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Downing Street has said that some wealthy individuals are giving money to bogus charities in order to avoid paying tax.
The Government has been criticised over its plans to tackle tax avoidance by limiting the tax relief that wealthy donors can receive in respect of large donations. Charities believe the move, announced in the Budget, could result in donations drying up.
This morning, the Prime Minister’s Official Spokesman defended the plan to cap tax relief on donations to charity:
"In certain instances they may be giving money to charities and those charities don’t in all cases do a great deal of charitable work."
He also suggested that many of these bogus charities were based overseas.
The spokesman added: "The system is being abused as it currently stands. Certain very wealthy individuals are able to reduce their tax bills, well below the kind of tax bills that most families currently pay, by exploiting certain reliefs.
The Ambassador for Philanthropy, Dame Stephanie Shirley, said the Government's plans would discourage philanthropists from giving to charities in need.
"All I know is people are ringing up the charities saying ‘hold on I need to put this on hold, I can’t guarantee to give you as much next year as I have this year’," she said.
This morning, George Osborne said he was "shocked" to discover how the rich avoid paying tax. After personally studying anonymised tax returns, the Chancellor is now convinced the wealthiest should pay at least a third of their earnings in tax.
He told the Daily Telegraph: "I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs, and to be fair it’s within the tax laws, so that they were regularly paying virtually no income tax. And I don’t think that’s right."
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