Who donates and how? New evidence on the tax incentives in the canton of Geneva, Switzerland

Abstract

The present study is the first large-scale empirical legal analysis of tax incentives for charitable giving in Switzerland, and one of the few studies globally. Using unique longitudinal data including household income and wealth of the entire taxpayers' population of the Canton of Geneva, Switzerland, we study patterns of charitable deductions and characteristics of donors making such deductions. Our study period extends over a decade (2001-2011), this period also encompassing a legal reform that raised ceilings for charitable deductions. We observe that an overwhelming majority of donors make deductions that never reach the legal ceiling, especially after the reform. Nonetheless, we identify a subset of donors that are potentially tax-incentive sensitive, because their deductions constantly reach (or exceed) this ceiling. Deductions made by those donors amount to 30%–54% of all such deductions in the canton of Geneva. If compared to all donors, the donors in this particular subset are older (in their mid-late 60s), mostly single, wealthier and more regular givers (deducters). Analyzing the deduction patterns in the entire donors' population, we observe that deducting charitable donations have become increasingly popular during the study period. In addition, we find that donors' relative generosity tends to decrease when their income and wealth increase. Those results have important tax policy implications and relevance in modeling tax incentives for charitable giving, in both Switzerland and elsewhere.