Timing of rebates and generosity

Abstract

Many countries provide rebates through the tax system for donations that individuals make to charity. In most countries, these tax rebates are not claimed until the end of the tax year, although there are some exceptions. In a small number of countries, there are payroll-giving schemes whereby employees can choose to have a charitable donation deducted from their wages and the tax rebate is immediate. To our knowledge, there is no existing research on whether the timing of rebates has any effect on charitable donations. We fill this gap in the literature, using both a laboratory and an online experiment. We find that donations are higher when the rebate is immediate rather than delayed. This implies that payroll giving schemes have the potential to increase charitable donations.