Israelis Don't Donate, Says Study

Gov't tax policy doesn't encourage altruism, private or corporate.

Donation drives on television. Public campaigns. Kids knocking on the door, e-mails and letters for the needy - they're happening all the time. Yet it appears that when asked to open their wallets, Israelis just say no.

Israel shekels, November 25, 2008
Bloomberg

Compared with Western countries, Israelis donate little of their personal money or time. Israeli companies don't either, according to a paper compiled by Hebrew University's Dr. Nissan Limor and his team.

The paper is a policy proposal for the "third sector," namely nonprofit organizations. It is based on research by Limor and others, and will be presented tomorrow at the Caesarea Economic Policy Planning Forum, a venue of the Israel Democracy Institute.

The team found that nonprofit organizations are dependent on government for funding, which impairs their independence and quashes their innovation.

Why don't Israelis donate more? Because the government doesn't encourage it, says the team. "It isn't a question of culture, but of policy," says Limor. "Philanthropy needs encouragement. The Israeli government never did encourage it. Incentives for donors are quite limited."

Estimates based on tax data and the Registrar of Associations places the number of nonprofits in Israel at 20,000 to 25,000. Each year 1,700 more are launched. Including the universities and hospitals, in 2007 their share of GDP was 6.7% and they employed 13% of Israel's workforce.

Israel therefore has one of the biggest third sectors in the West. But for that it can thank the generosity of Diaspora Jewry.

No grounds for pride

Aside from Limor, the team includes Prof. Benny Gidron of the Be'er Sheva University of the Negev; Raanan Dinur, former director-general of the Prime Minister's Office; Zvi Ziv, former CEO of Bank Hapoalim, who today chairs Maala; and representatives of the Tax Authority. Also on board is Ahuva Yanay, director-general of the Matan organization. This is a team with facts at their fingertips.

Once factoring in donations from abroad, the support for nonprofit organizations in Israel is second only to the United States, according to a study done at Johns Hopkins University. It is equivalent to 1.34% of gross domestic product, compared with 1.85% in the United States. But after setting aside donations from abroad, the rate - donations by Israelis alone - plunges to 0.8% of GDP, less than in most of the West.

In 2006, revenues of nonprofit organizations totaled NIS 6.6 billion, of which only NIS 590 million originated with Israelis, while NIS 3.5 billion came from abroad. The rest came from the income the organizations generated themselves and from the government.

Philanthropic funds in Israel don't do much better. According to the Central Bureau of Statistics, there are 6,377 of them, which donate about $150 million a year, combined. On top of these, about 1,500 foreign philanthropic funds operate in Israel, which donate a combined $1.5 billion a year.

Nor can Israel take pride in the number of Israelis who volunteer their time. The Johns Hopkins study found that only 6% of Israelis volunteer, slightly more than in emerging markets but well below the roughly 15% rate in the West.

The government provides 51% of the funding to nonprofits, says the National Insurance Institute, through budgets, extra support and payment for service that citizens receive from the organizations. That rate is far above the Western norm: The Johns Hopkins paper says that the average proportion of government support for nonprofit organizations among the 22 nations it checked is 37%.

Speak through taxes

The Limor team urges the government to revisit its policy regarding the third sector, noting the widening gaps in society. Incentives for individuals and corporations should be introduced.

This habit of schnorring has to change, quips Limor: Israel can hardly boast that it's a developed nation that belongs to the Organization of Economic Cooperation and Development (as of last month, at least ), while asking for charity. And donations from abroad are dwindling, he says.

Plenty of companies take pride in their civic activity. But a survey by the Ministry of Industry, Trade and Labor in 2006 found that only 9% of Israeli companies actually did anything "social." That year, companies contributed only NIS 1.1 billion to the community, of which 20% was actual money. That was equivalent to 1.2% of the business sector's turnover in 2006, which is very low, says the report.

Not only are few companies involved in social activity, the ministry report says 66% saw no reason to be, or thought it of little importance.

Tax policy is not shaped to encourage generosity, the Limor team concludes. It demonstrates the point with statistics. The cost to the state (in lost tax revenue, through deduction of charitable donations ) was NIS 170 million in 2009, which was 0.08% of total tax revenue last year. In the United States, the equivalent cost is 2% and in Canada it's 0.4%.

One recommendation designed to warm the heart and encourage giving is to abolish the minimum sum recognized for tax purposes in Israel. That is NIS 300. Below that amount, you can't claim the donation as an expense. Above it, you can. The team also recommends that the government raise the maximum recognizable donation from NIS 7 million.