Announcing the EA donation swap system

By Catherine Low🔸 @ 2018-11-25T08:09 (+63)

The new EA donation swap system on donationswap.eahub.org matches donors together so they can donate to each other's favourite charity, and both receive tax benefits.

If you want to donate to a charity or fund that is not tax deductible in your country, this system is for you!

AND

If you are a donor that is lucky enough to have many tax deductible charities (especially UK, US, Canada, Germany, Netherlands, Switzerland), then you can help EAs from around the world using this system.

The problem:

Many countries have a very small number of EA charities or funds that are eligible for tax deductions (e.g. New Zealand, Australia, Denmark, Norway), and expanding the list of tax deductible organisations can be very difficult. This means that EA charities are probably not be getting as much money as they could and/or EAs may not have as much money in their pockets as they could.

The size of the potential loss to EA charities can be very roughly estimated using the 2018 EA survey data. We removed the very large donors with $1 million+ donations from the data set (as they’d probably be hard to match), and the donors from countries with a large number of tax deductible EA charities (UK, US, Canada, Germany, Netherlands, Switzerland). The remaining donors donated approximately 2 million USD during 2017. If half of those donations are currently not receiving tax deductions, and the average tax back is 40%, that could be a loss of $400,000 to EA charities during 2017. We believe this is an underestimation, as it is likely that many interested donors would not have taken the EA survey.

Another potential loss is that some donors may be donating to charities they believe to be less effective, in order to receive a tax deduction. (We don’t recommend doing this as the variance between charities is likely to be much larger than the gain from the tax deduction).

The solution:

The EA donation swap system will match donors together who want to support charities or funds that are tax deductible in each other’s country. They then donate to each other’s favourite charity or fund. The additional tax benefits will mean EAs will have more money in their pocket, or more money will be donated to effective charities.

Members of EA New Zealand have arranged a handful of swaps in the past, indicating there is a market for this system.

The countries we support so far are Australia, Canada, Denmark, France, Germany, Ireland, Italy, Netherlands, New Zealand, Norway, South Africa, Spain, Switzerland, USA, United Kingdom

A simple example of how it works:

Inger from Norway wants to support the Good Food Institute (GFI) with a donation of 5000 USD. Robert from the USA wants to support the Against Malaria Foundation (AMF) with a donation of 5000 USD. AMF is tax deductible in both countries, GFI is only tax deductible in the USA. The EA donation swap system introduces Robert and Inger together and they agree to swap donations.

Inger donates 5000 USD to AMF, Robert donates 5000 USD to GFI. They both get their tax deductions at the end of the financial year.

Keeping it in the EA community

Since this is a trust system, we think it would be best if this is kept to the EA community. We are only adding charities that have some affiliation to EA, or are recommended by EAs.

We also recognise that this system could result in a lower tax take, so may not be welcomed by the tax departments! We’ve had some EAs with legal experience state they believe it is okay in their country, but we haven’t confirmed that swapping donations is legal in all of our countries where we offer swaps.

Beta version

This is the first iteration of the EA donation swap system, so there are bound to be some issues, and there are many improvements that could be made if it proves to be popular, including

We would really appreciate feedback to help us improve.

For more information, or to set up a swap, please go to donationswap.eahub.org.

If you have any questions that our website doesn’t answer, please ask in the comments below or get in touch on donationswap@eahub.org.

The EA donation swap system is a volunteer project by EA Christchurch, with the assistance of a handful of EAs around the world who provided us with donation information, and Rethink Charity who are allowing us to host it on the EA Hub website.

The team: Catherine Low, Marc Spoor, Jaram Lallu and Zoe Williams

null @ 2018-11-25T20:11 (+14)

Do you have any more details on the opinions you've gotten from legal experts? I'd be interested in hearing more about the reasoning for why it's okay.

I think Paul Christiano explained well here why it might be questionable:

If you make an agreement "I'll do X if in exchange you do Y," ... Obviously the tax code will treat that differently than doing X without any expectation of reciprocity, and the treatment depends on Y. ...

null @ 2018-11-26T01:54 (+6)

Thanks David. As Paul says, it certainly isn't clear cut. We have had unofficial legal advice, but nothing formal. The general idea from the advice is that some of the laws say things on the lines of "You must not have received goods or services from the charity" - which is still true in the case of swapping. There is also no legal obligation for your matched donor to donate to the charity you want them to donate to, and that is apparently significant. Also the tax rebate isn't dependent on WHY you chose the charity that you donated to. If the website proves to be popular we will look into getting official legal advice in the countries that want to use it the most.

null @ 2018-11-26T02:43 (+1)

Thanks!

null @ 2018-11-28T23:10 (+3)

While this is a different sort of issue, and has nothing to do with tax policy, it seems relevant to mention the example of vote swapping, which seems to be legal:

“The basic reason is that there is no exchange of anything of value,” Douglas told TheWrap. “The second is that there is no way to prove that both people went through with it.”

In the case of donation swapping, both of these ideas are shaky: It depends on the definition of "value" (do I technically get value out of giving money away?) and "prove" (receipts are easier to find for donations than votes). And of course, every country has its own law. But this example updates me slightly in the direction of viewing this favorably (though EA Hub should certainly keep looking for a definitive answer).

Catherine Low @ 2024-06-08T10:16 (+13)

The EA donation swap project has had very little usage over the last couple of years and has been officially discontinued.

You can find out about tax deductible effective giving options in your country by checking out Giving What We Can's guide.

Tobias Schmidt @ 2024-08-04T17:17 (+1)

Any recommendations for where I could turn to with a swap request now?

null @ 2018-11-26T23:17 (+6)

Can I just say how clever and user-friendly this system is? I love that you're prompted to add an expiry date for your offer when you first create it, that you put both a minimum and a maximum so no one's time is wasted, and that you're auto-matched. And this is so much better than a spreadsheet when it comes to privacy! Thank you for creating this.

null @ 2018-11-27T00:52 (+1)

Thanks Khorton! We really appreciate you saying those kind words.

null @ 2018-11-25T14:59 (+5)

Thanks, this is a cool idea.

Inger from Norway wants to support the Good Food Institute (GFI) with a donation of 5000 USD. Robert from the USA wants to support the Against Malaria Foundation (AMF) with a donation of 5000 USD. AMF is tax deductible in both countries, GFI is only tax deductible in the USA. The EA donation swap system introduces Robert and Inger together and they agree to swap donations.
Inger donates 5000 USD to AMF, Robert donates 5000 USD to GFI. They both get their tax deductions at the end of the financial year.

In this example Inger gains tax deductability, but Robert gains nothing in return for taking on the counterparty risk of the swap. Wouldn't it make sense for Robert to donate slightly less than $5000, or Inger slightly more, such that both parties benefit?

This reminds me a little bit of Critch's Rent Division Calculator, which aims to produce a room-and-rent-allocation for shared houses that everyone likes as much as possible; not merely one that no-one actively dislikes.

null @ 2018-11-25T18:13 (+2)

Thanks Larks! There will be the very occasional swaps where both parties benefit, but most will have just one beneficiary like the example above. We thought briefly about incentivising Robert-type people, but in the end decided to go for the simple "both charities get the same $" for the first iteration. If we are struggling to get Robert-type donors to offer swaps we will definitely revisit this idea.

null @ 2018-12-02T12:18 (+3)

Thank you for creating this! I want to understand some possible risks to my value system better. So here’s one scenario that I’ve been thinking about.

I realize that it’s a trust system but if Donor A trusts Donor B on something that is not clear enough to Donor A to be able to ask and that’s so unremarkable to Donor B that they see no reason to tell Donor A about it any more than their espresso preferences, then no one is really at fault if they miscommunicate.

Say Donor A:

  1. is neutral between Rethink Priorities (RP) and the Against Malaria Foundation (AMF) (but Donor B doesn’t know this),
  2. can get tax exemption for a donation to RP but not AMF, and
  3. wants to donate $2k.

And Donor B:

  1. values a dollar to RP more than 100 times as highly as one to AMF (but Donor A doesn’t know this),
  2. can get tax exemption for a donation to AMF but not RP, and
  3. wants to donate $1k.

Without donation swap:

  1. Donor A is perfectly happy, and donates $2k to RP because of the tax exemption as tie breaker (but even if they split the donation 50:50 or donate with 50% probability, this case is still problematic).
  2. Donor B is a bit sad but donates, say, $850 to RP, which comes down to the same cost to them due to the lacking tax break.
  3. In effect: RP gains $2,850 and AMF gains $0. Both donors are reasonably happy with this result, the only wrinkle being the taxes.

But with donation swap:

  1. Donor A loves helping their fellow EAs and so offers a swap even though they don’t personally need it.
  2. Donor B enthusiastically takes them up on the offer to save the taxes, donates $1k to AMF, and Donor A donates $1k to RP. Later, Donor A donates their remaining $1k to RP.
  3. In effect: RP gains $2k and AMF gains $1k. Slightly positive for Donor A but big loss for Donor B.

This seems like a plausible scenario to me but there are other scenarios that are less extreme but still very detrimental to one side and possibly even harder to spot.

So am I overlooking something that alleviates this worry or do donors have to know (commit) and be transparent about where they will donate if no swap happens, in order for the other party to know whether they should take them up on the offer?

null @ 2018-12-12T19:49 (+1)

That is a really good point Denis!

The only thing we put in to help with preferences, is to allow donors to "reject the swap" - e.g. if they don't like the charity they are instructed to donate to. But that is clearly insufficient. They could be given more information before they choose to reject.

I'm trying to think of a way of asking for easily accessible information from donors to avoid these problems. This info would be shared with the match. Would "If you don't get matched where would your donation go?"

with the options

  • Same charity, and I'll get tax benefits
  • Same charity, and I won't get tax benefits
  • Charity X and I'll get tax benefits

Would that be sufficient to avoid the worst of the problems?

Denis Drescher @ 2018-12-22T13:00 (+3)

Hi! Thank you! That sounds good (“Charity X” would be a free text field?), but I don’t know whether there are other problems it doesn’t address. To guard against that, an FAQ entry explaining the problem would be best. Generally that’ll be needed because this is probably unintuitive for many people (like me), so even if they have the information about the swap counterfactual, they may not be able to use it optimally without an explanation.

Thomas Kwa @ 2020-09-17T03:29 (+1)

Is this still actively in use in September 2020?

cafelow @ 2020-09-17T05:32 (+3)

Yes it is! We are still quietly swapping away. At some point we'll write a post to summarise what we've been up to.