tax relief. Under Gift Aid, the most popular scheme, relief on donations from basic rate income taxpayers is retrieved by charities and only higher rate taxpayers receive some benefit. (See below for tax relief details.) Fundraisers say that some rich donors are doing the maths: if they wish to make a total gift of £10,000, they write a cheque for £7,800.After their 18 percentage point rebate (the difference between the basic and higher rates) the cost to them is £6,000 and the charity reclaims the 22 per cent basic rate rebate to create the desired total.This so-called donor- benefit is the primary method of charitable tax relief in the US and, along with the greater simplicity of the US system, is cited as a key factor in the scale of philanthropy among the rich. In 2003, tax relief on charitable donations cost the British government £1.3bn. Of this sum, £240m was reimbursed to the 11 per cent of taxpayers who pay the higher rate, £293m is accounted for by charities reclaiming the standard rate paid by rich givers, and £350m by relief on charitable legacies, a method of giving available only to those who die with enough assets to pay inheritance tax.That leaves only £350m to support the giving of basic rate taxpayers and non-taxpayers. Although tax rebates clearly provide some extra incentive to donate, their impact on giving remains unclear: when donors are asked to explain why they give, they describe the pull of the cause before the push of fiscal incentives. The American comparison Britain has enjoyed a fiscal regime that encourages philanthropy since 1986, but charitable giving in America has attracted tax relief since the 18th century – and last year it cost the US government $17bn in foregone tax. There remain two big differences in the tax treatment of American donors. First, they are able to claim relief on gifts in kind as well as gifts of cash and assets.Having donated a car, clothes or computer to a charity,American donors can deduct the estimated (and often overvalued) price of that item from their tax bill (congress has just passed legislation to tighten up the perceived abuse of this system). The second difference lies in "split interest trusts," which enable donors to irrevocably commit a gift to charity on which they receive immediate tax relief and yet retain some financial benefit, usually annual payments from the interest, until they die, when the charity takes possession of the gift. Donors are attracted by the financial security and by the ability to donate illiquid assets such as art or property, which can then create pension-like payments.A number of British charities, including the Institute for Philanthropy,are campaigning to persuade the chancellor to permit this method of tax-efficient giving. If this lobby succeeds then the incentives for giving in Britain and the US will be more or less indistinguishable, and attention will turn to historical explanations for the different level of enthusiasm for charitable giving. Victorian Britain invented modern philanthropy,but in the 20th century an important strand of British opinion, mainly on the left, came to see charity as a poor alternative to state-funded provision,Americans have had no such qualms. Since the time of de Tocqueville's early 19th-century celebration of voluntary associations as a cornerstone of US democracy,philanthropy has enjoyed an honoured place in the American story. The Return of Philanthropy First published in Prospect, January 2005 Beth Breeze, Deputy Director, Institute for Philanthropy There are more than 160,000 registered charities in Britain. Last year they spent over £20bn on everything from conserving pond life to looking after the homeless.The top 500 fundraising charities raised £4.6bn in voluntary income in 2002-03 and, after a trough in donations during the late 1990s, individual giving is returning to levels last seen in 1995. Yet private giving in Britain is still disappointingly low – £7.3bn in 2002 (less than 1 per cent of GDP). Charities receive more of their income from government than they do from individual donors.A third of the public gives nothing at all and most of the rest do little more than chuck a few coins into collecting tins. Just 5 per cent of the population make regular gifts of over £50 a month and this generous minority provides over half of total voluntary donations.The rich are more likely to give than the less well off, but their gifts constitute a smaller fraction of their resources: of those households that donate, the wealthiest fifth give less than 1 per cent of their income while the poorest fifth give almost 3 per cent.Yet the greatest potential for a step change in domestic and global philanthropy lies with society's richest members.There are, on one measure, now more millionaires than teachers in Britain, and as the tax reforms of the Thatcher era and rising house prices have transformed the wealth of a large chunk of our population, the prospects for a new era in philanthropy ought to be bright. Tax incentives to give Some people are unhappy about public subsidy for philanthropy,especially as the fiscal framework in Britain (and the US) benefits the rich. But tax relief does stimulate spending on public goods rather than on individual consumption. Richer people enjoy bigger tax breaks because the treasury reimburses the full extent of income tax paid on donations, so it costs a higher rate taxpayer just 60p to donate £1, compared to 78p for basic rate taxpayers and £1 for that third of the adult population who do not pay income tax. In any case, the vast majority of donors do not directly experience Institute for Philanthropy