A possible tax efficient swap mechanism for charity

I had an idea a while ago, which sounded sim­ple to me, but search­ing with cer­tain key­words did not yield ap­pro­pri­ate re­sults, so am pre­sent­ing it for dis­cus­sion to LW . Please in­form me if some­thing like this is already in ex­is­tence. Please in­form if I need to cross post it on effec­tive al­tru­ism fo­rum also, or they share enough users with LW and it need not be re­peated.


Two per­sons A, B liv­ing in differ­ent tax ju­ris­dic­tions I and J re­spec­tively, want to con­tribute to or­ga­ni­za­tions M and N qual­ify­ing for tax ex­emp­tion in the other per­son’s ju­ris­dic­tion. i.e. M qual­ifies in J and N qual­ifies in I. For the pur­pose of this demo, lets con­sider they in­tend to con­tribute the same amounts.

They “swap” their char­i­ties and pro­duce re­ceipts to the effect from the re­spec­tive or­ga­ni­za­tions.i.e. A con­tributes to N and B con­tributes to M.

This helps them gain 10% to 20% more money when com­pared to con­tribut­ing to their preferred char­i­ties which do not qual­ify.

So, the idea is to cre­ate a web­site where peo­ple can post such an in­tent, to con­tribute to cross-na­tional char­i­ties and can re­li­ably pre­sent re­ceipts that will be ac­cept­able to all con­cerned.

The main uses i en­visage for such swaps would be sci­ence sup­port­ers in the de­vel­op­ing world want­ing to con­tribute to re­search hap­pen­ing in the de­vel­oped world swap­ping with EA’s want­ing to gain a big­ger bang for their buck in the de­vel­op­ing world. This po­ten­tially re­duces the need for a lot of char­i­ties to seek out tax ex­emp­tion in mul­ti­ple ju­ris­dic­tions.

Av­enues for fur­ther research

Ques­tion on the ba­sic idea

  • Do both char­i­ties have to be ac­cept­able to both donors or are neu­tral and maybe even “hos­tile” swaps pos­si­ble? How much does that com­pli­cate matters

  • A cer­tain cut of the pro­ceeds seems to be the sim­plest for the web­site to op­er­ate, but will it be ac­cept­able to the users?

  • Might this be con­strued as be­ing ille­gal in cer­tain ju­ris­dic­tions, af­ter all, it is a tax avoidance scheme, to be hon­est.

Lo­gis­tics questions

  • The 1:1:1:1 case for per­son to ju­ris­dic­tions to causes to “the time of swap” is the sim­plest. There are many pos­si­ble com­pli­ca­tions which can al­low more char­ity to be fun­neled, but re­quire the web­site hosts to be ex­posed to non-triv­ial amounts of risk. Ex­am­ple in one ex­change, more dol­lars are offered for char­ity than euro-equiv­a­lents while in an­other swap, more euro-equiv­a­lents are offered com­pared to dol­lars. This can bal­ance, but it is more com­pli­cated.

  • Do the ac­counts need to “bal­ance”? Will a non 1:1 ra­tio be ac­cept­able for cer­tain sup­port­ers of causes?

  • For­eign ex­change fluc­tu­a­tions af­fect amounts of money donated and may cause some un­nec­es­sary heart­burn in some cases.

  • Times of feel­ing char­i­ta­ble may wary and may pre­vent mar­kets from clear­ing. Chris­ti­ans may feel more char­i­ta­ble near Christ­mas or Easter and Mus­lims dur­ing Ra­madan.

  • Might this re­quire all char­i­ties to get them­selves a digi­tal sig­na­ture? What are the other av­enues to get­ting a re­li­able re­ceipt from char­i­ties?

  • If both pay­ments are routed through the web­site/​en­tity, then might un­nec­es­sary forex changes re­move a lot of value? Could crypto-cur­rency style atomic swaps help or would they in­tro­duce un­nec­es­sary com­plex­ity that peo­ple would rather not be both­ered with.

  • Might it com­pli­cate the re­la­tion­ship of donors with char­i­ties to the ex­tent that the gain is lost in ex­tra cost to reach out?

If such an in­sti­tu­tion is not already there, then af­ter le­gal con­sid­er­a­tions, I think sup­port­ing such a web­site could be a high value in­vest­ment for effec­tive al­tru­ists as it would lead to a 10% to 20% boost to the char­ity kitty.
[EDIT : ed­ited a lit­tle for clar­ity and gram­mar. added one more doubt]