Gift aid is used by Oxfam and other charities as a form of tax avoidance, according to an article published last week by a right-wing think tank, questioning charities’ right to criticise tax havens.
An article called Oxfam on tax avoidance: do as I say, not as I do? by Richard Teather, an academic who describes himself as a 'tax strategy adviser', says that using gift aid to transfer profits from trading subsidiaries is “an ingenious way to escape a tax liability” and that claiming gift aid on donated goods is “an artificial structure to gain a tax advantage”.
The IEA is the same think tank which called for a government crackdown on charitable campaigning because sector bodies were being used as “sock puppets” for government.
The article implies that so long as charity shops claim gift aid, charities lose some of their moral authority to criticise wealthy individuals who use tax havens.
“Use of artificial transfer pricing to gain a tax advantage is the sort of thing that various charities have condemned when used by commercial businesses; it weakens their position to be using the same techniques themselves,” the article says.
“Business done through tax havens is perfectly legal (except perhaps for occasional errors, which those involved carefully seek to eliminate) and there is nothing wrong with it. But that is not Oxfam’s view; it is a strange philosophy that condemns actions in others whilst busily engaging in them oneself.”
But Alison Hopkinson, finance director of Oxfam, said the IEA blog was misleading.
"The IEA blog is a classic case of smoke and mirrors," she said, "using partial information to make a case against Oxfam where none exists. The fact is that we are very careful to comply not just with the letter of the law on tax but also the intention behind it.
"Both the donation of profits from OAL via Gift Aid and the Tag Your Bag scheme follow approaches specifically approved by HMRC guidance. Let's not forget the purpose behind gift aid - to allow people to reallocate some of their own tax to causes they care about.
"It's also worth noting that the information in the blog is published in our annual accounts - tax dodgers tend to be rather more secretive."
John Hemming, chair of the Charity Tax Group, also said the comparison was not a fair one.
“The point with both of these arrangements is that they are agreed, sanctioned and promoted by HM Revenue & Customs,” he said. “The tax guidance for charities contains sections explaining how to do it.
“Oxfam are using the rules exactly as intended. The same can’t be said of people who use tax havens.”
This story has been updated to include a response from Oxfam.
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