Mark Zuckerberg’s ‘charity’ donation is not all that it seems

FACEBOOK boss, Mark Zuckerberg seems to have gone bonkers and given away all his wealth — $45bn (€41.37bn) on paper — to a foundation he has set up along with his wife, Priscilla Chan.

That, at least, is the initial impression one gets from a series of news reports.

Zuckerberg, however, is actually transferring his wealth into a limited liability company which, as the commentator Edward Luce points, out would not be considered a charity by the US Inland Revenue.

He will be able to invest the proceeds in venture capital projects which will make yet more money for the Foundation. 

At the same time, his move results in a minimisation of his capital gains tax liabilities. 

In other words, Zuckerberg has engaged in some very effective tax planning, something that the titans of new technology have proved themselves pretty adept at.

The move is being greeted with positivity, and why not? It is Christmas after all.

But at the risk of sounding like the Grinch one has to pose the obvious question: would the businessman not be better off making a large payment to his country’s tax authorities?

By doing so, he could ensure that more resources are devoted to the repair of America’s ageing infrastructure, or to the filling of gaps in an educational system from which he has drawn huge benefit.

In truth, the 31-year-old has little confidence in Government, in its various agencies and in the politicians who control many of the purse strings.

Instead, cheques will be written by the Zuckerberg-Chan entity to good causes, effectively bypassing Government.

By doing so, the donors will no doubt be doing good, but they will, in effect, be saying that they no longer trust a system which has been increasingly corrupted through the influence of powerful lobbyists and representative organisations.

This most contemporary of managers lies in a long tradition of benevolent corporate kingmakers. Back in the late 19th century, the great Victorian business donors were riding high. 

Lever Brothers erected ‘Port Sunlight’, an innovative housing complex for its workers near Liverpool.

The Guinness family donated St Stephen’s Green to the nation. They also established the Iveagh Trust in an effort to tackle Dublin’s huge homelessness problem.

Beer and sweets may rot the teeth or gut, but their providers did at least recognise their social responsibilities at a time when the State lacked the will and the capacity to meet the needs of the poorest.

One suspects that Zuckerberg does not make a big distinction between venture capital type investment which creates employment and spreads wealth, and donations to good causes.

Today’s world resembles the Victorian era, only with nobs on. Wealth is once again highly concentrated, not least because of the impact of globalisation and and a supremely effective tax avoidance industry.

Seeking to burnish their image, ease their consciences, head off their detractors or simply do some good, people of great wealth are opening the cheque book as never before.

In the US alone, this year, it is estimated that $350 billion will be given away to charity.

Back in 2006, Bill Gates announced that he would be leaving Microsoft to work full time for the Bill & Melinda Gates Foundation.

Months later, businessman Warren Buffet declared that he was giving away 85% of his fortune to the Foundation and would be coming on board as trustee.

The Foundation now has an endowment worth over $42bn. A key aim is the eradication of four major diseases including polio by 2030, just 15 years away. The Foundation has produced a ‘Grand Challenge’ programme aimed at accelerating research activity across a broad front.

But it has been attacked for its ‘technological style’ and ‘failure to deliver within the timescales originally delivered’, according to the web publication, SciDev net.

Many other donors have adopted the acceleration approach favoured by Gates, but in October, Bill Gates himself acknowledged that ten years ago, he was “pretty naive about how long the process would take”.

In his view, “the Foundation underestimated the effort required to implement new technologies in countries without basic services, including clean water and reasonable medical care”.

Gates has to be complimented for his frankness and it would appear that the Foundation has already changed tack somewhat.

While the Foundation has spent $1bn on global health research teams developing drugs to treat Aids and TB, Gates has acknowledged that it could be another decade before even the most promising initiatives bear fruit. It seems there really is no magic bullet for problems even when people of the proven quality of Gates and Buffett are involved.

Within the Fund, some acknowledge that there has been a ‘fixation on technology.’

In fact, real progress is taking place in Africa due to the adaptation at city district and village level of technologies, particularly mobile devices, developed elsewhere.

In his latest annual letter, Bill Gates hinted at a different approach, with a particular emphasis on areas such as crop yield enhancement and the development of mobile-based banking.

Gates has learned the lessons that great economic thinkers such as Barbara Ward sought to inculcate a generation ago. Ward was dismissive of the emphasis organisations like the World Bank placed on grand projects. 

For Ward, it was all about harnessing the capacities of people living in the villages and the often socially vibrant big city slums.

As Gates noted, maize yields in Africa are less than one fifth of those in the US — there is scope to double these, thereby reducing reliance on imports, boosting peoples’ health and productivity and generating funds for new enterprises.

But Gates recognises that the continent is in a race against time, as disruptive climate change kicks in. He estimates that it is pivotal that alternative energy sources be developed within the next 15 years.

The Microsoft co-founder clearly has been on a steep learning curve and it might be well worth the while for the 31-year-old Zuckerberg to start picking the brains of his elder and erstwhile rival.

Whether we like it or not, globalisation has resulted in a huge concentration of resources in the hands of global corporations and the people who control them. It is unlikely that this group — barring some form of revolution — will be surrendering these resources any time soon.

It is vital then that they be channeled towards truly productive uses.

At a time when democratic government is gridlocked, or short termist in nature, and when autocrats concentrate on building up war machines (matched of course by democratic equivalents) the demand for compensating action from the current generation of business tycoons is obvious.

It would, of course, be nice if Facebook could be persuaded to cough up more than the measly £4,327 it paid the British taxman last year, but in the absence of dramatic immediate progress on the tax front , the next best thing would be a surge in corporate giving from that source of the type at least hinted at by Mark Zuckerberg this week.


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