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Overview of indirect government support to NGOs

Overview of indirect government support to NGOs. Nilda Bullain European Center for Not-for-Profit Law (ECNL). Forms of indirect support. Tax benefits for organizations Profit tax exemption on “regular” income Profit tax exemptions on economic activities Property tax Customs tax VAT

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Overview of indirect government support to NGOs

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  1. Overview of indirect government support to NGOs Nilda Bullain European Center for Not-for-Profit Law (ECNL)

  2. Forms of indirect support • Tax benefits for organizations • Profit tax exemption on “regular” income • Profit tax exemptions on economic activities • Property tax • Customs tax • VAT • Fees and dues • Local taxes • Etc.

  3. Forms of indirect support • Tax benefits for donors of NGOs (individual and corporate taxpayers) • Tax deductions • Tax credits • Percentage designations • Other incentives (e.g. gift aid)

  4. Forms of indirect support • Tax benefits to volunteers of NGOs • Tax benefits to beneficiaries of NGOs • Personal income tax exemptions related to training, scholarships, aid, assistance etc. received from NGO

  5. Public Benefit Status • Special status for granting certain tax exemptions • Transparency and accountability criteria (stricter than other NGOs) • Higher level of indirect support “in exchange” • Sometimes additional benefits (e.g., direct support)

  6. Some dilemmas • Should government provide direct financing to PBOs only? • YES: more accountable organizations • YES: public money spent on public purposes • NO: depends on the goal of financing • Direct spending can be controlled through contractual relationship – PBO is primarily a tax status

  7. Some dilemmas • Do tax incentives really help with development of philanthropy? • NO: research shows worldwide that tax relief is not main motivation for giving • YES: tax incentives can influence how much people give and in what way • ?: percentage laws – no proven effect as yet

  8. Some dilemmas • Should related economic activities be tax exempt? • NO: it fosters unfair competition, creates opportunity for abuse • YES: it helps fulfill NGO’s mission • YES: it helps sustainability of NGOs (greatest % of NGO income worldwide from economic activities)

  9. Tax Tools: www.icnl.org • Survey of Tax Laws Affecting NGOs in Central and Eastern Europe • Survey of Tax Laws Affecting NGOs in The Newly Independent States • The Tax Treatment of Nongovernmental Organizations - A Survey of Best Practices from Around the World

  10. Thank you! For more information: www.ecnl.org

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