How tax incentives slow down positive change in social impact ecosystems and what can we do about it

Abstract

To advance positive change within social impact ecosystems, policy makers offer tax incentives in return for social value. Some social enterprises are exempt from paying taxes, with an expectation that they will create positive change in society. Yet, studies have highlighted that there are a growing number of value-detracting issues with tax exemptions, which detract from ecosystems of positive social change. Therefore, spotting and rectifying situations of potential value detraction is paramount. In this paper we offer a two-sided framework called SCAM/MEND, to identify and act upon the ‘dark side’ of tax exemptions in social impact ecosystems. The SCAM side of our framework allows ecosystem actors to spot situations in which negative outcomes are likely to emerge from tax exemptions. The MEND side of our framework offers policy makers and ecosystem actors a new course of action to redirect positive change efforts.