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The International Journal
of Not-for-Profit Law

Volume 3, Issue 2, December 2000

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

Table of Contents

Letter from the Editor

Articles

Church and State Relationships in German "Public Benefit" Law
By Dr. Christine R. Barker

Evaluating Tax Incentives for Donations to Public Benefit Organizations
By Paul Bater

Freedom of Association: Recent Developments Regarding the "Neglected Right"
By Leon E. Irish and Karla Simon

The Government of Israel's Control of NGOs: Legal Dilemmas and Structural Constraints
By Nitza Nachmias and Amiram Bogot

Reviews

Introduction to the Non-Profit Sector in the Balkans
By Jenny Hyatt
Reviewed by Douglas Rutzen

The Third Force
By Ann M. Florini
Reviewed by Karla Simon

Weak Democracy and Civil Society
By Imco Brouwer
Reviewed by Sam Charron

Case Notes

Central and Eastern Europe:
Poland

Latin America and the Caribbean:
Venezuela

Middle East and North Africa:
Egypt | Tunisia

North America:
the United States

Newly Independent States:
Moldova
| Russia

Country Reports

Asia Pacific:
Regional
| Australia | the Philippines

Central and Eastern Europe:
Hungary

Latin America and the Caribbean:
Regional | Dominican Republic | Guatemala | Peru

Middle East and North Africa:
Bahrain | Israel | Palestine | Yemen

Newly Independent States:
Kazakhstan | Ukraine

North America:
the United States

South Asia:
India | Pakistan

Sub-Saharan Africa:
Ghana | South Africa

Western Europe:
Belgium | France | Germany | Ireland

International Grantmaking

Conducting Overseas Site Visits
By Victoria B. Bjorklund and Jennifer I. Goldberg  

- - - - - - - - - -

Editorial Board

Country Reports: Middle East and North Africa

Bahrain

New Directory of Organizations in Bahrain

Gulf Global Consultancy announces the publication of the “Bahrain Directory for National, Co-operative Societies, Charity Funds, Expatriate Societies and Clubs”. Prepared by Dr. Hussain Moh'd Al Mahdi, in Association with the Ministry of Labour and Social Affairs, the publication will provide helpful information for those interested in the not-for-profit sector in Bahrain.

The Directory contains recent basic information for 220 societies in Bahrain, (both in English and Arabic language), and includes information regarding:

The Directory is available on line at www.bahraindirectory.web-page.net  

Israel

Tax Credit for Donations Under Israeli Law

By Dr. Hadara Bar-Mor,
Netanya Academic College, Israel

Under the Israeli tax law, donations to NPOs may receive tax benefits only if the non-profit institution qualifies as "public institution". This status is granted to any association of at least seven persons, the majority of whom may not be related to each other, or to an endowment where the majority of its trustees are not related to each other,  that exists and operates exclusively for public purposes. Public purposes are defined by the law as religious, cultural, educational, scientific, health and welfare, and sports-related purposes and any other purpose approved by the Minister of Finance. Additional purposes so approved include the prevention of accidents and the prevention of unemployment.

The tax benefit is a tax credit of 35% of the amount of the contribution, provided this does not exceed 30% of the total taxable income of the contributor or a certain sum specified in the law. Obviously, the higher the amount approved by the legislator, the bigger the incentive to donate. During the last ten years the Israeli governments were ready to recognize the important task played by the third sector in society and increased their indirect support for the third sector by raising the ceiling on donations recognized for tax credits. In 1993, in explaining a bill which increased the sum recognized as a donation for tax purposes, it was noted that the government wanted to encourage donations to public institutions, thus alleviating the burden of support for various groups in Israeli society.

On November 27, 2000, the Minister of Finance had suggested to increase the donated sum recognized for tax credit, up to a ceiling of 2,000,000 NIS (approximately 500,000$). Furthermore, the suggestion was to implement the change retroactively from the beginning of 2000. The sum was 4 times greater than is in force presently, and reflects a significant step towards subsidizing not-for-profit institutions. According to the Minister of Finance, in the last few years wealthy businessmen have been willing to finance social projects, especially those which the government is unable to execute. By quadrupling the credited sum it wanted to encourage this trend. However, the bill has yet to be confirmed though it is hoped that it will be passed before the present parliament disbands.

It should be noted that before qualifying for public institution status permitting tax credits, another precondition must be fulfilled - the institution must receive a certificate of "proper bookkeeping" from the NPO Registrar confirming that the institution keeps its accounts in order. This double check of the management of the NPO before granting tax credit has resulted from the abusive conduct of several Israeli NPO which caused the Israeli public to turn against the NPO sector in general.

We are waiting to see whether this bill will be passed before the end of this Parliament.

Palestine

Further to the enactment of the Law of Charitable Associations and Community Organisations (see IJNL Volume 2 Issue 2), which came into force in April 2000, concerns have been raised about the drafting of implementation guidelines by the Ministry of the Interior. Although the guidelines have not been published, it appears that they impose conditions which depart from the letter and spirit of the new law, e.g. by requiring that elections of new board members be approved by the Ministry and that minutes of NGO board meetings be made available on request. At the same time, the new Ministry of NGO Affairs has drafted its own guidelines, which are reported to require NGOs to specialize in only one field of work and to seek its approval before raising funds. The Palestine NGO Network (PNGON) has obtained an opinion from the Palestinian Independent Commission for Citizens’ rights (PICCR) that the Ministry of the Interior’s guidelines are incompatible with the new NGO law, but this opinion is of advisory value only.

Yemen

Law of Associations – Backward*

By Jamal-Addin Al-Adimi, Lawyer

The campaigns aroused about the constitutional amendments, draft law of the police authority and demonstrations law were about to finish when another campaign on the draft law of associations and public organizations started. The latter and 40 of its articles were discussed in a parliamentary session before Ramadan. It is believed that the Parliament would hold another session after Ramadan to discuss the remaining articles.

Stripped of its Value

The draft law of associations and public organizations, appearing too late, had been discussed by many local and international organizations. However, it was perverted and had many impediments that threaten working for non-governmental organizations. Those who prepared this draft law deleted many articles that were included in the draft law that was prepared in cooperation with international organizations. This indicates the government's insincerity, mistrust and disrespect towards associations.

Article No. 57 in the constitution ensures people the freedom of organizing, establishing and unrestricted membership in public associations where they organize themselves according to their own regulations. Public associations are formed via civilian contracts and must not be harassed by the state in any way. The state must not hinder them from being established, developed or from practicing their role in developing the society. The law must be confined to organizing registration of associations in the concerned authority, Moreover, it must leave the organizational matters to associations themselves. Cases of internal differences must be resolved by the judicial system, not by the Ministry of Social Insurance.

Ascendancy

The texts of the draft law of associations and public organizations included a number of shortcomings such as contradiction between texts of articles, inaccuracy of drafting, ambiguity and generalization of its phrases and referring most of the essential issues to the executive bill. This allows the government to dominate the associations and exert restrictions upon them to prevent them from receiving foreign financing. It also authorizes the Ministry of Social Insurance to dominate associations, intervene in their affairs, restrict their domains and effect penalties upon their members.

A Series of Penalties

The danger of the draft law, now being discussed in the Parliament, lies in a number of articles that include severe penalties. Articles No. 68 and 69 state that imprisonment for six months or a year or penalty of paying a fine of 1000 rials applies to any member who invites or allows non-members of the general assembly to attend its discussions or to be one of its directors or managers. These penalties are also applicable to any person who endites, presents, or holds documents or registers that include false information with knowledge beforehand. Those penalties also apply to anyone in the association who deliberately gives information to unconcerned authorities or deliberately conceals accounts needed as a proof by the law.

All those who initiate an activity of any association or organization not publicized yet, or practice an activity contradicting the objectives of the association or spend the association's funds in activities that do not serve its purposes or transfer the funds to their own account or to the account of the association are liable to suffer the same penalty. These penalties may also be invoked against the following: any person who takes part in continuing activity of an association that had been dissolved by a decree, anyone who collects unlawful donations from the public, or any person who uses facilities of the association for purposes other than those purposes they are meant for. Article No. 70 of the draft law states that any violator of the law or the executive bill, not existing yet and which might complicate the public work further, would be severely penalized.

More Penalties

Article No. 71 entitled the judicature to inflict the most severe penalty on any violator of the law, whether that penalty was in the Criminal Law or in other laws. Furthermore, Article No. 77 prohibits the Board of Directors of the association from collecting donations unless the general assembly agrees to that. This article nullifies the role of the administrative board which was originally authorized by the general assembly itself and restricts the association's right to gather donations to support its activities by allowing the bill to include specific conditions and methods of collecting those donations.

The unreasonable and severe penalties of those texts show clearly the danger encountering associations. Moreover, there are other articles in the draft law that reveal the insincerity of the executive authority towards associations' activities and those in charge of them. All those indications arouse many questions about removal of articles in the original law before it was approved by the Ministers’ Council and presented to Parliament in its present form.

Difficulties of Establishing an Association

The Ministry of Insurance is boasting that the draft law was prepared in cooperation with the Consultative Council of Laws of Non-profit Establishments. The council is located in the United States capital, Washington, DC. Although the Ministry had conservation about the law at that time, it removed many articles, such as the ones related to the definition of associations and private foundations. In addition, the number of people required to establish an association was seven under the original law, while in the amended law it rose to forty-one. Undoubtedly, this exaggerated number aimed at hindering establishing associations. Many of the modernized laws in developed countries stipulate no more than seven persons to establish an association.

In Term No. 5 of Article No. 4, the draft law stipulates that there must be a financial supervision system for associations. This may constitute an obstacle for associations in case the executive bill stipulates conditions that, if not abided by, will impede the work of associations. Article No. 9 also stipulates that any person wanting to establish an association must fill out an application form for the Ministry of Insurance or another concerned office and take a receipt of the application. This article did not indicate what would be done if the ministry turned down the application documents or refused to give a receipt of the application. It also did not mention if submission of applications is limited to the Ministry of Insurance or to its offices in the governorates. This system, although it takes the form of registration rather than granting permits, restricts the procedures of registration and popularization. These restrictions make the registration system more complicated than the system of granting permits. This gives the General Administration the right to hamper associations prematurely.

Generally, we can say that if the draft law were approved as it is now, it would limit the right given to the people by the Constitution to establish associations and it would penalize private associations and organizations, especially those working in the field of human rights, if they did not please the government.

Only the Government Deserves Foreign Aid

Article No. 24 of the draft law prohibits associations from receiving foreign financial aid. This article contradicts the laws of the UN that state that associations must not be prevented from practicing work and getting foreign financial support. Furthermore, it would terminate many civil society organizations, which, presumably, is what the authority is aiming at by including such a useless text in the law. So, why does the government accept foreign funds for all the projects that must be carried out by it and prohibits associations from receiving such international aid to support their activities for developing society? Why does the government prevent the associations from making international or foreign relations? The answer is simply to terminate the activities of those associations.

More Moral Stipulations

Besides all the impediments and conditions mentioned above, there are more restrictions, conditions and impediments that aim at making the General Administration a supervision authority over establishing associations. These include annual supervision of the registration system and changing it to a permit granting system. In this way, the administration controls granting, renewing and refusing to renew permits to associations.

Moreover, there are also articles that restrict the association's right to choose its members. There are articles in the draft law that give the General Administration the right to interfere in specifying, modifying and amending the objectives or charter of the associations, to classify associations, to modify and withdraw resolutions of associations or object to the appointment of particular managers in them. All those impediments need firm opposition by all civil society organizations and politicians. All must work hard to stop approval of the draft law in its present form. Otherwise we will wake up, too late, to see that the General Administration has aborted civil society organizations that attempt to develop society and defend its rights.

Responsibility of the Parliament

The Parliament must undertake its responsibility to amend the draft law to conform to the constitutional right given to the people to unconditionally establish associations. This is necessary in order for Yemen to keep its many commitments, including those made in support of the Universal Declaration of Human Rights and other international conventions and agreements. In addition, Yemen has commitments, such as supporting civil society organizations, that it had promised to fulfill in the Evolving Democracies Conference held last year. The latest commitment was made through support of a UN resolution that states that the rich countries must support the development of the poor ones. However, the present draft law prevents Yemen from providing this support.

*A substantially similar version of this aticle originally appeared in the Yemen Times. 

 

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