Russian tax change could hit charitable donations
“Tax on seriously ill children” may hit charity
Interview with the director of fundraising and communications at Children’s Villages – SOS. Will the introduction of a mandatory increase in personal income tax, with the additional money raised ringfenced for supporting orphaned children, harm fundraising activities with donors?
“There could be issues around this change, since the scheme that is being proposed would involve mandatory contributions to a sector that has so far been seen as relying exclusively on charitable donations. This earmarked funding mechanism is, of course, not an act of charity, but rather a new way for the state to use taxation to provide social support. It could harm the charitable sector, as when such changes have been introduced in other countries, citizens tend to view this change as an increase in taxation “for the charitable sector”, in lieu of making donations.
When similar changes were introduced in other countries (such as Poland, Hungary and others), citizens were able to outline which social sector should be funded with their own taxes.
One such scheme is the widely known “1% tax”, where every citizen is able to nominate an NGO on their tax return, which will receive part (1%) of the value of their tax paid. NGOs have received millions of euros as a result. This initiative involves an extensive list of eligible NGOs in a variety of sectors and authorised by the state that can benefit, as opposed to supporting a single organisation. However, many residents in these countries do not then make donations to NGOs directly as they have “already made payments through the taxation scheme” – although in reality they have only told the state where to direct the taxes they have paid,” – Dmitry Daushev told ASI.
In a televised address on 23 June, Vladimir Putin suggested increasing income tax amongst those who earn more than 5 million roubles a year and directing the additional funds raised to a newly formed state fund, aimed at supporting orphaned children with diseases.