Legal Developments in Central Asia

7 April 2003

The Government of Kazakhstan approved the State Program of Government Support of NGOs

Finally, on March 17, 2003, the Government of Kazakhstan approved the State Program of Government Support of NGOs. This program has the status of the legislative act, and authorizes specified government branches to “work on creation of conditions for sustainable development of NGOs, as a part of civil society and to strengthen their role in resolving socially important problems based on cooperation with and support from the Government”. This is an important first step towards the improvement of relations between NGOs and the government and, hopefully, termination of the constitutional prohibition against any direct or indirect government support to public associations. This constitutional prohibition has no international precedents.

However, this is of course only the first step, and unless appropriate follow up legislation is adopted and implemented, the program will remain only a declaration of good intent.

Amendments to the Kyrgyz Tax Code including tax privileges for NGOs signed into law

On December 16, 2002, the Kyrgyz Parliament passed the Law on Amendments to the Tax Code. The law was signed by the Kyrgyz President on March 8, 2003. The new amendments exempt humanitarian aid, grants, charity donations, endowments, membership and entry fees from income tax, and provide additional incentives for companies and individuals to support charities by increasing allowable deductions from 2 to 5% of a taxpayer’s taxable income. The amendments also exempt supplies of goods and services provided by charitable organizations for charitable purposes from VAT. In addition, amendments improve implementation of existing tax code provisions by providing clear definitions of the key terms “charitable organization”, “charitable activities”, “membership fees”, “entry fees”, “grants”, and “humanitarian aid”.

The amendments to the Tax Code represent the culmination of an extensive two year effort by the International Center for Not-for-Profit Law (ICNL), to improve the tax treatment of NGOs in collaboration with all the stake holders. These amendments are the product of joint efforts undertaken by NGOs, progressive parliamentarians and government officials, and international organizations.

In May 2001 ICNL, with financial assistance of the USAID’s Global Program, held a Central Asian regional conference in Issyk-Kul which brought the attention of the Kyrgyz government and parliamentarians to the problematic issue of NGO taxation.

The remainder of 2001 was spent effectively facilitating a participatory process of drafting amendments to the tax code, and educating NGOs, government and parliamentarians on good international practices of taxation of NGOs. And as a result, in early 2002, at the initiative of two Parliamentary Committees with the assistance of ICNL, a roundtable discussion on the need to revise the Tax Code provisions affecting NGOs was organized among NGOs, government officials and parliamentarians. In February 2002 ICNL organized and financed a special workshop at the Issyk Kul where the official Working Group (including parliamentarians, senior government officials, tax experts, and ICNL) developed initial drafts of the proposed amendments. Subsequently, the IMF, Barents Group, and other international organizations had an opportunity to comment and contribute to the final draft submitted to the Parliament for the consideration.

Finally, in April 2002 the draft amendments were discussed at a Public Hearing held by the Parliamentary Committee for Public Associations and Information Policy Affairs. Counterpart Consortium, including ICNL, conducted a National Advocacy Campaign using a series of roundtable discussions to direct support for the new amendments to Tax code just as the draft was coming to the Floor of the Parliament.

Draft Law “On State Registration of Legal Entities in Tajikistan” Approved by the Lower Chamber of the Parliament

The new law approved on December 20, 2002 by the Lower Chamber of the Parliament (Majlisi Namoiandagon of the Majlisi Oli) would establish a simplified single registration procedure for both commercial and non-commercial legal entities, if adopted by the Upper Chamber and signed by the President. The new law reduces non-commercial organization (NCO) registration fees, the period for application processing, and eliminates the registration body’s powers to refuse issuing a decision on the registration of an NCO. This law is now in the Upper Chamber of the Parliament (Madjlisi Milli of the Madjlisi Oli) and is scheduled to be approved in April 2003. After which the law will be presented to the Tajik President for signing.

During 2002 ICNL worked closely with the drafters providing them with technical assistance and helping them to make the drafting process transparent and participatory. ICNL experts reviewed and provided recommendations on numerous draft versions of the law and organized seminars and roundtable discussions on the evolving drafts of the law with NGOs, drafters and government officials. Dozens of NGOs contributed to drafting by presenting their comments and participating in discussions of the draft law with the drafters organized by ICNL.

Although there was initially strong resistance from conservative officials at the Ministry of Justice who introduced several restrictive provisions, including a provision requiring yearly re-registration with a state fee payment, technical assistance provided by ICNL and effective advocacy from the NGO community led to the removal of restrictive provisions and the reintroduction of provisions favorable to the development of legal entities in Tajikistan. Also, ICNL worked closely with the drafters to ensure that NGOs’ suggestions and amendments were taken into consideration. ICNL will continue educating parliamentarians and will continue to facilitate a transparent process of discussion of the draft, making sure that NGOs and the public have access to parliamentarians so that their comments are heard. ICNL will monitor this law to ensure that no backsliding occurs as it passes through the Upper Chamber.