Tax Incentives or Political Motivations? Evidence from Corporate Contributions

with Julia Cagé, Malka Guillot, Simon Muchardt, and Camille Urvoy

Corporate philanthropy has been increasing in Western democracies in recent decades, a rise often explained by the development of tax policies offering substantial incentives to donate to charities. Yet, corporate philanthropy is also increasingly perceived as a means to influence politics. In this paper, we estimate the tax price elasticity of corporate donations, and investigate how it differs depending on the recipients’ purposes and the donors’ characteristics. To do so, we use an exhaustive administrative panel dataset on firms’ tax returns in France from 2013 to 2022, including the identity of the charities that benefit from the donations, from which we recover their purpose using NLP methods. Exploiting two reforms that affect the price of donations for firms, we document significant bunching around major regulatory thresholds. We then show that the tax-price elasticity varies significantly depending on the type of beneficiaries.