Civil Society in Complex Environments

Charity Law and Social Inclusion: An International Study

The International Journal
of Not-for-Profit Law

Volume 9, Issue 3, July 2007

By Kerry O’Halloran
Routledge. 437 pp. $150

Reviewed by David Robinson 1

Kerry O’Halloran’s timely study comprehensively covers current charity legislation in the United States, England and Wales, Ireland, Australia, New Zealand, and Canada, with a focus on how recent reforms have impacted the law as it affects philanthropy and charities in relation to social inclusion.

The social inclusion agenda includes domestic issues such as persistent poverty, immigrants and refugees, and inequality, as well as issues in the international agenda such as how to balance aid, trade, and anti-terrorism. Particular attention is given to indigenous people and social inclusion. These major categories in turn cover issues of health, housing, education, and general human rights.

This publication is both a valuable reference book and a polemic stating the case for revising charitable legislation to enable the growing range of non-government, philanthropic, and not-for-profit organizations to better engage and deal with issues of social disadvantage and promote social inclusion.

The question is, to what degree has the common law tradition of charity legislation enabled or impeded the ability of philanthropy to engage with these issues?

From the Statute of Charitable Uses 1601 onwards, charity legislation was rooted in the obligation on the Crown to protect the interests of charities (as well as those of wards and lunatics). This has formed the basis for a paternalistic, controlling attitude towards charities and a restrictive approach to any attempts to widen the definition of charitable activities that might subsequently qualify for beneficial tax treatment.

As a reference book it covers current legislation in six common law jurisdictions, each of which has either recently completed a major review of charity legislation or is currently engaged in such a process.

In the introductory chapters, the concept of charity is separated from that of philanthropy, “Theoretically, charity is concerned with the fact and effects of poverty and is focused on methods for directly alleviating the suffering of others. This should serve to distinguish charity from philanthropy which is primarily about respect for the civilizing effects of human endeavour and is focussed on providing and promoting opportunities for bettering the human condition.”

O’Halloran goes on to note that the meaning charity acquired in law diverged considerably from any social meaning that would otherwise have logically been ascribed to it.

The discussion and core argument that runs through the book is concerned with the impact of charity (what is funded by charitable giving), rather than the gift-giving end of the process. The latter is better characterized as philanthropy, indicating the impulse to give.

The sections on each country provide up-to-date coverage (or as up-to-date as possible for a subject that seems to be in the midst of constant review) of the historic role of charities in the country, a short overview of the charitable sector, an outline of the current legal framework, explanations of available legal structures and tax rates and procedures, and summaries of definitions as to what is considered a charitable purpose. It then considers any specific constraints on modern philanthropic activity and sets out the current situation regarding the review of charity law.

These chapters make the publication an essential and unique reference book for those working in this area or those interested in the legal environment in which the charity sub-sector of civil society operates. The comparative layout provides a simple and practical form of cross-referencing different jurisdictions.

Although specific issues vary considerably, a pattern does emerge of what O’Halloran describes as the “main areas of sensitivity” in the relationship between the charity law framework and social inclusion in the six jurisdictions covered. These areas are as follows:

  • Partnerships with government;
  • Restrictions on advocacy/political activity;
  • Human rights and anti-terrorism;
  • International aid;
  • Issues relating to indigenous people/multicultural matters;
  • Fiscal issues, particularly taxation;
  • Roles of the court and Attorney General;
  • Forums for developing charitable purposes;
  • Legal structures; and
  • Public benefit issues.

In the concluding chapter, each of these issues is addressed in general terms with proposals for changes to encourage greater involvement of charities, or at least to remove the major barriers to such involvement.

Current restraints on the operation of charities that have grown from the common law tradition include the following.

  • The definition of public benefit, requiring that this benefit accrues to sufficient members of the public, and not just a limited section, has restricted action by charities in favor of small groups of severely disadvantaged people.
  • An obstacle to the involvement of charities in advocacy and lobbying for changes in the law, which is essential for their effective intervention on social exclusion issues, is the court ruling (McGovern v A-G 1982) that it “had no means of determining whether the outcome of policy changes would be beneficial or otherwise.”
  • Restrictions on the recognition of trusts as being charitable if they are for the benefit of groups of people related by blood. This has restricted the recognition as charitable of associations in indigenous communities organized around tribal or blood relationships.

These examples are indications of the degree to which the realities of community need have diverged from those set out in 1601 and (cautiously) amended since. They also indicate that reform is long overdue, but the outcome of recent reviews suggests that it may be a long time coming. In general, the countries covered here that have recently reviewed their charity laws have failed to effectively address these issues.

For example, O’Halloran states that in New Zealand, “The Charities Act 2005, on the face of it, has left charity law in New Zealand anchored to its common law legacy and largely unchanged in terms of its capacity to address contemporary social inclusion issues.” In Australia, “the collapse of the charity review process is a serious setback for the prospects of achieving a better fit between the legal framework for philanthropy and the contemporary needs of the socially disadvantaged.” And in England and Wales, though the proposed statutory changes are important and can only benefit the social inclusion agenda, O’Halloran continues to state that “the principal jurisdictional characteristics of the law will continue.” In particular, restrictions on advocacy, political activities, and fiscal issues relating to trading will further inhibit the development of a strategic role for philanthropy.

Perhaps the reluctance of governments to confront constraints on the effectiveness of philanthropy and charity in the modern world reflects an unwillingness to allow the expansion of an independent civil society space outside the control of the state.

In a section of the final chapter, O’Halloran notes recent government declarations of their intentions to further develop partnerships with the voluntary and community sector, often with a revised charity law framework as part of the arrangement. He also notes that the privatization of some nonprofits in the United States is cause for concern in relation to the ability of charities to maintain their independence, but does not draw the same conclusion so clearly in reference to the developing partnerships with government.

In practice, the reluctance to effectively reform charity legislation to encourage charities to engage with social inclusion issues, combined with increased government funding of community organizations, government/community sector partnerships, and corporate privatizations, suggests that we may need above all to defend the inherently independent nature of philanthropy and charity, rather than seek to widen definitions of what is charitable and liberalize tax regimes. This means acknowledging that tax benefits inevitably entail an element of state intervention, and insisting that charities should vigorously defend their independence even at the cost of losing beneficial tax treatment. Current challenges to this independence are apparent in anti-terrorism legislation.

In general, issues dealing with the apparently intractable problems of ongoing poverty, social exclusion, discrimination, and inequality (both in the domestic and the international arenas) are the responsibility of governments. The generally poor response of governments to social inclusion issues in recent reviews of charity legislation suggests the value of carrying out a comparative study of the boundaries between charitable (or philanthropic) and government action – that is, between funds provided by citizens of their own free will, for purposes selected by them without coercion, and the use of funds collected by governmental decree from the wider population for, in theory at least, purposes that have been collectively agreed upon.

The ultimate strength of philanthropists is the ability to choose what issues to support. Charity and philanthropy are expressions of the human impulse (present in some if not all of us) to share their surplus resources with others. How wide this sharing should extend – to the family, tribe, local community, or all those in need – is at the core of much of the debate around charity legislation. To what degree should gift giving beyond the immediate family be encouraged or restrained by the state?

Perhaps civil society (and charities, or charitable people) should claim outright the freedom to raise sometimes unpopular issues, to campaign for changes in government policies, and to act directly where necessary, without requiring legislative action promising tax breaks. It is, of course, possible for philanthropists to fund whatever activities they choose, as long as they are within the boundaries of the law. One can be “charitable” without the permission of the state. Charity Law and Social Exclusion, however, is concerned with organizations legally formed as charities rather than the activity of being philanthropic or charitable.

As moral and social definitions of charity, altruism, and sharing have become subsumed by economic and legal definitions, the focus has turned from the motivation of individuals to give to the functions of legal structures.

However, changes in government legislation focused on enabling access to preferential tax treatment are not likely on their own to persuade philanthropists that action on social justice issues is necessarily the most critical and interesting aspect of charity.


1 David Robinson, a member of ICNL’s Advisory Board, is Director of the New Zealand Social and Civic Policy Institute and a Board member of CIVICUS.