Beijing looks at laws on philanthropy

By Lian Mo (China Daily)
Updated: 2010-11-03 18:05
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BEIJING - The first national charity law is likely to be legislated in three years in China, a former official of the Ministry of Civil Affairs told China Daily.

Wang Zhenyao, former director of the Ministry of Civil Affairs' social welfare and charities department, said the draft was submitted to the Legislative Affairs Office of the State Council last year for further revision.

"The legislation is highly possible in next three years as both the National People's Congress and the society have a lot of concern on the matter," said Wang, who was in charge of drafting the charity law when he worked for the ministry.

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The Legislative Affairs Office introduced a structure of the draft law at a symposium on charity legislation at the end of July, which was mainly consisted of three parts.

First, the law will make innovations on tax deduction and registration systems to give a looser but more regular environment for charities, especially grassroots ones.

Second, it will confine the power and responsibility of the government, enterprises and society to assure the voluntary and civil positions of the charity sector.

Third, it will request charities operate in a more public and transparent way to guarantee credibility.

Wang, who now heads Beijing Normal University's One Foundation Community Research Institute, said the draft also includes regulations about donations of stocks and shares, and about managing the shares. With the recent visit to China by US billionaires Bill Gates and Warren Buffett, many people have called for further reforms of the charity system.

Present regulations said enterprises in China enjoy a total tax deduction if its donation is no more than 12 percent of its annual profit. The rate is higher than the 10 percent in the United States, but not all non-government organizations (NGOs) in China have tax-exempt status.

"Among the more than 420,000 registered NGOs in China, only very small percentage of organizations and their cooperated partners have tax exemption status," said Yang Tuan, a professor at Institute of Sociology of the Chinese Academy of Social Sciences in Beijing, who participated in drafting the charity laws.

"To avoid some NGOs taking unfair advantage of tax exemptions, the government strictly examines NGOs before giving out the tax exemption status," she said.

For the same reason, it is very difficult for an organization to gain NGO credentials.

To register with the Ministry of Civil Affairs as an NGO, an organization has to find another government department to be a "responsible institute".

"This requirement stops most grassroots organizations from being legal NGOs," said Li Dajun, program manager for the China Social Research Center affiliated with Peking University.

"Without such credentials, it is very hard for grassroots organizations to get resources and trust."

Tian Huiping, founder of Beijing Stars and Rain, a grassroots NGO helping autistic children, said it had never been able to get tax exemption status until December last year when it began using the account of China Charities Aid Foundation for Children to accept donations.

Founded in 1993, Stars and Rain had to be registered as a company with commerce and industry bureau.

"We have always been trying to find a responsible institute and register as an NGO, but no government department is willing to take us as there is no benefit for them but big responsibility," she said.

"Our past operation has been 'illegal'. All we can do is to keep our financial statements transparent."

Stars and Rain is now seeking affiliation with the Beijing Disabled Persons' Federation, which last year became a "responsible institute", thanks to a new government policy.

Sun Zhongkai, Stars and Rain's director, said there are still lots of procedures to go through "before we can become a real NGO".

In the case of personal donations, China's tax laws say no more than 30 percent of annual income will be tax exempted. But Wang's experience showed it was not as easy as the policy said.

In 2005, he donated 500 yuan ($75) to China Charity Federation and applied for exemption, which took him two months and 10 procedures to be successful.

"Beijing's tax deduction procedures have since been improved, but problems still exist in other areas," Wang said.

Financial commentator Pi Haizhou wrote in the Beijing News newspaper that one reason why the US charity industry prospers is that it has a proper tax exemption system.

In 2007 and 2009, the amount of donations in China totaled 60 million yuan; in 2008 it was 107 billion yuan, due mainly to the Wenchuan earthquake in Sichuan province in Southwest China. In the US, the annual average of donations is $300 billion.

Wang said the government wants charity organizations to play bigger roles in society.

In August, few months after Yushu earthquake in Qinghai province, Northwest China, five central government departments including the Ministry of Civil Affairs asked 15 national philanthropic organizations to transfer their quake-relief funds to the Qinghai civil affairs department, Red Cross Society of China or China Charities Federation in Qinghai.

This received much opposition, with opponents saying the government was trying to be involved with civilian matter.

"The government which gets used to managing everything needs to examine itself and consider what it shall not do," Wang Ming, head of the NGO research center at Tsinghua University told the South Weekend newspaper.

Yang, from the Chinese Academy of Social Sciences, said "the government cannot intervene in charity matters, but should allow civil society to be autonomous".

She said the administration of some charities needs to change. "For example, many China Charities Federation's local operations are run by government officials and they influence the charities' directions," she said.

Guo Changjiang, vice-president of Red Cross Society of China, said government assistance can help charities do better jobs as many grassroots organizations lack professionalism.

But some do not agree. Li Dajun, from the China Social Research Center, said: "For what I know, most grassroot operations are quite all right. They would cooperate with professionals when working in specific areas."

Yang said: "Although they may be not professional enough, they have their own advantages and need space to grow up."