Friday, June 1, 2012

U.K. Backs Off Charitable Deduction Cap

U.K. Chancellor of the Exchequer George Osborne has withdrawn his proposal for a cap on charitable deductions after significant push back from opponents of the measure.

Bloomberg Business Week reported that Osborne, who had earlier defended the measure by saying that some wealthy people were abusing the system, announced his decision today, saying that any cap could have damaged charitable giving. If it had been implemented, the new rule would have capped tax relief at 50,000 pounds or 25 percent of income.

This prompted nonprofits in the country to cry foul, claiming they would lose a huge portion of their income. The Charities Aid Foundation (CAF) hailed Osborne's decision in a statement from its CEO, John Low.

“We are delighted that the government has responded to the challenging calls from philanthropists and charities across the country and taken the bold decision,” he said.

Yet it wasn't just nonprofits that opposed the plan. Members of Osborne's own Conservative Party also criticized it, with lawmaker Zak Goldsmith saying he was "ashamed" of the proposed cap. Academic institutions were also not in favor, most notably the University of Oxford, which had raised nearly 1.25 billion pounds at a recent fundraiser.

The reversal is the latest setback for Prime Minister David Cameron's budget plans. Just three days earlier, Osborne changed course on another of his proposals, a plan to levy value-added tax on hot snacks and charge the full 20 percent rate.

You can read the full story in Bloomberg Business Week.

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