It’s the most wonderful time of the year! Is it because of the festive mood of most people, the willingness to forgive and forget the faults of others, or the culture of giving gifts that makes this season irresistible even for non-Christians? Of course for the religious, the season is for thanksgiving for God’s gift for humanity- the birth of the Messiah. Perhaps it is for this reason that we give gifts during Christmas. Whenever we give gifts we recreate the gesture of God in giving his only begotten Son for the sake of his people. As we receive our gifts, we also express our gratitude for the thing received and for the affection expressed by the giver. For most of us, perhaps we are more excited to receive rather than to give. But the government is more interested on gift giving since it can collect taxes for it.
Tax on Donors
The act of gift giving does not escape the long arm of our laws. The transfer of wealth is something that interests the government. It is a taxable event. The sale of properties, especially land, stocks, vehicles, and others is taxed. Gift giving or donation is another. Donor’s tax is actually one of the biggest taxes in our tax system. This is a tax on the exercise of the donor of his right or privilege to give something of value. As the term connotes, it is a tax paid by the donor and not the donee or the receiver. Why the donor when he is not benefited by the act? We can only guess that the law considers the donor as richer party since he is in fact giving something away to someone who has less, that is why the receiver is not taxed since he is more in need. If donation is not taxed the government will most certainly be defrauded by people who want to avoid the payment of capital gains tax when selling properties since they will just make their transaction appear as donation to avoid payment of tax. Donation is even considered as advance inheritance and they are actually considered in the determination of the decedent’s estate. When a parent gives land to his son while the former is alive, the same is considered as advance inheritance. There are instances when gift giving is even prohibited just like between spouses except for casual gifts during family occasions.
Monetary Benefit of Donating
In some instances, donating something has its monetary benefits. Donations in favour of the government, educational institutions, and religious organisations can be exempted from taxation. In case the donor is a business entity, the amount or value of the donated property to the government or charitable institutions can be deducted from their tax liability as a business entity. This is called tax avoidance which is permitted by our laws because it benefits society anyway. That is why big businesses make donations here and there because their businesses are benefited in at least two ways. Their taxes are reduced while being perceived as generous in the end contributing to the image of the company bringing in more clients as a result. The act of gift giving serves as free advertisement. So really, there might be no “free gift” after all.
