New University of Otago research shows people will donate more money to charity if they receive a rebate immediately, which could have positive implications for Aotearoa charities.
The study, published in the Journal of Behavioral and Experimental Economics, investigated if the timing of rebates has any effect on charitable donations.
In Aotearoa, donations of $5 or more to registered charities qualify for a tax rebate of 33 per cent.
Co-author Professor Stephen Knowles, of the Department of Economics, says people are “likely to donate more to charity when they do not have to wait too long to receive a rebate on their donation”.
“Our research was carried out in a laboratory environment, but our results are consistent with evidence that in Australia and the US donations increase towards the end of the tax year because people get their rebates sooner,” he says.
For the study, co-authored by Professors David Fielding and Ronald Peeters, more than 400 participants were asked to divide a sum of money between themselves and a charity.
Variables included whether: there was a rebate or not; the rebate was received immediately or in four weeks; and the money participants kept for themselves was received immediately or in four weeks.
Results show donations with the rebate are larger than donations without the rebate, and donations are larger when the rebate is given immediately rather than later.
Professor Knowles says rebate timing matters.
“Our results imply that the payroll giving scheme that some employers operate in New Zealand is likely to increase charitable donations.
“With payroll giving, employees choose to have a donation deducted from their wages and the rebate is paid back to the employee immediately, rather than them having to wait to claim a rebate at the end of the tax year.”
In times when the cost of living is increasing and the safety net is stretched thin, people should turn to charities, faith-based organisations and local programmes to support communities, Professor Knowles says.
“Employers wanting to contribute to corporate social responsibility should consider adopting payroll giving.
“Our research suggests this may well increase charitable donations and, since the government pays the rebate, there will be no cost to the employer.”
Timing of rebates and generosity
David Fielding (University of Manchester and University of Otago), Stephen Knowles, Ronald Peeters (both University of Otago)
Journal of Behavioral and Experimental Economics
For more information, contact:
Professor Stephen Knowles
Department of Economics
University of Otago