Influential Tory backbencher says cracking down on tax avoidance would be better achieved by scrutinising charities
David Davis has put himself at the forefront of a growing revolt over the government’s plans to limit tax relief on charitable donations.
The influential Conservative backbencher said the government should rethink the plans. He said that if the aim was to prevent tax avoidance, it would be better to ensure schemes were approved by the Charity Commission – or Revenue & Customs in the case of charities based abroad. If the aim was simply to raise money from philanthropists, the government should say so, he said.
Davis is a former chairman of the Commons public accounts committee, which called in a report a decade ago for the commission to be more robust in its approval of charities.
The row over the plans, which were announced in the budget, intensified on Thursday when Vince Cable suggested the cap could damage university funding.
The business secretary has been one of the toughest advocates of a crackdown on tax avoidance.
A spokesman told the BBC that Cable “fully supports the need to clamp down on abusive tax avoidance but this should be separated from genuine charitable giving”.
The government has been left increasingly beleaguered by the outcry against the measures.
The Treasury and No 10 have said EU law is inhibiting their ability to regulate bogus charities based in member states that are being used as vehicles to avoid paying tax.
The Labour leader, Ed Miliband, seized on the furore, telling an audience in Derby that the prime minister was trying to “single out those who are trying to do the right thing for a tax rise”.
The British Red Cross’s head of fundraising, Mark Astarita, said: “There has to be a solution to this debate on tax relief. At the moment, donors are able to claim tax relief on large-scale donations for themselves. We propose a simple, tick-box scheme that would allow donors the option to donate that tax relief amount to the charity as an extra donation.
“Providing this option – to claim the tax relief, or to donate it – would be simple to administer and would result in a huge boost to charities. For example, an additional £312,500 could be added to a £1m donation. With gift aid on top, that donation would be worth £1,562,500. A simple tick-box option on tax relief – to opt in, or opt out – could have a huge impact.”