NGOs comment on the President’s proposal to exempt charitable work from taxation
In his annual address to the Federal Assembly, Dmitry Medvedev stated that the development of conditions for the creation of civil society was a government task, and promised that aid for NGOs tackling difficult social problems would continue. In particular the work of charitable organisations assisting socially vulnerable categories of citizens would be simplified. The president said that an institution for socially orientated NGOs would be set up to which organisations could apply direct for government help – financial, informational and advisory. They would receive tax exemptions and would be in line for government and municipal commissions. Government agencies would be able to make property available for their use.
Mr Medvedev promised that charitable help afforded to people with disabilities and children not receiving parental care would be tax exempt. NGOs caring for the sick, the disabled, the very old and providing social services for orphans and children not receiving parental care would not have to pay VAT. Grants in aid of health maintenance, physical training and public sport would not be subject to tax.
He also stated that the endowment capital that certain NGOs are entitled to hold could include securities and real property. He exampled those involved with education, culture, sociological research, physical training (but not professional sport) arts and crafts, historical documents and social welfare.
NGOs want the tax-exempt category to be expanded and a great deal hangs on what is included. They want to know, for instance, whether aid to needy families with a large number of children will be included as is already the case with aid to orphans and those with disabilities? Of especial interest to NGOs is Mr Medvedev’s proposal for NGOs to be entitled to receive government commissions. This is seen as normal practice in the West as regards social functions. NGO leaders say that the intention appears to be to introduce reforms, but the outcome will depend on those who implement them. It would be unfortunate if NGOs were to be divided into white and black sheep so far as government contracts are concerned, however. Transparency is thought to be essential with regard to the proposed tax exemptions.
Elena Topoleva, ASI Director, who acts as an expert advisor to the NGO legislation working group, observed that the president’s proposals were a follow on to the adoption in the summer of the concept of supporting the development of charitable endeavour and volunteering. The proposals were not just ‘hot air’ but resulted from actual and significant work undertaken by representatives of civil society and officials. Bills had been drafted and she hoped that they would be enacted into law by the New Year.
Another charity director illustrated the importance of reforming the taxation system by instancing the hardships faced by recipients of services from charities who are taxed on services provided. She also spoke about the value of providing an alternative network of social service providers to the governmental one. The two systems could collaborate and the government could grant aid NGOs. She was convinced that NGOs could be more effective than the authorities*.
* According to research carried out by the Russian Public Opinion Research Centre jointly with the research group ZIRCON, in 2008, sixty-seven percent of Russians stated that ‘the charitable sector conferred greater advantages since realistically many people and organisations had no alternative source of help’.