KEY POINTS:
Many businesses are slashing and burning to keep their bottom line afloat, but some say now is the time to promote generosity and a commitment to community.
Robyn Scott, executive director of Philanthropy New Zealand, spent 20 years campaigning for changes to charitable tax laws. They finally came through this year.
Now her mission is to explain to businesses that the new tax environment makes it easier for them to give.
For tax years up to March 31, 2008, the maximum deduction a company could claim was 5 per cent of net income. But for this tax year, ending March 31, and beyond, companies can claim a deduction up to the amount of the company's net income.
The changes "take us from being one of the meanest countries in the world to one of the most generous. "It's put us up there with the United States," Scott says.
Because most Kiwi businesses are classified as small and medium enterprises (SMEs), they generally demonstrated a commitment to their community, but the tax changes have the potential to encourage businesses to make larger donations.
"While changes in tax might not motivate everyone to give, for people looking at making major gifts the tax does make a difference," says Scott, who aims to promote the concept that every contribution, no matter how big or small, makes a difference.
The tax changes have nothing to do with Wellington web design company Signify's commitment to philanthropy.
To promote team-building, managing director Elliot Strange has his company's 20 workers picking up rubbish on the beach and collecting for daffodil day.
Signify's generosity does little to lift its profits, but it does lift office morale and helps the community.
"You go to work to earn money, but if you can go to work and know you did something good it makes you feel good about yourself too," he says.
The business donates to charities such as Wellington City Mission's food bank and also does a lot of pro-bono work. There is no tax-credit for that - it's extra time the company writes off.
Pro-bono work "is a cost to the company but the rewards we get from doing it are enough", Strange says.
Alexandra Lutyens, director of strategy at Origin Design, says the pro- bono design work her company does for charities allows staff to create something from the heart. Again, there is no tax write-off, but it's rare for the company to lose employees, which has a positive effect on the bottom line.
A tough economic climate has forced Origin to look at how much pro bono work it can afford to do, as paying customers take priority.
But Lutyens hopes generosity won't disappear in tough times. "We should be increasing generosity in times of hardship as that's when people really need it," Lutyens says.
Nick Jones, director of Sustainable Advantage, uses Nielsen Media Research figures to convince businesses they should have a focus on corporate social responsibility (CSR), the community and the environment. Nielsen's research suggests that a sizeable number of people make employment and buying decisions based on a business' commitment to them.
Jones says that although the credit crunch effects the way people spend, the message is that if businesses don't keep up with customers' needs they will fall by the wayside.
He says businesses are in effect grappling with a "triple crunch" - social, environmental and economic - and the survivors will be those who have addressed these challenges.
But Brien Keegan, the business manager of Link Recruitment's Auckland office, has noticed that the credit crunch has reduced the public's interest in CSR. Three years ago it was a key selling point for companies looking to attract staff, but stability is now much more attractive.
Last week, Keegan searched on seek.co.nz for recruitment ads with the phrase "corporate social responsibility" and returned no hits. But when he looked for "job security" he came up with 58 positions. Keegan has found that organisations that promote CSR are found around the government sector and they also promote work-life balance and stability.
THE PHILANTHROPISTS
Last year 1.22 million people in New Zealand volunteered, $1.71m worth of goods or money were donated to an appeal and 1.21 m made a donation or sponsorship.
About 439,000 did all three and 461,000 New Zealanders make their employment and purchasing decisions based on corporate social responsibility, and strongly support their community.
Nielsen Media Research
Panorama (Jan-Dec 2007)
HOW IT WORKS
The new tax laws effective from the 2008/2009 year make it easier for companies to give.
The 5 per cent limit on deductions companies can claim for cash donations has been removed.
Companies will be entitled to a deduction for all donations made
to donee organisations, limited only by the amount of the company's net income.
The donation deduction is also being extended to unlisted close companies (companies with five or fewer shareholders).
For example, Company Ltd is a publicly-listed company. In the 2009 tax year (April 1, 2008 to March 31 2009), Company Ltd supported local community charities, donating $20,000. Its net income before taking into account its donations was $200,000.
Under the old rules, Company Ltd is entitled to a tax deduction of $10,000. Under the new rules, the $20,000 can be deducted. The tax deduction will be included in the company's income tax return (IR4).
For more information refer to Inland Revenue's website at: www.ird.govt.nz
