IT SURELY is better to give than to receive, but sweeter it is by far when the giving involves no sacrifice; as in the US, where the giving is easy. Ninety per cent of all money given to the arts there comes from individuals. It amounts to pounds 9bn a year. And it is all tax deductible.

In Britain business gives pounds 90m a year to the arts, and this is tax deductible; but no figures are available for individual giving: it is not monitored because it is not regarded as a significant source of funding.

Gordon Brown can help to solve the crisis in the arts by allowing potential donors in the community and private companies tax relief on the American model. He need only announce in the Budget that all donations and sponsorship payments to the arts are tax deductible.

A report by the President's Committee on the Arts and the Humanities noted: "If the charitable impulse is the train of American philanthropy, the charitable deduction is the coal that stokes the engine." And the government tempers the brutality of US capitalism in pages 163-170 of the Internal Revenue Service's "Tax Guide". Among organisations that qualify as charities for tax purposes are museums and centres for the performing arts, along with non-profit parks, hospitals, and schools. If you have $2,000 of disposable income you would like to share among your local mosque, your child's state school, Yellowstone National Park, the Museum of Modern Art and the Washington Opera, you can do so knowing that you will remain $2,000 better off than if you had spent the money on a new computer, or Al Gore's Year 2000 election campaign.

What a contrast to our convoluted, contradictory and at times ludicrous systrem. Below are the anomalies that Mr Brown must end so that the arts can benefit.

If you give to a charity you get tax relief on your donation under the Gift Aid scheme, brought in in 1990. Under the scheme the charity can claim back basic-rate tax (23 per cent) from the Inland Revenue while higher-rate taxpapers can claim back 17 per cent of the gross value of the gift - the difference between the 40 per cent higher rate and the basic rate. If a person gives pounds 250 to an arts body it would be able to claim back pounds 74, making the gift worth pounds 324. Higher-rate taxpayers could claim back 17 per cent of this sum, ie pounds 55. So for a net outlay of pounds 195 they have the charity has benefited by pounds 324. But some arts organisations are charities, others are not: 50 per cent of museums are not, for example. If the arts organisation is not a charity, then there is no tax relief.

In addition, tax relief under Gift Aid is given only on sums larger than pounds 250. You can also make a deed of covenant, which is time-consuming but attracts tax relief. But there is a further anomaly. If you benefit from your donation by, for example, getting reduced admission prices after your donation, or even just get put on a priority mailing list, you may lose your tax relief. And to make the system yet more ridiculous, if it is not a pure donation but has a tangible return for you, it counts as trading income for the arts body and it may have to pay tax.

In the US the only condition is that claims for deductions on contributions of more than $250 must be accompanied on the tax return by written receipts. Aside from that detail, the law allows for individuals to donate up to 50 per cent of their gross adjusted taxable income.

Business in Britain fares less well than in the US, where the arts get pounds 2bn a year from corporations, but business is far better treated than individuals. Sponsorship of the arts does attract tax relief either as a charitable donation or because it furthers trade. So a business has to argue with the taxman in one of two contradictory ways: yes we're doing it just to help the arts, or yes it's for the sole purpose of helping our trade. A further bizarre complication is that if a business buys seats to take clients to the theatre or a concert there are no tax deductions. If it takes staff on a works outing then the seats are tax deductible. But if the company takes staff too often, the seats may be be tax deductible, but could become taxable on the staff as a benefit in kind!

So different rules apply for donations, sponsorship, staff entertaining and client entertaining. But a business wanting to sponsor the arts wants to do all of those things as a complete package.

David Oliver, a partner at Arthur Andersen, accountants, and an expert in donations to the arts and the tax implications, says: "The current state of the law is a complete mess. There's utter confusion. Over several generations we have developed layers of encrusted imbecility as regards tax and giving to the arts - it's time for a major overhaul."

Colin Tweedy, director of the Association for Business Sponsorship of the Arts, says: "There is not a climate of giving in this country. And part of the problem is that individuals cannot always get tax relief on giving to the arts. If they could, we would see contributions mushroom."

Even ABSA's own chairman, Robin White, who heads a leading advertising agency, admits that he has to ask his accountant to sort out his Gift Aid forms, as they are so complicated. And Gift Aid is meant to encourage individuals to support the arts.

The present situation is particularly galling for museums and art galleries, and for people who want to give paintings and objects to them. In Britain, in notable contrast to the situation in the US, gifts of works of art given in an individual's lifetime cannot be written off against tax. Only after death do such schemes as acceptance in lieu come into play. David Barrie, director of the National Art Collections Fund, estimates that hundreds more pictures would be given to museums if the law were changed.