I once was too cynical about philanthropy and charity. I saw people avoiding tax all week, and then on Sunday, dropping a few coins in the plate to appease their Gods and conscience. I was wrong. Well, mainly wrong. My country, New Zealand, is not big on philanthropy, after generations of the ‘welfare state’ and high taxes, we see the state as the provider or, as Michael Joseph Savage, Labour’s first NZ Prime Minister, said in defence of the welfare state, it was “applied Christianity.”
Generations ago, when there was no personal tax or social safety net, the rich gave to soup kitchens and charity got a bad name.
Philanthropy is big business overseas, especially in the US where, for generations, the Carnegies, Hewlett Packards, and now Gates and Buffett see it as natural to donate billions to good works. Gates now gives more to fight AIDS in Africa than all the UN Agencies. Billionaire capitalist, George Soros, gave millions of dollars of equipment, faxes, photocopy machines, and telephones during the Cold War to churches, unions, civil society, figuring if people could communicate, they would organise and Communist regimes could not withstand that scrutiny. It helped. The great universities of Harvard and Princeton have billion-dollar endowment funds gifted by grateful graduates. For the Muslim world, this has always been so, giving is a basic Islamic obligation.
It’s in the area of development in poor countries that I’ve seen on-the-ground experience of how philanthropy can often elbow out corrupt politicians and bureaucrats to get things done. Wealthy philanthropists typically keep it simple, low-tech, practical, inexpensive ideas. I met a wealthy car dealer who had donated half a million wheelchairs to Africa and India. One great idea was a school playground wheel. Here’s the difference, the wheel is connected to a pump, the water goes up to a tank, advertising is sold on the tank to pay for maintenance. Kids playing on the metal wheel can pump up enough water for 2,000 people. Cost? US$20,000.
Peter Watson, ex-pat Kiwi and former head of the US Government Agency, the Overseas Development Corporation (OPIC), put together a great project for HIV/AIDS victims in South Africa. Here was the deal. You had to be HIV positive, OPIC covered your mortgage, but then you had to take treatment, the medicine provided by Foundations. None of this can replace good governance, open economies, democracy, property rights, or the rule of law to get wealth generated in poor countries, but that’s another story. Much can be done by private individuals and businesses.
Corporations are waking up to this, there is virtue and profit in doing good, it enhances corporations’ reputations. It feels good, it’s fun, and motivates staff and customers. That’s why I’ve accepted the Chair of the Altimo Foundation based in London. A study recently examined shareholder price based on reputation. A reputation is a business’s most precious asset, it’s all the goodwill and trust built up over years. It’s hard to get, easy to lose. What would happen to share price value of several major corporations if they could switch places with their rivals. If Colgate had the reputation of Proctor & Gamble, its stock would be worth 6.2% more, about US$2 billion; if Coca-Cola had the reputation of rival Pepsi, its stock would be worth 3.3% more, an increase of about US$4 billion. At last, NZ is making some tax changes to facilitate giving. But there’s still a long and complicated road to go. Tax and Inland Revenue rules need to be clear, simple and predictable. The issue of taxing a Foundation on money going in and when it goes out, and what is a charity, especially offshore, needs to be clarified. I’m setting up my own Education Foundation and it’s taking months of paperwork. It would be easier and more tax attractive to set it up overseas, paying into it from offshore earnings that need not come back to NZ.
This will be a matter that estate and tax specialists need to explain to their clients, but it’s a healthy worldwide move. |
