December 17, 2011

AUSTRALIA: The stingy rich need to dig deep

SYDNEY, NSW / The Sydney Morning Herald / Society & Culture / December 17, 2011

  By Adele Horin, Sydney Morning Herald Columnist & Reporter

Illustration: Simon Bosch

If you are over 40 and pulling in an executive's salary, here is a maths problem to ponder at Christmas. Are you giving at least 7.5 per cent of your pre-tax income to charity? Do the sums.

Hopefully you will discover you give double. These proportions are considered the base range for philanthropic giving by the prominent Australian philanthropist and fund-raiser Bill Ferris, who doesn't let younger high-fliers, with their mortgages, off the hook either. The under-40s, he says, should be giving away between 2.5 per cent and 10 per cent of their pre-tax income.

As he released new figures on income inequality this week, the Labor MP and former professor of economics Andrew Leigh said that nothing much could be done about growing inequality given the forces of globalisation and labour mobility, and the worldwide competition for corporate chief executives.

If governments forsake taxation as a lever for fairer income distribution, then the notoriously stingy Australian rich must be shamed and peer-pressured into greater philanthropy. The Howard government did much to help bring about a philanthropic culture but the legal and tax changes have not been enough.

In Australia, the super-wealthy have the best of both worlds. They enjoy opportunities to halve their effective tax rates though salary sacrificing, negative gearing and income splitting through family trusts; as well, they are untouched by a culture of noblesse oblige that in other countries propels the rich to give back to the community.

Here the rich, along with everyone else, rely on government to fix social problems and fund services, while pumping their own fortunes into real estate and personal consumption.

But the government is cutting spending and even in the big spending days under John Howard, funds did not necessarily reach unpopular but worthy causes, or disadvantaged groups.

Dick Smith first rang the alarm bells on the miserliness of the rich, puncturing the myth they were all-round good guys. People who give, like Smith, have the inside knowledge on those whose token contributions provide a fig leaf for meanness.

Recently, Smith threatened to release his ''name and shame'' list. Bring it on, Dick. In 2008-09, there were 2366 people who told the tax office they earned more than $1 million but claimed no deductions for charity. It is possible they don't claim their dues, or are so disorganised they lose receipts, but it is more likely they gave nothing at all.

As a proportion of their taxable incomes, millionaires on average gave 1.7 per cent away, well below Ferris's benchmark, and a world away from American millionaires, who give 15 per cent.

What accounts for this stinginess? No tradition of major giving is entrenched because most wealth has been generated in Australia in the past 30 years. And a lot of rich people pretend to be members of the middle class, and therefore have no moral obligation to give back.

A man I described as ''rich'' during an interview recoiled from the adjective on the grounds he was not in the BRWRich List even though he was by any standards immensely wealthy. Leigh's figures reveal an annual income of $190,216 is enough to put you in the top 1 per cent of income earners, a privileged band indeed. The rich need a sense of perspective about what others earn.

But the sad story about Australia's rich is that some have no interests beyond their business and amassing a fortune. Simon Mordant, adviser to some of Australia's major corporations and a philanthropist who, among other gifts, gave $15 million towards redevelopment of the Museum of Contemporary Art, has had direct contact with the impoverished inner life of Australia's rich.

Prompted by his example, some wealthy folk approached him saying they did not know how to give. He was gratified by their seeking his advice, he told me, and shocked they had no idea what to do with their money. They had no passions, and he had to prompt them into thinking about sick relatives and hospitals, their children and schools, and so on, to spark a light.

At least these Australians felt a desire to change. Mordant is not the only one to have told me other high-fliers feel no duty to give back. Daniel Petre, the former Microsoft executive, said: ''It's pretty sad, but there's lots of wealthy people who'll write cheques for $10,000, very few who'd write a cheque for $1 million … ''

The issue is proportionality. A lot of people have benefited hugely from the prosperity of the past two decades. They have worked hard and they have been lucky, they have benefited from government policies such as superannuation tax breaks that helped them amass fortunes. And their children will benefit from lack of inheritance and wealth taxes.

But how much is too much to leave the kids, given the potentially corrosive impact on character of an unearned fortune? How many Paris Hiltons are in the wings with the prospect of a $10 million inheritance that generates $600,000 annual income for doing nothing?

Ferris has provided a benchmark for the wealthy. (The Peter Singer-inspired website also provides a giving standard linked to income.) And maybe it is a good time for the rest of us to do our sums.

Average Australians give little, 0.4 per cent of taxable income. A target of 1.5 per cent is more appropriate for citizens of such a wealthy country.

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