The announcement by Facebook CEO Mark Zuckerberg and his wife Priscilla Chan (via a letter to their newborn daughter Max) that they are going to divert 99% of their Facebook shares (a cool $US46 billion or so) into a foundation to benefit the world has engendered its expected share of congratulation, money-grabbing and journalistic cynicism – mostly in that order.
Immediate media reaction was mostly positive, and there were plenty among the great and the good (Bill and Melinda, for example) weighing in to wish the new family well. Punters were next offering suggestions of how the Chan Zuckerberg Initiative could spend its money – “my college tuition fees” being an early idea.
The conversation changed when a New York Times writer bluntly suggested (in an article entitled “How Mark Zuckerberg’s altruism helps himself”) that the couple’s use of a limited liability company (LLC) rather than a charitable foundation as the vehicle for the charitable donations was a handy way for Zuckerberg to minimise his tax. The argument was basically that the LLC structure allows Zuckerberg to sell or pass on his stock without paying capital gains or other taxes.
“At heart, the debate boils down to whether you think Mark Zuckerberg is a benevolent billionaire do-gooder or a shameless capitalist in search of a tax break,” opined Mashable.
Of course, getting cynical over Zuckerberg and tax paments is hardly unexpected. Facebook has come under fire worldwide for making megabucks and paying very little tax. In New Zealand, for example, the company paid just $43,000 of tax last year, despite income rising 41% to $1.2 million. That’s a tax rate of about $3.6%. In Britain it was even worse. Facebook paid less than £5000 in corporation tax.
Still, the LLC model may be less an evil ploy and may in fact be a clever move to give Zuckerberg more opportunity to flex his philanthropic muscles to get political and social change, according to Bloomberg. This view is shared by New Zealand philanthropy expert Lani Evans, who founded social enterprise Thankyou Payroll, and works with both Philanthropy NZ and the Vodafone Foundation.
Evans likes the fact that the LLC model allows advocacy, lobbying and making a profit – which means money from the Chan Zuckerberg Initiative could more easily be used to fund social enterprises, she says. This could be a model for New Zealand to follow, she says. While our charities legislation doesn’t explicitly prohibit political lobbying, courts have ruled that “it may be uncommon for political purposes to be charitable purposes” and charities like Greenpeace have got itself into trouble in the past.
“The traditional charity model is limiting,” Evans says. “If you are a global poverty group, for example, being able to do advocacy work, being able to lobby for policy change, would be a positive. [Zuckerberg’s move] could open up a conversation that could allow New Zealand to do it better.”
Zuckerberg has been open about the fact lobbying is on his agenda. "We must participate in policy and advocacy to shape debates,” he told Max in the letter.
It’s this idea which may be at the heart of what is most interesting about Zuckerberg’s announcement – his evident wish to take control of his giving. Most of us do the vast majority of our philanthropic giving – contributing to health and education and poverty alleviation – via the Government through our taxes.
If we don’t like how the Government is spending our money, we vote to change the people in power.
Zuckerberg’s model (and that of many of the huge American foundations) is different, and worrying, says Kiwi inequality writer Max Rashbrooke. He says the public philanthropy model, for example in Scandinavia, leads to better social outcomes (life expectancy, teenage pregnancy, drug addiction, homicides etc) than the private philanthropy model prevalent in the US.
Rashbrooke believes Zuckerberg’s choice of the philanthropic LLC model says as much about his age (31), as anything. Millenials want to change the world, but want to change it in an individual way.
“Zuckerberg cares about meaning and purpose, but thinks the way to better society is him generating largess his own way. So paying tax isn’t what he wants – he wants an individual response. The problem is there is a limit to what you can do acting individually. Fundamentally, America’s record on social progress, dependent as it is on philanthropy, is not good."