance
industry to reducing premiums as reforms are implemented.

Reducing the Burden of Compliance
Many charities are subject to regulation or oversight by a number of state agencies -The Charities
Regulator, the Revenue Commissioners and State funders like the HSE. Cii would welcome a collaborative
study involving Government and the sector into how the burden of compliance on charities can be
reduced while maintaining the necessary standards of transparency and accountability.

Increased Resources for Charities Regulator to Proactively Promote the Benefits of
Charities

The Charities Act 2009 includes its list of functions for the Regulator – “increase public trust and
confidence in the management and administration of charitable trusts and charitable organisations”.

To date, the Regulator has been (for good reason) focussed on regulating the sector in the public interest
to ensure compliance with the law and supporting best practice. Cii believes that it is now appropriate to
provide additional resources to the Regulator so that it can proactively promote the benefits which
charities bring to Irish society and encourage a greater level of giving.