Policy incentives urged for charitable activities
By Wu Chong, Li Jing and Sun Xiaohua (China Daily)
Updated: 2005-11-22 06:10

Chief Executive Officer Jeff Immelt of the General Electric Company receives a gift from the China Youth Development Foundation (CYDF) on May 24 in Beijing after the GE Foundation donated US$800,000 to CYDF to support its training programmes for teachers.

China is considering a range of rules and regulations, including a charity law, to encourage and regulate charitable activities in the country where charity is still not very popular.

This was revealed yesterday at the China Charity Conference.

"It aims to co-ordinate relations between governments, charity organizations and foundations, companies and individuals in this field," a source at the conference said.

An outline of the law is almost complete, with a large part aimed at encouraging people to participate in charitable activities.

"The law will include favourable tax policies for charitable deeds. About 13 current taxes may be affected in the final proposal," he revealed.

Now the Ministry of Civil Affairs is pooling ideas for the proposed charity law, as well as related regulations for lottery and donations.

It seems that not until this year has "charity" become popular in the country, against the background of an increasing gap between the country's poor and rich.

In March, Premier Wen Jiabao expressed the central government's resolution to "support charity development" in his government work report at the third session of the 10th National People's Congress.

It was the first time that "charity" has been written into the government's annual work report, marking a breakthrough in the development of charity work in China.

Last month, the Communist Party of China put forward a message that it will support social charitable activities to "enhance the social security system" at its annual plenary session.

"Charity is not a new concept for our nation. But the connotation has been extended over time," said Wang Laizhu, a senior official with the Ministry of Civil Affairs.

He said charity today refers to a wide range of good deeds volunteered by ordinary people and corporations, including establishing charitable organizations, making donations and voluntary work.

"It is a part of the social security system," Wang said.

Ministry statistics indicate that each year more than 60 million people fall victim to natural disasters and around 22 million people struggle at the poverty line.

In addition, a rural population of 75 million lives in poverty.

People who are in great need of help include 60 million disabled and 140 million people who are above the age of 60, added Ding Yuanzhu, a senior researcher with the National Development and Reform Commission.

"We played up the role of economic growth in the past decades while neglecting something spiritual. People's reluctance to devote to charity is one of the results," Ding said.

Lu Shizhen, a professor with the China Youth University for Political Sciences, pointed out another important reason to popularize charity among the public: "It can create great economic value."

According to him, Chinese young volunteers have devoted more than 4 billion hours of voluntary services to society since the end of 1993, creating an accumulative business value of 12 billion yuan (US$1.5 billion).

However, the country's charity development has experienced a disordered period, leaving a number of problems that wait for immediate solutions.

Tax policy

Among them, tax policy is highlighted.

The current law states that domestic corporations' donations are exempted from income tax if the amount is within 3 per cent of taxable income. The ratio is 30 per cent for individuals.

Foreign-funded companies enjoy an exemption of all tax if they make charity donations.

Synutra, a dairy product enterprise, based in Qingdao, Shandong Province, has donated at least 2 million yuan (US$247,000) worth of funds and materials to the country's poor children since 1998.

Its latest donation was the contribution of 100,000 yuan (US$12,000) and milk powder worth 400,000 yuan (US$48,000) to the country's orphans, some of whom are infected with HIV/AIDS.

However, compared with the enthusiasm for donations shown by enterprises in developed countries, Chinese enterprises lag behind.

"The lack of encouragement in the system is a major problem," said Chen Xinnian, a director from the Economics Research Institute affiliated to the National Development and Reform Commission.

"There is no preferential policy of tax exemption for domestic enterprises who make donations," Chen said. "Meanwhile, domestic non-governmental organizations (NGO) have little influence among the public. Such NGOs need to be further developed."

"Without the preferential policies, Synutra will still give to charity," said Wang Bo, manager of Public Relation Department of Synutra. "But if there are preferential policies encouraging enterprises' donations, more enterprises will join in China's charity."

Now China has more than 10 million enterprises; however, only less than 100,000 enterprises have a record of making donations. Donations made by those enterprises account for just 0.1 per cent of the country's gross domestic product, according to Chen.

In comparison, foreign-funded enterprises are seen actively involved in the country's charitable causes. Novartis, a Swiss pharmaceutical company, said it donated 500 million yuan (US$61.65 million) last year towards treating leukaemia patients in China. The company won a prize for its achievement at the conference.

Chinese enterprises and entrepreneurs have begun to strengthen their awareness of their social responsibilities. In January this year, Ding Lei, the founder of Netease Corporation, personally donated US$1.2 million to the Red Cross Society of China to help victims of the South Asia tsunami.

Organizations

Domestic charitable organizations are also in a dilemma.

China's non-government organizations, which have achieved remarkable growth over the past few years, still need urgent support from the government in terms of policy and finance.

Shen Limin, director of a community service centre in Shanghai, said the government should set up a system that differentiates non-profit sectors from for-profit ones, adding that the most pressing issue was the reform of the tax system.

He said that at present, non-government institutions are regarded as for-profit companies, greatly hampering their development.

The government should also consider providing financial aid to institutions for their basic operations, helping them tide over economic strains so that they can observe the non-profit principle, Shen added.

He said non-government organizations, which play an increasingly important role in charity and other civil affairs, do not enjoy the same policy and finance support as State-run institutions.

For instance, Shen said, in Shanghai, senior citizen's homes operated by the government enjoy a monthly subsidy of 90 yuan (US$11.1) for every elderly resident, but those run by non-government organizations are not eligible for the support.

Chong Chan-yau, executive director of Oxfam Hong Kong, echoed Shen's words, saying it was important to empower the "third sector" the non-government sector as well as the traditional two major sectors, namely the government sector and the business sector.

Chong said collaboration between the three sectors was crucial to achieving a harmonious society, but at present, the third sector was in its fledgling stage and faced a number of difficulties such as in registration, money raising and tax exemption.

Self-management of non-government organizations and supervision from public and government agencies are also among the urgent issues to address, Chong added.

He suggested that Chinese non-government organizations learn from their overseas counterparts in terms of structure building, management and financial operation.

(China Daily 11/22/2005 page5)