Business, NGOs and government representatives discuss problems relating to charitable donations in R

Chulpan Khamatova, member of the public chamber and of its committee concerned with the legislation on NGOs, and founder of ‘Gifts are Life’, has expressed concern over the fact that at least fifty percent of the value of gifts made via SMS or the Internet or of the proceeds of the sale of minor souvenirs for charitable purposes goes on non-charitable items like taxes and commission. In several countries, charitable donations are either not subject to tax at all or only at a very low rate.

 ‘In contrast to everywhere else we have been looking for loopholes in the law and employing indirect methods’, said the executive director of Gifts for Life. He was speaking at a round table meeting on finding new ways of making donations in Russia that took place in the public chamber on 2 March and was attended by representatives from business, government and the third sector. He explained that business and the third sector would prefer not to be seeking ways round the law. If a donor gave money without specifying their address and passport number, it was counted as money laundering in Russia, unlike in many countries. Representatives of business preferred either to give cash or donate through offshore companies to avoid tax levies. Added value tax was charged on educational material published by institutions of higher education for distribution free of charge. Charitable auctions were plagued by similar difficulties with loss of part of the proceeds where the law was observed to the letter. Auction houses might have to pay as much as forty percent in tax. One scheme devised by the fund is called ‘an auction of charitable donations’ where you receive a gift of one of the lots by bidding. One fund director characterised this method as lawful but so alien to common sense that ordinary people would not be attracted to participate. The problem could be overcome by allowing NGOs to receive donations in kind for onward sale. At the moment it was more effective to employ tax avoidance schemes.

Furthermore, it was considered that the definition of charitable activity was unduly limited. Charitable and voluntary work could be enhanced by extending favourable treatment of donations to NGOs that were ready to accept the need for increased accountability. Another suggestion was that the legislation relating to NGOs should be consolidated under a discrete title so that the detail was not scattered amongst provisions that applied generally. An independent expert warned that reform of donation and accountability practice needed to proceed in parallel if the NGOs were not to be accused of devising dubious schemes.

The sale of goods by Internet companies for the benefit of NGOs in exchange for minimal commission, or the donation of a small amount of money to charity each time a particular telephone call is made or a metro ticket is sold, were mentioned as examples of ways of simplifying the donation process. Reference was made to research carried out in the USA showing that on average NGOs provided like for like services three times as cheaply as government institutions. That is why in many countries business and NGOs receive government allowances.

The fundamental problems of mechanisms for making donations in Russia are set out in a research report entitled ‘ An Analysis of Russian Legal Practice and Proposals for Reform; Adoption of Novel Mechanisms for the Receipt of Donations’, prepared by an expert working under the auspices of the State Duma (Parliament) committee on economic policy and enterprise, Victor Kalinin. The document is to be completed by the addition of recommendations emerging from the round table and forwarded to representatives of the law-making and law-enforcement bodies.


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