Charitable donations can top $500 billion with proper tax incentives, regulatory reforms
Asian philanthropists can potentially give twice as much as US
MASAYUKI YUDA, Nikkei staff writer
TOKYO — Thanks to rapid economic growth, personal wealth in Asia is at an all-time high, with more billionaires in the region now than anywhere else in the world. But have charitable donations grown proportionally to the region’s wealth? The answer is not as fast, but the potential is huge.
According to a report released Tuesday by the Centre for Asian Philanthropy and Society, or CAPS, the region can potentially give more than $500 billion to charity per year, if the environment is improved. Such an advancement would mark a new dawn for Asia, with philanthropy becoming a new norm for the rich.
U.S. philanthropists donate around $250 billion yearly, which amounts to roughly 2% of the country’s gross domestic product. CAPS calculated Asia’s charity potential by also taking 2% of regional GDP.
In Western culture, philanthropy is considered a form of noblesse oblige. From entrepreneurs to sportsmen, the genuinely successful do their part by donating to existing charity organizations or forming their own foundations.
For example, investor Warren Buffett has given away nearly $50 billion since 2000. Microsoft founder Bill Gates, Amazon.com founder Jeff Bezos, and Google’s Sergey Brin and Larry Page are all also well-known alms-givers. In 2015, Facebook founder Mark Zuckerberg and his wife Priscilla Chan pledged to donate 99% of their Facebook shares to public-interest causes.
Asia has certainly been no stranger to philanthropy. Former NBA star Yao Ming formed his own foundation in 2008, in response to the devastating earthquake in Sichuan Province, China, and played a fundraising game in Hong Kong last year. Tecent Holdings co-founder Charles Chen left the Chinese tech giant to become full-time philanthropist in 2013.
Yet compared to the U.S., not many billionaires in Asia donate to charity, at least openly. What stops them? CAPS pointed out burdens such as insufficient tax incentives and slow regulatory reforms.
CAPS came up with a new guidepost, called the Doing Good Index, to evaluate how well the economies are effectuating philanthropic giving. It examines 15 Asian economies’ tax incentives, regulatory regimens, procurement procedures and cultural conditions. According to its analysis for 2018, only Japan, Singapore, and Taiwan were “doing well.” Conversely, Indonesia and Myanmar were seen as “not doing enough.” Seven economies including South Korea, Thailand and Vietnam were “doing better,” while China, India and Pakistan were evaluated as “doing OK.”
In terms of tax incentives, Singapore allows the largest deduction by far for individuals and for corporations, in order to draw in more rich people and competitive companies. Japan, Taiwan, South Korea and the Philippines are the only four among the 15 economies with a tax incentive to bequeath funds to charity.
The process and quickness of registering a charitable enterprise vary widely across the region. The laws related to giving in Japan and South Korea, for example, were characterized by charitable entities as very difficult to understand. Singapore, Sri Lanka and Malaysia, on the other hand, scored well on the regulatory ease of doing good.
The lack of talent is another difficulty that Asia’s philanthropists share. Among Asia’s charitable foundations, the CAPS survey showed half of them found it difficult to recruit general staff. The number jumped to some 74% for recruiting skilled staff. The survey indicates that such charitable foundations or organizations are not yet considered attractive destinations for Asia’s best and brightest.
The official development assistance, or ODA, provided for Asia amounted $45.5 billion in 2015. If the potential materializes in the future, philanthropic giving in the region will have an economic impact 11 times more than the most recent ODA figure.
Asia’s higher contribution to philanthropy may be an important force for the world to achieve the United Nations’ $1.4 trillion funding target for financing low- and lower-middle-income countries, which is part of the international body’s Sustainable Development Goals it hopes to meet by 2030.
But no Asian economy has yet reached its potential. CAPS constructed the Doing Good Index with a top score of 5 and lowest of 0. Although the organization did not disclose the rating each economy received, it did reveal that none scored higher than 4.
“There is unprecedented space and opportunity for Asia to leapfrog ahead and be on par with donors in the West,” said CAPS Chief Executive Ruth Shapiro. “But for this to happen, Asian governments need to lay the right regulatory, institutional, and even cultural and social foundations for private social investments to thrive.”