The International Journal
of Not-for-Profit Law

Volume 1, Issue 2, December 1998

A quarterly publication of the International Center for Not-for-Profit Law

Table of Contents

Letter from the Editor

Articles

Registration of Associations in Central and Eastern Europe and the Newly Indpendent States: A Survey
Rachel L. Holmes

The Case for Intermediate Sanctions
Milton Cerny

Voluntary Organizations in Europe: The European Convention on Human Rights
Erik Denters and Wino J.M. van Veen

Improving Civil Society in Hungary
Daniel Csanády

El Proyecto de Ley N. 4690/98 (Developing State - NGO Relations in Brazil)
Anna Cynthia Oliveira

NGO Legislation in Georgia
Vasha Salamadze

Reviews

The Non-Profit Handbook (1997-1998 National Edition)
Reviewed by Karla Simon

Handbuch Stiftungen
Edited by Bertelsmann Stiftung

Case Notes

Trustees of Sahebzadi Oalia Kulsum Trust v Controller of Estate Duty [1998] 233 ITR 434

Revenue Commissioners v Sisters of Charity of the Incarnate Word

Gaudiya Mission v. Kamalaksha DAS Brahmachary

Country Reports

Asia Pacific:
Regional | Australia | China | India | Japan | Mongolia | Nepal | New Zealand | the Philippines | Thailand | Vietnam

Central and Eastern Europe:
Regional | Albania | Bosnia-Herzogovina | Bulgaria | Croatia | Czech Republic | Hungary | Latvia | Lithuania | Macedonia | Poland | Slovakia | Slovenia | Yugoslavia

Latin America and the Caribbean:
Argentina | Brazil | Ecuador | Puerto Rico | Venezuela

Middle East and North Africa:
Regional | Egypt | Jordan | Morocco

Newly Independent States:
Regional | Armenia | Azerbaijan | Belarus | Georgia | Kazakhstan | Kyrgyzstan | Moldova | Russia | Tajikistan | Turkmenistan | Ukraine | Uzbekistan

North America:
Canada | Mexico | the United States

Sub-Saharan Africa:
Regional | Ethiopia | Mauritius | South Africa

Western Europe:
Regional | England and United Kingdom | Finland | France | Germany | Republic of Ireland | Netherlands | Northern Ireland | Sweden | Turkey

International Developments:
UNESCO | Loccum Conference | Birmingham Conference

Self-Regulation Initiatives

United States - Overview of the Bishop Estate Controversy

United States - Maryland Association of Nonprofits Adopts "The Standards of Excellence"

International Grantmaking

Options for Increasing U.S. Support for Chinese Nonprofit Organizations
Robert A. Boisture

Grantmaking by Private Foundations in the International Arena
Thomas Chomicz

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Editorial Board

Subscription Information

Previous Issues

ICNL Homepage

Country Reports: Newly Independent States

Regional

UNDP Regional Conference in Yalta (September 2-4, 1998)

On September 2-4, 1998, a UNDP regional conference entitled "Human Rights for Human Development" was held in Yalta for the 50th anniversary of the Universal Declaration of Human Rights. About 300 participants representing NGOs and governments of over 27 countries participated in this conference. The UNDP and the Ukrainian Government hosted the Conference. In addition to celebrating the 50th Anniversary of the Universal Declaration of Human Right, the objective of this multinational European conference was to promote partnerships between States and Civil Society. The two day conference was composed of a panel discussion on "Partners for Human Rights: the State and Civil Society", and 5 working groups. ICNL participated in a working group entitled "Promotion and Protection of Human Rights by NGOs and the Private Sector" where the issue of "principles of regulation for the Not-for-Profit Sector" was addressed amongst others. In the other working groups the issues raised were: "Democracy and Freedom from Discrimination," "Protection and Promotion of Human Rights through Judicial and Non-Judicial State Institutions," "Economic and Social Rights" and "Women's Rights are Human Rights."

The European conference helped to establish links between NGOs and governments of the country-participants, in order to share their experience and knowledge. The conference was concluded by the creation of an "Action Plan" which will be supported and coordinated by UNDP and other international entities. This conference became an important event in the history of the governments of civil society in Europe and in the history of the implementation of the European Conference on Human Rights.

WestNIS Conference on NGO Legislation in Kiev (September 9-10, 1998)

The WestNIS Regional Conference on NGO Legislation (Kiev, September 9-10) was the second of a series of conferences on NGO legislation in the NIS organized by the Council of Europe, UNHCR, ICNL, and OSI. The first conference  (for Central Asian countries) took place in Almaty in 4-5 May, 1998 (and was reported in the first issue of the Journal), and the third in this serious conference for the Caucasus countries took place in December 10-11, 1998 in Strasbourg.

Experts from Belarus, Central and Western Europe, and the US shared with other participants information concerning NGO law reforms in different regions of the world. Delegations of NGOs and government officials from Ukraine, Russia, Moldavia, as well as representatives of major international organizations active in the NIS participated in this conference. According to participants, the conference helped government and NGO representatives to understand one another better and to find new ways to cooperate. Both the government and NGO representatives demonstrated their confidence in the need of the strong NGO sector. They discussed important problems NGOs still face, such as luck of tax benefits, problems with registration, transparency of NGOs activity.

The organizers of the conference see its value not only for local governments and NGOs, but also for international donor organizations, like themselves. The conference helped them to better understand the needs and perspectives in NGO law reform, to define which kind assistance is needed in the region particularly in light of demands for a strong NGO sector to meet growing human needs throughout the republics of the former Soviet Union. The conference helps international NGOs to better organize and coordinate their efforts in the NIS region.

Regional Caucasus Conference on NGO Legislation in Strasbourg
(December 10-11, 1998)

The Regional Conference on NGO Legislation was the last in a series of conferences on NGO legislation in the NIS organized by the Council of Europe, UNHCR, ICNL, and OSI. The first conference for (Central Asian countries) took place in Almaty in 4-5 May, 1998, and the second of this serious conference for the WestNIS countries and Russia took place in September 11-12, 1998 in Kiev.

Delegations of NGOs and government officials from Armenia, Azerbaijan, and Georgia, as well as some major international organizations active in the Caucasus region participated in this conference. Each delegation presented to the participants the overview of the NGO legislation in their country. Experts from Hungary, Czech Republic, Western Europe, and the US shared with other participants information concerning NGO law reforms in different regions of the world. In working groups participants discussed issues of NGO regulation important to the development of the NGO sector in their countries: taxation, the freedom of association, registration, governments supervision and reporting requirements for NGOs. Both the government and NGO representatives demonstrated their confidence in the need of the strong NGO sector. According to participants, the conference helped government and NGO representatives to understand one another better and to find new ways to cooperate.

It has been decided by participants and organizers of the conference that the follow up to the conference is needed. Organizers will continue to provide support to NGOs and governments interested in NGO law reform. In addition, in early 1999 the organizers will decide which joint follow up activities are appropriate to further develop the achievements of the conference.

Armenia

Framework Legislation

The NGO Legislation of Armenia

By Nouneh Doudoyan

The Armenian legislation of direct relevance for formation, operation and development of NGOs and therefore for civil society development in the country includes:

1. The Constitution of the Republic of Armenia adopted by referendum on July 5, 1995;
2. The new Civil Code signed into law by the President of the Republic of Armenia on July 28, 1998 and enacted as of January 1, 1998;
3. The NGO Law of the Republic of Armenia enacted as of November 1, 1996. This law is going through revisions to comply with the new Civil Code;
4. Tax Legislation of Armenia with provisions of direct relevance for non-commercial entities as reflected in the current Corporation (Profit) Tax Law, Income Tax Law, and VAT Law.

Important NGO law initiatives include the draft Law on Grants. The draft law regulating charity has been initiated by the Social Welfare Ministry of the Republic of Armenia. Both drafts are going through consideration in Committee on Social, Health, and Environmental Issues of the Armenian National Assembly. Neither draft has yet been presented to and discussed at the National Assembly plenary sessions.

NOTE: Both drafts have been reviewed and discussed at a number of meetings organized by Young Lawyers' Union and NGO Training and Resource Center with participation of governmental and non-governmental representatives. This informal discussion and review process is planned to continue.

The adoption of the new Civil Code triggered the review of 1996 NGO Law. The new Civil Code identifies the following types of non-commercial entities: non-governmental associations, union of legal persons, foundations, and non-commercial cooperatives. Over a period of time, specific laws for the identified legal-organizational types of non-commercial entities are expected to be elaborated and adopted.

The operation of religious organizations and political parties is regulated by special legislation. However, trade unions have been registered under the same law as associations and unions of associations.

Per Article 75, Chapter IV of the Constitution, the right to initiate legislation is reserved only to Deputies and the Government and therefore, direct legislative initiative cannot be exercised by entities other than those mentioned, including non-commercial non-governmental organizations.

The laws of the Republic of Armenia do not forbid NGO engagement in political activities and cite only one restriction which is a characteristic that distinguishes NGOs from political parties, that of non-participation of NGOs as organized entities in the elections to the state institutions formed through electoral process. However, NGO representatives are recognized as election candidates on the basis of proportional representation provided they are citizens of Armenia

For more information, please, contact Nouneh Doudoyan , Assistant Director, Armenian Assembly of America's NGO Training and Resource Center (AAA NGOC) Tel: (3742) 151-919; 52-86-54; 50-10-64; 58-15-77; Fax: (3742) 15-17-95; e-mail: nouneh@ngoc.am
Mailing address is: 23 Sevastopolian Street, 375028, Yerevan, Armenia.

Azerbaijan

Legislation affecting NGOs in Azerbaijan NGO

There are two main laws in Azerbaijan specifically regulating NGOs: the Law on Public Associations (1992) and the Law on Grants (1998). Among other laws affecting NGOs are the Law on Registration of Legal Entities (1996), the Law on Tax on Profit, and the Law on VAT.

A. Statutory (General) NGO Laws

The Law on Public Associations is based on the All-Soviet model "public associations" law and contains deficiencies similar to those in "public associations" laws in other NIS countries:

  1. the current law does not allow the formation of non-membership organizations, such as foundations;
  2. only citizens of Azerbaijan are allowed to be founders of NGOs;
  3. NGOs are currently defined geographically (international, all-republican level, multi-regional, or local, thereby limiting geographic area of activity); it is more difficult to register international and all-republican organizations; activities of NGOs are limited within the area of registration and expantion of activities requires re-registration of the organization;
  4. NGOs have to be registered with the central office of the ministry of Justice in Baku which makes it especially problematic for regional NGOs outside of Baku;
  5. the present laws contain various other features that have a negative impact on NGOs:

At the invitation of the UNHCR, with co-funding from Open Society Institute/ Azerbaijan, and based on extensive consultations with local NGOs, lawyers and government officials, the International Center for Not-for-Profit Law («ICNL») presented to the Parliament's Commission a draft NGO law On Voluntary Non-commercial Entities («Draft Law») in January 1998. While this draft law has not been considered by the Parliament it encouraged local NGOs to initiate drafting of other NGO laws, such as the law on charity and the statutory (general) NGO laws. ICNL prepared draft law was taken as a bases to prepare initiated these draft laws.

B. Civil Code

It is especially important that new draft laws comply as much as possible with the new Civil Code. It is expected that the draft will be adopted in 1999. Currently it is going through legal review at the Council of Europe.

C. Tax Legislation

The other important issue needs attention is taxation of NGOs. In Azeri legislation there are no clear criteria and mechanism to grant tax benefits to NGOs. Tax benefits are mostly granted based on the subjective decision of government officials, and as a result, tax benefits are unfairly granted to organizations which abuse them, while on the other hand, many public benefit (charitable) organizations are not granted any benefits. If clearer definitions of public benefit or charitable organizations and other appropriate changes are introduced to tax and/or statutory NGO laws, it may be possible to eliminate many abuses by government officials as well as NGOs, and at the same time, to assure support of public benefit (charitable) organizations.

For more information, please, contact Natalia Bourjaily, ICNL Program Director for NIS/FSU in Washington. Tel: (202)624-0766; e-mail: nbourj@icnl.org 

Belarus

1. Framework Legislation

On October 28, 1998, the Parliament adopted a new Civil Code. Presented to the Parliament by President Alexander Lukashenko, the Code was the result of the work of a newly created working group established by the President. Its text is similar to but more conservative than the Russian Civil Code, incorporating, for instance, sections on non-commercial legal entities. The Parliament had previously adopted a different version of the Civil Code in 1997, but President Lukashenko declined to sign it.

2. Tax Legislation

On January 20, 1999, the new Tax Code, Part One (General), passed its first reading in the Parliament.

Further information on the NGO legislation in Belarus can be obtained by contacting in Minsk Elena Tonkacheva, President of Belorussian NGO Independent Society for Legal Research (375-172)29 00 01 (tel/fax); (375-172) 36 55 17 (tel.), or in Washington Natalia Bourjaily, ICNL Program Director for NIS nbourj@icnl.org.

Georgia

Framework Legislation

The Nonprofit Sector in Georgia

By Nino Saakashvili

Located between Armenia, Azerbaijan, Russia and Turkey, and bordering on the Black Sea, the ancient country of Georgia and its 5.2 million citizens remain a mystery to much of the outside world.

The country, its unique language -one of 13 existing alphabets in the world -and its cultural traditions (which date far beyond its cultural and political renaissance in the 11th and 12th centuries) vanished from the global scene when the Red Army invaded and absorbed Georgia into the Soviet Union in 1921. The reappearance of Georgia on the international map in 1991 resulted in dramatic crises and troubles - a civil war and armed conflicts, acute political and ideological problems, a collapsed economy and disintegrating social systems.

Nevertheless, in the face of absolute frustration, inactivity and stigma of previous governance, Georgia's population established a new identity. Within the government the Parliament adopted a new constitution and successfully introduced monetary reform and held (what were judged as) fair and free elections for Parliament and president. Outside the government, a few idealists were traveling all over the country, talking with starving and hopeless communities about forming citizens' groups to solve their growing social, economic and environmental problems, and promoting a new concept in the country- nonpartisan, independent organizations.

This sparked, in early 1994, the establishment of civic organizations (also known as nongovernmental organizations or NGOs) in Georgia. Throughout the past four years, while the country suffered through a painful economic situation and an energy and heating crisis, NGOs have rapidly sprouted and spread across Georgia. By the end of 1997, nearly 4,000 NGOs working on problems facing

children, the environment, education, legal reform, economics, health, arts and culture, human rights, and women and youth had been registered with the Ministry of Justice. Today, many of these NGOs have offices and initial technical bases, active members, local and international partners, relations with government and business, and successfully implemented and planned programs. Most significantly, through such organizations, citizens no longer feel helpless and no longer remain inactive

Success Factors

The first of many factors that enabled development of NGOs was the idealism, enthusiasm and volunteerism of the pioneers of the NGO sector who established a sound base for future development. They began in a bleak situation-practically no electricity, heating, funds from a state budget, individuals or businesses offering financial support, existing relevant legislation, and very few persons aware of the concept of an NGO. With an initially small amount of international support, the pioneers exhibited a selfless drive to change and help the country and, as a result, motivated others to follow their example. The drastic needs of communities energized these volunteers, and the first NGOs exponentially multiplied throughout the country.

Second, timely and appropriate amounts of international support and assistance from foreign donors and private foundations enabled the newborn NGO sector to move toward implementation of practical projects that respond to the needs of the local communities. Subsequently, training and informational assistance provided by both international and local organizations helped the young NGOs to grow into more sophisticated and sustainable organizations.

Third, the general course of the government of Georgia toward a more democratic system included the creation of a civic society, The government, in particular specific members of Parliament, showed willingness to listen and respond to initiatives for cooperation from the Third Sector. NGO leaders, in cooperation with international organizations, initiated and wrote basic NGO legislation, including sections of the Civil and Tax Codes and laws defining grants and grantees (a law defining charity organizations written by NGO leaders is currently under consideration today); these laws were considered and then passed by the Parliament within the last two years. This legal base establishes the relation of nonprofit organizations (in the legal form of "association" and "foundation") to the state. By registering with the government, groups receive official, state recognition of being civic institutions. They have freedom in governance, operations, fundraising, international relations, lobbying and economic activities.

Troubleshooting Current Problems

Despite regular examples of support from the government, many officials in the legislative and executive branch (especially in local administration) have old ideological views on the management and the overall culture of the state sector. As a result, they have little understanding of the concept of a nonprofit organization and its role in society. These officials often create hurdles in the further development of the sector. Such views can have a particular damaging influence, because, as of today, there is no established policy or strategy for the long-term development of NGO-government relations. The government possesses no tools for reaching out to the Third Sector. Currently, some of the more progressive government officials together with NGO leaders are trying to identify such strategies and policies for the future.

A related problem is that because of intensive activity of NGOs in nearly all fields, organizations have increasingly been invited to work -in the state sector. On the positive side, this shows clear acknowledgment of the sector from the government. However, the government frequently attempts to "absorb" the newborn NGOs into their governmental bodies or political interests. NGOs must strive to maintain their individuality and independence as the level of cooperation with government increases.

Also, the government remains incapable of providing transparent direct or indirect funding to nonprofit organizations. The single reference to the nonprofit organizations in 1997 State Budget of Georgia was an appropriation of approximately 0.0002 percent of the overall budget expenditures. According to official governmental information, NGOs can receive support from "Reserve Funds" of the state and of the President, but in reality such support is inaccessible for the general Third Sector. Rather than establishing a positive precedent of transparent decision making in the allocation of state funds, up until today, such support from the government has been given to preferred organizations and has had no practical value to the large majority of NGOs.

Finally, international organizations operating in Georgia regularly reassess their missions and roles. Unfortunately, such organizations often establish their priorities outside of Georgia and arrive with goals not necessarily reflective of the most pressing needs of Georgia and the NGO sector. This has led to unnecessary misunderstandings between local NGOs and international organizations. Local and international organizations must seek mechanisms for more coordination and cooperation, including the participation of local NGOs in the formulation of strategy.

Hurdles Facing Nonprofits

First, although all NGOs have established organizational structures defined in their bylaws, most face the problem of inactive operating boards. Nearly all local NGOs must seek to improve organizational management skills, operational principles and organizational policies, in order to secure their further institutional development.

Secondly, because of more regular relationships and cooperation with government and business, more NGO leaders are leaving NGOs to work with other sectors. In many ways, this is a positive trend because it Provides new Opportunities within the NGOs and ensures greater understanding of NGOs in other sectors. However, sometimes, the departure of NGO leaders results in the liquidation of their NGOs. This problem can be solved by developing successful leadership skills along with skills and mechanisms for inviting and maintaining new members and volunteers.

Finally, even though deep traditions of different forms of philanthropy existed in Georgia before the beginning of this century, the culture and value of individual giving to NGOs needs to be further publicized and developed. The Horizonti Foundation utilizes its grants, training and information programs to secure the sustainable development of the third Sector. Among other activities, it plans to address the development of a culture and strategy for individual- and corporate-giving in Georgia. Practical projects include distributing educational materials about the role of the sector targeted at the general population and business community and facilitating communications between NGOs and the general public. The Horizonti Foundation aims to build mechanisms of communication between the sector and the progressively developing business community in Georgia.

As evidenced above, the Third Sector in Georgia has many problems it must still solve. However, it has already successfully completed the first stage of establishment and survival and has shown to society, its potential for addressing and solving major problems facing communities. As such, I believe, that together with progressive members of the government and the developing business sector, NGOs in Georgia will contribute to the long-term establishment of a healthy and stable democratic state.

For more information, contact:

Ms. Nino Saakashvili
Director, Horizonti
The Third Sector Foundation
13 Zandukeli, Apt. 3,
Tbilisi, Georgia Republic
Tel: 995/32-933007, Fax: 995/32-987504,
E-Mail: nino.adm@horizonti.org

This article first appeared in International Dateline, the quarterly newsletter of the Council on Foundations. For more information, call 202/466-6512 or visit them on the web at http://www.cof.org.

An article titled NGO Legislation in Georgia by Vasha Salamadze can be found under the heading "Articles" in this issue of the Journal.

Kazakhstan

Framework Legislation

Non-Commercial Legislation of the Republic of Kazakhstan: Paths for Development

By Vadim Nee

1. Introduction

This paper sets forth several important questions that should be emphasized at this time in considering the legal regulation of the non-commercial sector in Kazakhstan. The goal of the paper is to suggest paths for further development of non-commercial legislation in the Republic of Kazakhstan.

2. The Current Legislation

In Kazakhstan there is a good base of legislation regulating the not-for-profit sector. The General Section of the Civil Code (December 27, 1994) clearly defines the organizational-legal forms of non-profit organizations. The Civil Code and the Presidential Decree, "About the State Registration of Juridical Persons" (April 17, 1995 with subsequent changes and other normative acts), regulate registration issues and other issues regarding the creation and activities of legal entities, including non-profit legal entities.

The law "On Public Associations" (May 31, 1996) is one of the more deeply developed laws among analogous laws in other NIS states which meets the needs of the non-profit sector.

Laws such as the "About Professional Unions" (April 9, 1993), "About Political Parties" (July 2, 1996), "About Education" (January 18, 1992)(regulating the creation and activities of institutions in the educational sphere), and various other acts regulate the activities of separate types of non-profit legal entities.

The Presidential Decree, "About Taxes and Other Obligatory Payments in the Budget", (adopted into law on April 24, 1995), provides for a series of tax exemptions for non-profit organizations and legal entities assisting non-profit organizations.

3. Direction of the Improvement of Non-commercial Legislation: the International Experience

Currently there are different potential variants for the development of non-commercial legislation. Practice shows, that many of the common problems in regulation of the sector can be avoided, if laws are developed and adopted in accordance with an on-going overall plan (conception) for the development of non-commercial legislation. In addition, many problems can be anticipated and avoided by recognizing the experience of other countries.

The laws regulating non-commercial organizations, can conditionally be divided into two groups; laws that confer a status (regulation of the organizational/legal forms of non-commercial organizations) and laws on taxation. Taking in to account the experience of other countries, one needs to note that charities are more frequently regulated by self-standing laws (which confer status) or are regulated by the tax legislation.

In practice, countries that maintain civil codes, in particular, countries of Central and Eastern Europe, can choose from three systems of laws that confer status:

A country can also choose one of three variants on the legislating relationship between charity and taxation:

4. The Direction of Improving the Non-commercial Legislation in Kazakhstan

Work on the development of the non-commercial legislation in the Republic of Kazakhstan can come along two paths:

i.  The Necessity of Elaborating Laws on the Regulation of (1) foundations, and (2) institutions.

Separate Law on Foundations

Separate Law on Institutions

ii. The Necessity of Elaborating a Law on Charity

Charitable organizations assist the government in fulfilling its social functions (for example, to render assistance to the elderly, families with many children invalids), attracting additional means of support for social causes (like labor of volunteers and charitable donations). The government has an interest in sustaining charitable organizations and favoring their development by allocating to them wider benefits according to comparison with other non-commercial organizations.

The Presidential Decree "About Taxes and Other Obligatory Payments in the Budget" (April 24, 1995), provides for a series of tax exemptions regarding charitable activities and charitable organizations. In Kazakhstan's legislation not a single definition of "charitable activities" and "charitable organizations" exists, while these terms are used in the tax legislation. This makes the use of tax benefits harder for charitable organizations that are enumerated in the legislation, and also leads to an unmanageable, free flowing definition of charities (that is, who decides on tax benefits and defines these ambiguous terms?).

A general base law on charities separates charitable organizations from the general masses of non-commercial organizations in order to allocate to them benefits (in this case, preferential tax treatment). A law on charities in the present case would be consistent with the tax legislation:

Citizens in Kazakhstan, both commercial and non-profit juridical persons, are engaged in charitable activities, but the development of charity itself is being slowed down by the lack of legal regulations. In Kazakhstani legislation, definitions of "charitable activity" and "charitable organizations" aren’t given, even though these terms are used in tax legislation. The forms state support can take in regard to charity and charitable organizations aren’t clearly defined, nor are the criteria for singling out charitable organizations from the general mass of non-profit organizations. This makes the use of limited benefits provided for in tax legislation for charitable organizations difficult.

International practice shows that the state is interested in the existence of charitable organizations and encourages their development by granting them more extensive privileges in comparison with other non-profit organizations. Charitable organizations often help the state carry out its social functions in assisting groups such as the elderly, families with many children, and the handicapped, often attracting additional means (such as volunteer labor and donations) which the state doesn’t have the opportunity to attract. The development of a Law on Charity will promote the development of charity in society. Laws on charity have been developed and are currently in effect in Russia, Moldova, Latvia, and other states. Corresponding bills are being reviewed in Armenia, Azerbaijan, and Kyrgyzstan. Issues of charity, the creation of charitable organizations and their activities are regulated by legislation in Germany, the United States, Great Britain, and other states.

For more information on the UNDP/ICNL legislative initiative contact Vadim Nee, ICNL local partner and NGO law specialist (7-3272) 62-16-44 [kazleep@igc.almaty.kz] or the UNDP NGO Resource Center (7-3272) 62-83-26 or fax at (7-3272) 78-14-50 [ai@un.ala-ata.su]. For information on NGO development contact the Counterpart Consortium in Almaty Kazakhstan (7-3272) 62-16-44 or fax at (7-3272) 60-86-06 [allocal@cpart.alma-ata.su].

Tax Legislation

In January 1998 the Order of the President terminated tax benefits for public associations on income gained from statutory activities. Currently NGOs have to pay income tax even when the income is re-distributed for statutory and charitable purposes.

Kyrgyzstan

Framework Legislation

Draft NGO Law in Parliament

As in other CIS countries, the legislation governing NGOs in Kyrgyzstan has been far from meeting international standards. To formulate better NGO legislation, ICNL facilitated the creation of an NGO law working group, which included NGO representatives and parliamentarians. This group has been meeting since March. After finalizing a suitable draft that both reflects the concerns of the NGO community and complies with international standards of NGO legislation, ICNL, the National Democratic Institute (NDI), and the working group submitted the draft law on NGOs to the Legislative Committee of Parliament. The process of completion and submission of the draft represents effective NGO/governmental cooperation. If the draft successfully passes the scrutiny of the Legislative Committee, it moves to the floor of Parliament for a vote in December's session. Current draft NGO law available through ICNL.

Competing NGO Draft Laws Successfully Consolidated

In Kyrgyzstan fragmented efforts at legislative reform led to conflicting draft laws. The working group addressed this problem by combining three drafts to form one final version, which incorporated the best from each draft. There remained two versions competing with the working group draft. The Legislative Committee desired to eliminate two of the three existing drafts before recommending a final draft for consideration by Parliament.

NGO partners met with competing drafters last month to discuss the situation. The drafters (parliamentarians) were presented with an analysis of the NGO draft prepared by ICNL. After discussing the drafts and their duplicative content, the drafter of one of the competing versions, Deputy Cholponbaev, agreed to support the combined draft and to withdraw his draft from consideration. The second competing draft (a revision of the current Public Associations Law) has been discussed and discarded by the Legislative Committee. This action moves the combined draft on NGOs one step closer to law.

The Legislative Committee is expected to make a final decision on the final draft and forward it to Parliament for its first reading in early 1999.

NGOs Form Grass-Roots Lobbying Effort

Another hurdle for the NGO Law in Kyrgyzstan is exposure and grass roots lobbying. NDI and its partner NGOs (with ICNL assistance) have been developing a strategy for a lobbying effort in Kyrgyzstan. This approach has led to the construction of a government coalition of support for the draft law, which involves key parliamentarians. The result of these efforts will be seen in December when the draft comes to floor for vote.

For more information on the NGO law initiative contact Interbilim in Bishkek, Kyrgyzstan at (3312) 26-87-11 or 66-05-16 [asiya@cbilim.bishkek.su] or ICNL in Almaty, Kazakhstan at (7-3272) 62-16-44 or fax (7-3272) 60-86-06 [rremias@cpart.alma-ata.su]. For information on NGO development contact the Counterpart Consortium at (3312) 61-00-35 or fax (3312) 22-38-13 [office@counterpart.org.kg]. For information regarding the proposed referendum and governmental activity contact the National Democratic Institute at (3312) 66-01-66 or 66-01-67 [ndirick@asiainfo.kg].

Moldova

The Public Benefit Status of NGOs in Moldavian Legislation

By Ilia Trombitsky and by Piotr Gorbunenko

Moldavian legislation on NGOs might be considered to be one of the most advanced among the NIS countries. The new Moldavian Law on Public Associations was adopted in 1996 and came into effect in January, 1997. The new Tax Code was subsequently enacted in January 1998. These laws differentiate between public and mutual benefit associations and establish preferential treatment for certified public benefit associations. The new legislation was drafted and successfully lobbied by local NGOs, headed by BIOTICA Ecological Society.

According to the Law on Public Associations, a Certification Committee checks applicant associations to ensure that their activities are of a public benefit nature and that they neither support political parties nor participate in election campaigns. The members of the Certification Committee are appointed by the Government, President, and the Parliament. At least three member out of 9 are representatives of associations and can not be state officials. Associations which receive certificates are entitled to additional tax benefits as compared with non-certified associations.

The current tax legislation recognizes certified associations and provides certain benefits to such associations. For example, according to the Parliamentary Budget Law, 1998 certified associations were entitled to pay 25% of their salary fund into the Social Fund while non-certified associations had to pay 31%. The new Tax Code allows every legal or natural person to deduct from 2% to 7% of their income for donations to certified public associations.

However, many tax benefits are still granted spontaneously. For example several years ago some foundations were granted extraordinary privileges when exporting or importing goods not related to their statutory activities. On the other hand, in order to the limit budget deficit, the government is trying to terminate income tax benefits even when the income was gained from and reinvested in public benefit activities. Many government officials and even legislators fail to understand the value of the NGO sector for the development of a democratic society. It is vitally important to focus on the training of government officials and legislators to insure that better NGO legislation is adopted and properly implemented.

About the Authors : Ilia Trombitsky, Ph.D., is a Member of the Moldavian Parliament and Chairman of the Environmental Committee of the CIS Interparliamentary Assembly, and  Piotr Gorbunenko, is the the President of BIOTICA Ecological Society of Moldova.

For more information, please contact the BIOTICA Ecological Society. Tel/Fax: (373 2)24 3274; e-mail: bio@mdearn.cri.md  

Russia

Framework Legislation

The NGO legislation in Russia is the most sophisticated and complex among other NIS countries. The following federal laws affecting NGOs are currently in effect in Russia:

In addition, the Tax Code Part # 1 was recently adopted by Duma, which will come into effect on January 1, 1999. The Law on Registration of Legal Entities was adopted by Duma, but has not been signed yet by the President. There is a number of other laws regulating specific types of NGOs, like the Laws regulating religious organizations, invalids, education, others.

Russian NGO legislation contains many contradictions within itself. For example two different laws regulate foundations (the Law on Non-commercial Organizations) and public foundations (the Law on Public Associations) while there is no clear difference in these two organizational forms of NGOs. Russian NGOs face many problems which are insufficiently regulated by the current legislation, such as taxation of NGOs (according to the new Tax Code there is no differentiation in taxation of commercial and non-commercial legal entities), regulation of certain organizational forms (like foundations). The federal structure of Russia where each region-subject of Federation has its own legislation, makes the NGOs legislation even more complicated.

Taking into the consideration the current status of the NGO legislation in Russia ICNL believes that it is more effective to focus on assisting the municipal governments of regions-subjects of Federation and NGOs which are working on municipal level NGO laws. ICNL’s and its partners experience shows that the process of drafting and lobbying NGO legislation on the Federal level is very unpredictable. The agenda of the Federal Duma depends on too many political factors. More then 3000 draft laws are waiting to be considered by Duma. At the same time the laws adopted on municipal level might be defined as framework laws. These laws allow to adopt more specific, easy to implement legislation on regional level.

Tax Legislation

Seminar of NGO Tax Issues in Moscow

By Petr Pajas, Associate General Editor, IJNL

The Russian Representation of the Charity Aids Foundation office a seminar on tax issues related to the charitable activities in the Russian Federation organized from October 14 to 16, 1998 in Moscow. It was a part of the TACIS Democracy Programme financed by the European Union. There were about 30 participants, mostly from the Moscow and Saint Petersburg headquarters of charitable funds and associations with a nation-wide scope of activities.

The first day of the seminar was devoted to a discussion about the general situation of the Russian charitable independent non-governmental organizations and overall political framework in which they have to develop their activities. The main speaker, political commentator Mr. Kurnikow provided a thorough analysis of the relationship between the state and NGOs in Russia. According to him, the state policy with respect to the charitable activities is not supportive enough, and he suggests this might be connected with the generally low role played by the general public in the political development in Russia. The activities of NGOs are not the focus of interest of the media and they have to survive in a very difficult economic environment. This too is a result of the complete destruction of the civic society, which was deeply rooted in the Russia before 1917. At that time there was a very good tradition in self-regulation of the associations, with an official template for by-laws of an association being issued by the Government. This template dealt deals with membership categories and fees issues, organs of the association, its property and legal ways of its use. The present day Russian Federation will have to do much more for the development of the civil society to achieve the pre-revolution status of the legal and fiscal framework for the charitable and publicly beneficiary activities. However, a somewhat better situation is in Moscow, where a Regional Charitable Council was established in 1996 in accordance with Moscow’s local law On Charitable Activities from March 31, 1995.

The second and third day of the seminar were devoted to issues related to the implementation of the Tax Code with respect to charitable organizations. Special attention was given to the draft of the new Tax Code, which is presently processed by the Duma (Parliament of the Russian Federation). Ms. Davydova, senior officer of the State Tax Administration of the Russian Federation analyzed the draft and expressed the opinion that its present text would provide some tax benefits only to very few NGOs. This might be due to the extremely complicated and extensive text of the articles, which define the conditions for tax benefit and tax exempt provisions. Some practical recommendations were given to the NGOs by Mr. Glinkin from the State Tax Inspection in Moscow and by Dr. Tolmasova from CAF.

The experts from Poland (Krzyszoff Pawlowski), Romania (Daniel Chliban) and Czech Republic (Petr Pajas) provided comparison with the tax policy towards NGOs in their countries. The participants were also given a Russian text of the ICNL paper "Taxation of Not-for-Profit Organizations: Overview of International Best Practice" as well as excerpts of the World Bank publication "Handbook on Good Practices for Laws Relating to Nongovernmental Organizations."

Tajikistan

Tax Legislation

The Tajik government prepared the draft of a new Tax Code. Local NGOs, under the leadership of the well known lawyer and ICNL local partner, Muatar Khaidarova, and NGO leaders Farhod Bakiev, the Office Manager of Counterpart/Tadjikistan, and Mrs. Bobosadikova, the Chair of the Association of Women with University Education, created a working group to prepare recommendations to the draft Tax Code to insure that the interests of public associations are protected. These recommendations were then submitted to the Parliament. According to government officials, some of the working group’s recommendations were incorporated into the final text of the Tax Code.

The new Tax Code was adopted at the end of 1998. For the first time in Tajik legislation, the Tax Code introduced new definitions (economical, entrepreneurial and non-entrepreneurial, charitable actitvities, and charitable organizations).  The new Tax Code also regulates several issues regarding conflicts of interest.  If implemented properly the new Tax Code might encourage the development of the NGO sector in Tajikistan.

For more information on the NGO law initiative contact ICNL in Almaty, Kazakhstan at (7-3272) 62-16-44 or fax (7-3272) 60-86-06 [rremias@cpart.alma-ata.su]. For information on NGO development contact the Counterpart Consortium in Dushanbe, Tajikistan at (3772) 21-65-14 or fax (3772) 21-75-59 [root@cpart.td.silk.org].

Turkmenistan

For more information regarding the new Civil Code and reform of NGO legislation, contact ICNL in Almaty, Kazakhstan at (7-3272) 62-16-44 or fax (7-3272) 60-86-06 [rremias@cpart.alma-ata.su]. For information on NGO development contact the Counterpart Consortium in Ashgabad, Turkmenistan, at (3632) 35-71-20 of fax (3262) 24-38-51 [roselie@cpart.sibnet.tm].

Ukraine

Framework Legislation

Ukrainian NGO Legislation

Two main laws regulate NGOs in Ukraine: the law On Public Associations (1992) and the law On Charity and Charitable Activity (1997) (the Law on Charity). There are also multiple provisions affecting NGOs in tax and other Ukrainian laws and legislative regulation, which govern different areas of NGO activities.

A. The Law on Charity and Charitable Activity. Many provisions of the current law on charity are inconsistent with other Ukrainian laws. While the law gives the definition of charitable (public benefit) organizations, it does not establish appropriate criteria or a mechanism to define charitable (public benefit) organizations in order to provide additional tax benefits to this specific group of NGOs. This law is confusing in implementation.

B. The Draft Civil Code. It is expected that the drafting of the new Civil Code will be completed in 1999, and the draft will be presented to Verkhovna Rada in late 1999. There is a discussion among local lawyers representing NGOs and the government: which organizational forms of NGOs should be regulated by the Civil Code; what the registration procedure for legal entities (including NGOs) should be, which government agency should be in charge of registration of legal entities. While working on statutory (general) NGO laws it is important to insure that provisions in other new NGO laws (such as the law On Civic Organizations) comply with provisions in the Civil Code.

C. The Draft Law On Civic Organizations. The draft law On Civic Organizations is being revised by the drafters, taking into consideration provisions in the draft Civil Code and the law On Charity. It is expected that the draft law will be considered and adopted by the Verkhovna Rada in 1999.

D. Tax Laws. Currently mainly two tax laws (on Profit and on VAT) affect NGOs. The new Tax Code, which will replace all current tax laws, is in the drafting process. Some provisions in the tax laws are inconsistent with provisions of other non-tax laws. For example, the Law on Charity and Charitable Activities exempts NGOs which do not carry out economic activity from all taxes and duties, while provisions of the tax laws prohibit the provision of tax benefits through laws other then tax laws. As a result of this contradiction, the exemption provision in the Law on Charity and Charitable Activity is not implemented.

Inconsistency and contradictions among laws allow the State Tax Authority expand its authority to the detriment of NGOs. Many important issues affecting NGOs are regulated by the State Tax Authority instructions and regulations -- for example, the instruction On the Procedure of Entering Non-profit Organizations into the Register. In addition, Ukrainian government is trying to fulfil IMF mandated reductions in tax benefits.

Registration

Non-Government Organizations Registration in Ukraine By Alexander Vinnikov

Further information on the NGO legislation in Ukraine can be obtained by contacting in Kiev Anatolij Tkachuk, Director of the Ukrainian NGO Institute of Civic Initiatives (380-044) 295-43-98 (tel./fax,) or in Washington Natalia Bourjaily, ICNL Program Director for NIS nbourj@icnl.org.

Uzbekistan

In August of 1998, Karimov, the President of Uzbekistan, made a national address, where he called upon the Parliament to write a new NGO law. Karimov further stated that Uzbekistan should strive to promote overall NGO development. As a result of this request, an official working group was created to draft a new law. The working group included some "quasi-governmental" charitable foundations, the Ministry of Justice, the Institute of Monitoring of Current Legislation and the National Center of Human Rights.

The draft law passed its first reading in the Uzbek Parliament on December 24, 1998. However, there are important amendments that should be made to the draft prior to final approval to insure that it will enable the development of the NGO sector and comply with international principles of NGO regulation. The text of the draft is now available to the public for comments. All comments should be submitted to Oli Madjilis at the Committee of the Uzbek Parliament on Legislative and Judicial Issues. It is expected that the draft law might be considered by the Parliament again in April of this year.

Further information on the NGO law or current legislation, one may contact Inna Bagdasarova, Advocate and ICNL local partner in Tashkent, Uzbekistan (3712) 76-29-66 [icnl@cpart.silk.org]. For information on overall NGO development contact the Counterpart Consortium in Tashkent Uzbekistan at (3712) 76-29-66 or fax (3712) 78-14-50 [blair@cpart.silk.org].

 

Copyright 2008 The International Center for Not-for-Profit Law (ICNL)
ISSN: 1556-5157