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If Guernsey's income tax rate is raised to 22%, the tax rebate for charities will also increase to a new rate of 28.2%.
The 2025 Budget proposals suggest the increased rate of income tax to try and plug the island's growing financial deficit - but other proposals look at helping those in need of financial and other means of support.
One way the Policy and Resources plan aims to help the third sector is by allowing registered charities to claim a 28.2% tax rebate on charitable donations made between individuals of between £500 and £750.
Currently the limit is 25%.
That rate was set in 2021, and increasing it to 28.2% now would enable charities to claim more money back on each donation.
P&R is also suggesting increasing the maximum individual donation limit from £7,500 to £10,000. That would mean an increase in the amount of money charities can claim too.
"The Policy & Resources Committee recommend that the maximum aggregate donation is increased to £10,000, an increase of 33.3%, which is 6.4% higher than the impact of inflation in the intervening period.
"The combination of the change in the income tax rate and the proposed increase would mean that the maximum amount by which a charity can benefit will increase from £1,875 to £2,820," said P&R.
The Association of Guernsey Charities has welcomed the move, saying it will benefit the more than 300 member organisations.
"The AGC are pleased that Policy and Resources, having supported our #WithoutUs campaign, have acted during a difficult budget year to recommend an increase in the maximum level of Charity Tax Relief donors may claim to £10,000 per tax payer," said the organisation.
While the AGC is also pleased with investment in cultural and economic projects that it says will benefit the wider community - like the Victor Hugo Centre - it has raised concerns about other aspects of the budget.
In particularl, the AGC has said that previous taxation proposals would have helped more people and it is concerned that increasing income tax to 22% could mean more people have to rely on third sector services if they start to find it hard to make ends meet.
"In acknowledging that the tax changes are a necessary fix to give a breathing space, we are concerned that the regressive nature of the income tax increases proposed, more so that the previous GST package which left 50% better off compared to 30% under the proposed changes, will further widen the inequalities in our community, increasing the demand on charity services when combined with increasing housing costs etc, whilst the reduction in disposable income for higher income families could reduce charitable giving."
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