The new Sars online query system (SOQS) offers insight into how policy design, administrative systems and taxpayer behaviour interact to shape the impact of tax incentives. With the 2025 tax filing process underway, SOQS allows taxpayers to claim deductions on charitable donations more easily and without visiting a South African Revenue Service office. But the system may do more than ease compliance; it opens the door to rethinking how tax policy can help foster generosity.

Understanding how current incentives shape giving is important as these systems evolve. The South African tax-deductible donations policy allows individuals to deduct up to 10% of their taxable income for donations to approved public benefit organisations. Donors can also carry forward any excess to future tax years. Despite these provisions, take-up of this deductible option remains relatively low: fewer than 1% — less than 140,000 people out of more than 14-million — report donations.

Still, among those who do give, the policy appears to work. There is strong evidence of bunching behaviour, where donors concentrate their giving just below the 10% cap. This suggests that individuals actively adjust their donations to maximise tax benefits. In fact, more than 5% of donors were clustered just below the threshold, with almost zero donors above the 10% threshold. This pattern suggests that the cap is not only shaping behaviour, but potentially limiting generosity by acting as a ceiling beyond which few choose to give.

Building on a methodology developed to study charitable giving in the US, estimates using South African data place the tax price elasticity (how much people change their behaviour when the price or incentive changes) of donations at about -2. That means a 1% reduction in the “price ” of giving (through a higher deduction) could boost the amount donated by 2%. This is a large effect when compared with high-income countries such as France (-0.6) and Germany (-1.2).

Patterns suggest that tax incentives affect donors differently across gender, age and income groups. One of the most striking findings is the gender gap in responsiveness: women demonstrate a much higher elasticity of donation behaviour than men (-3.6 vs -1.6). This suggests that women are significantly more responsive to tax incentives. Several factors could explain this. On the one hand, women tend to have lower average incomes, which may make the relative cost of giving more noticeable.

On the other, women may be more motivated by causes that promote social welfare and collective benefit. While this gender dimension of donation elasticity is less explored in developing country contexts, studies in high-income contexts consistently find that women are often more generous and more likely to respond to giving prompts, especially those linked to community-oriented or charitable causes. Age also plays an important role. Individuals between 15 and 64 show greater sensitivity to donation tax incentives than people 65 and above.

The lower elasticity among older taxpayers may reflect the fact that many retirees live on fixed incomes and are less influenced by tax considerations when making charitable decisions. Their giving patterns are likely shaped by long-standing commitments or personal values rather than financial incentives, pointing to a more stable, less price-sensitive form of philanthropy. Perhaps most interesting is that lower-income taxpayers (those in the bottom 50% of the income distribution) respond more strongly to tax incentives than their higher-income counterparts in the top half of the distribution (top 50%). This finding challenges the common assumption that tax deductions primarily benefit the wealthy.

For lower-income donors, even modest tax relief may significantly reduce the effective cost of giving, making donations more accessible and worthwhile. It also highlights an important opportunity: with well-designed and well-communicated incentives, tax policy could play a vital role in broadening participation in charitable giving beyond high-income earners. What does this mean for tax policy? The 10% cap clearly shapes donor behaviour, with many giving just below the limit. But it may also discourage further donations or reduce reporting beyond the cap, limiting the policy’s potential.

More flexible or tiered thresholds or incentives to report excess donations, even if not deductible, could improve transparency and inform better policy. Targeted reforms could also boost participation. Awareness campaigns aimed at underrepresented donor groups, such as women or lower-income earners, could improve take-up. Streamlining reporting by integrating PBO receipts into the SOQS platform would ease compliance. Gradually raising the cap, or replacing it with a tiered system, could encourage sustained giving without disincentivising smaller contributions.

Tax incentives remain one of the policy tools that can harness private generosity for public good, especially in a resource-constrained environment. But to fully unlock their potential, they must be transparent, accessible and equitable. With Sars modernising donation reporting and digital tools becoming more widely used, the timing is right for a broader policy conversation.

 *This article is based on an analysis of anonymised administrative tax data for more than 14-million taxpayers between 2011 and 2021, detailed in a “Southern Africa — Towards Inclusive Economic Development ” working paper on tax incentives and charitable giving. It first appeared in the Sunday Times on 7 September 2025.

Fadzayi Chingwere is a PhD candidate in economics at the University of Pretoria (UP) specialising in microeconomics and public and behavioural economics. Nicky Nicholls is a behavioural economist and associate professor at UP. Eleni Yitbarek is a development economist, associate professor at UP, and research fellow with the Partnership for Economic Policy and Economic Research Southern Africa.