Israeli Philanthropy Trends: more overseas donations than domestic; low rate of tax-exempt requests
A report on philanthropic giving in Israel (2012–2015), published by the Israeli Bureau of Statistics, confirms that Israel is one of the largest importers of philanthropy, and reveals that only 20% of households asked for a tax deduction for donations.
The report heralds good news for the Israeli nonprofit sector. There was a 10.3% increase in domestic Israeli philanthropic giving, parallel to an 18.5% increase in overseas philanthropy to Israel. This increase is comparable with the 10% increase in philanthropy in the U.S. during the same period and confirms that Israel is one of the largest importers of philanthropy among developed countries.
Although donations, in general, are increasing, domestic donations are still outnumbered by overseas philanthropy, representing more than double the sum of domestic philanthropy. Between 2012 and 2015 Israelis donated $1.475 billion (5.9 billion NIS), compared to $2.899 billion (11.3 billion NIS) received from overseas donations. The domestic donations came from households (65%-70%), businesses (25%-31%), and bequests (3%-4%).
One of the report’s thought-provoking findings is that only 37% of donations were reported as tax deductions to the Israeli Tax Authority: 20% of donations from households, and 48% of corporate donations. By comparison, 80% of US household donations and 95% of corporate donations are reported to the IRS on tax returns.
Although the Israeli taxation system is different than the American one, this finding is significant and very alarming. One of the core differences between these two taxation systems is that in Israel citizens are not obliged to submit a tax return every year unless they have a special reason to do so (for example, if they own a business, have multiple sources of income, etc.).
This means that 20% of Israeli households had to actively ask for their deductions, either directly from the Israeli Tax Authorities or through their employers. It also means that the majority of households refrained from asking for the deductions they were entitled to by law. These dynamics emphasize the complex relationship between tax authorities, non-profits, and taxpayers.
This finding is significant for the US tax bill as well. The Washington Post published an op-ed arguing that the new higher standard deduction of $24,000 per couple would mean that only 5% of taxpayers would take itemized deductions, and charitable contributions could drop by $13 billion, according to the Indiana University Lilly Family School of Philanthropy.
The Israeli data questions the efficacy of tax exemptions as an incentive to motivate philanthropic giving, as well as the role of the state and the non-profit sector in educating the public to ask for those exemptions. Both aspects should concern the Israeli government and non-profit sector, which must take effective measures to encourage the public to give more as well as ask for the tax benefits. Here is a short video (in Hebrew) that was created to encourage the public to ask for tax benefits, which is a step in the right direction:
Interestingly, the majority of household donations (46%) were of amounts up to 500$ (2,000 NIS). However, 22% of household donations were more than $25,000 (100,000 NIS). This difference implies a large gap among household giving, as only 32% of households donated $500-$25,000 to charity. It also shows that while most of the households (46%) donated a small sum of money, there is a rather large percentage of households (22%) who donated much larger sums.
This data is important because it allows non-profits to develop their fundraising strategies and pinpoint their target audiences. This segmentation, utilized wisely, can allow fundraisers to learn about donors’ giving habits and suggest tailored sums for donations, suited to specific types of donors.
The share of Israeli household donations is relatively large, similar to specific European (PDF) countries but smaller than in the U.S. The amount of philanthropic giving as a percentage of the GDP (Gross Domestic Product) in Israel has been steady, about 0.5% of the GDP. The equivalent U.S. rate is 1.7%. This table compares households’ share in overall donations in Israel, Europe, and the U.S., for 2013:
Nonprofits reported a substantial increase in donations larger than $25,000 (100,000 NIS), meaning that more significantly large donations were accepted in this period than in earlier years and that the overall amount of donations increased. By and large, this is good news for the Israeli nonprofit sector. The data demonstrates the growth in philanthropic giving via large donations and possibly indicates even more committed donors. It will be interesting to follow this trend for further fundraising campaigns, and especially to monitor how non-profits used this money to advance their goals effectively.
Areas of philanthropic giving
The lion’s share (28%) of Israeli philanthropy is dedicated to welfare (for example, services to the elderly or people with disabilities), and the area of religion (25%). The rest is divided among education and research (18%), philanthropy and volunteering (3%), and advocacy (1%). Most of the overseas donations to Israeli non-profits are focused on education and research (31%), followed by philanthropy and volunteering (21%), welfare (17%), religion (14%), advocacy (8%), and health (3%). In comparison, the major areas of philanthropic giving in the U.S. are religion (32%), education and research (17%), and philanthropy and volunteering (14%). For more about the Israeli classification of non-profit areas, visit the Israeli Guidestar.
In conclusion, there is much to be learned from such reports. This is an example of how statistics can be an effective tool for fundraisers and nonprofits. It also sheds light on the role of taxation in encouraging giving, and the important role of tax authorities’ relationship with taxpayers to encourage giving. It will be interesting to follow the next report and compare the numbers.
*The survey is based on data accepted from NPOs and therefore indicates on actual donations accepted by the NPOs and not necessarily on the scope of households or businesses’ donations (which could donate to several NPOs simultaneously).