You hear a lot about how “the rich” are using charities to effectively reduce their tax to minimal amounts, among other methods.
On the face of it without digging, it obviously makes people angry and detest the rich. But scratching beneath the surface, I’m not quite sure how exactly they would achieve this? In order to claim the tax back from money donated, you still have to… donate money? Which would still equal more than the money claimed back from tax.
So unless they are actually doing something illegal and funneling money through a charity, claiming tax, and then using that money from the charity to fund purchases not related to the charities mission, how exactly is it benefiting the donor (financially)?
In: Economics
Not a direct answer to this question, but charitable donations can also be used to “hide” the movement of money.
For example, let’s say I have a manufacturing business and want my company to be chosen for a lucrative government contract. I can’t directly pay the government official in charge to select my company, that would be a bribe. But let’s say that government officials wife sits on the board of a charitable organization and receives bonuses when the charity does particularly well. My company could make a large donation to the charity. This would provide income to the family of that government official to sway their opinion while also making my company look good.
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