Should Tax Incentives for Social Enterprise Stop?
I recently attended the launch of a report by the Centre for the Study of Financial Innovation entitled “Investing in Social Enterprise; The Role of Tax Incentives”. What followed was one of the most vigorous and lively debates in which I have ever participated in this sector.
The report catalogued the considerable number of tax incentives available for investors in social enterprise in the UK—many of which have been available for some time. Government officials in many countries are studying case studies like the UK and toying with alternatives. At the CSFI debate, numerous practitioners argued for a series of sensible refinements. Others noted that the field of play should at least be level with the private sector. There is, however, a compelling case for an end to all incentives.
First, there is little evidence they succeed. In the UK it seems the progress of the sector has happened despite, and not because, of the incentives. Areas of particular benefit seem to have enjoyed less, rather than more, growth.
Second, the vast array of incentives is highly complex, difficult and expensive to negotiate. Small wonder the cover of the report was an image of a maze.
Third, they are highly distortive. There is considerable evidence they also displace important private sector efforts in the social enterprise area. When these incentives are augmented by the creation of Government funded or backed vehicles, as in the UK or Ontario, Canada, for example (thus far the US has been relatively light on such distortions), this can seriously impede private sector involvement.
Fourth, Government incentives can be highly volatile and vulnerable to a shift in the political winds. Thus, well-intended initiatives can be undone at the stroke of a pen, which is disruptive and damaging to the operations impacted.
Fifth and most importantly, at such times, it is difficult to argue that our sector is as deserving as so many whose lives have been destroyed by such man-made calamities as the credit crisis and the resultant fiscal retrenchment, or the recent oil spill in the Gulf of Mexico. Our genuine concern for the social impact of our sector needs to take into account the human suffering around us.
Moreover, with private capital making its way into the social or impact investment space, are we really in a position to justify our pleas?
Nevertheless, questions remain:
· Are there specific areas where there is simply no choice but to require governmental capital or fiscal incentives to correct a genuine market failure (rather than frustration over speed)?
· Which sorts of governmental activity can have the biggest impact? In which circumstances?
· Are any particular countries especially effective in social enterprise development as a result of governmental action? Many of my examples reflect my own Anglo-Saxon orientation. Are there other models that are working? Do recent fiscal programmes in France offer a new path to follow?
Join Rod Schwartz, CEO of ClearlySo, in the conversation.
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In the business world, it’s par for the course to move on when a project has proven financially unviable. Those of us who identify as social entrepreneurs can be more stubborn, at our own expense. We don’t necessarily move on when our projects have proven financially unviable. 
If we loved perpetual hand-to-mouth fundraising for our social enterprises, we’d never make this announcement. If the market were up to speed on the scalable potential of social entrepreneurship with engaged funders like the more advanced VC community that the exclusively for-profit sector looks to for scale, this discussion would be lame. But it’s not and we are raising money hand-to-mouth when we know for sure that a modest infusion of capital would scale our social enterprises. 
A recent post which appeared on Social Edge and ClearlySo infuriated my friends and colleagues from the Socially Responsible Investment (SRI) sector. 
Do we really need more money? 
Online social activism - what I call the CauseWired sector - is rapidly coming of age. Innovative web tools, online story-telling, and social media are more often than not at the center of the modern social enterprise, and not on the edges. The reason is simple and compelling: gathering people online is easier, less costly, and in many cases more effective in building support and creating real movements.
Are you changing your lightbulbs? Driving less? Exercising more? Are you voting for the best social entrepreneur idea? Joining a cause? Signing a petition? Are you blogging and twittering to raise awareness? Loaning money to people in emerging markets? Feeding the homeless, donating new pajamas to foster kids, and giving toys to tots? Are you saving the rainforests one candybar at time and providing clean water one bottle at a time? Are you recycling, composting, reusing? Are you bringing your own shopping bags and your own coffee cup? Are you shopping ethically? Sustainably? Organicly? Locally?
Making the Case in Five Minutes or Less.