New Philanthropy Capital (NPC), a leading philanthropy think-tank and consultancy has called on the UK government to consider removing the tax privileges of foundations who don’t conform to improved standards of transparency. NPC argues that greater transparency among grantmakers would encourage strategic and impact-focussed giving.

The NPC proposal was made in its response to a consultation on the UK’s civil society strategy, launched earlier this year. The think-tank advocates that ‘government should create a requirement for grant-making trusts to be more transparent and publish the reasoning behind their payout ratio.’

NPC suggests that one way of increasing transparency could be to make favourable tax treatment conditional on being part of 360Giving, an initiative set up in 2014 by philanthropist Fran Perrin.

‘To promote transparency and effectiveness in philanthropy government should consider making participation in 360Giving a precondition of tax breaks for grant makers,’ the think-tank argued.

The NPC proposal has added significance because the organisation’s CEO, Dan Corry, is one of seven commissioners for the Charity Tax Commission, which is reviewing tax benefits in the charitable sector. Corry told an Alliance audio podcast earlier this year that foundations have a responsibility to ‘raise the bar’ by being more transparent about their conduct and practices.

Rachel Rank, CEO of 360Giving, welcomed the call for more sharing of grants data. ‘We welcome NPC’s recommendation that funders share their grants data in the standard format we have developed. Many grantmakers already share information about their funding, but releasing this data in a standard, open way means anyone can find out who is funding what, where and what for. This helps us to easily see what funding is being provided to specific sectors or regions, as well as patterns and changes over time.’

However, the proposal is likely to prove controversial in the foundation sector. The Association of Charitable Foundations, which represents British foundations, said that the recommendation is ‘worrying’. Keiran Goddard, ACF’s Director of External Affairs commented: ‘Foundations are increasingly being open about who, why and how they fund – a shift that is being driven by a desire for collaboration and evidence. But decoupling charitable tax relief from charitable status and then proposing to reinstate it based on specific acts is worrying. It erodes the principle that it is worth subsidising the production of varied, pluralistic and independent social good on the basis that it helps contribute to a thriving, diverse and healthy society.’

Around 15 per cent of ACF’s members have signed up to 360Giving. Early adopters include the Esmee Fairbairn Foundation, Paul Hamlyn Foundation and the Lankelly Chase Foundation.