Tax incentives for the cultural sector

In the USA, private and corporate donations are very important for the cultural sector. In Europe, cultural institutions are often funded by direct subsidies. However, private donations, including corporate sponsorship, are also important in many European countries. On the other hand, because of tax incentives applicable to donations, private donations often imply indirect government support, also in countries such as the USA. An important example of a tax incentive is the deductibility of gifts for income tax purposes, an incentive provided for by, for example, the USA, Japan and several European countries. The questions discussed in this chapter are why governments apply this kind of government support and what the pros and cons of tax incentives are, especially in the field of culture.