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The International Journal
of Not-for-Profit Law

Volume 4, Issue 4, June 2002

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

Table of Contents

Articles

The Legal Framework for Civil Society in East and Southeast Asia
Barnett F. Baron

A Flaw in Comparative Studies of the Tax Benefits for NGOs in Latin America
Antonio Itriago M. and Miguel
Itriago M

The Principle of Subsidiarity in Italy: It's Meaning as a "Horizontal" Principle and It's Recent Constitutional Recognition
Andrea Maltoni

A Synopsis of Law Reform for Iranian NGOs
Zahra (Sahar) Maranlou

Tax Treatment of NPOs in Macedonia
Prof. Dr. Vesna Pendovska

Competition and Abuse of Association Membership
Assoc. Prof. Ivo Telec

Reviews

Working with the Non-Profit Sector in South Africa
Working with the Non-Profit Sector in Nigeria

By the Charities Aid Foundation / Allavida
Reviewed by Karla Simon

Legal and Organizational Practices in Nonprofit Management
By Pacquale Ferraro
Reviewed by Karla Simon

Promoting Legal and Institutional Frameworks for Corporate Social Responsibility in Peru
By Javier de Belaúnde L. de R., Beatriz Parodi L., and Delia Muñoz M.
Reviewed by ICNL Staff

Social Responsibility: 12 Case Studies from Chile
by Soledad Teixido, Reinalina Chavarri, and Andrea Castro
Reviewed by ICNL Staff

Case Notes

Asia Pacific:
Hong Kong

Newly Independent States: Russia

North Africa:
Egypt

North America:
Canada | United States

Sub-Saharan Africa:
Ethiopia

Western Europe:
United Kingdom

Country Reports

International:
FATF | World Bank

Asia Pacific:
Regional | Australia | Indonesia | Japan | New Zealand

Central and Eastern Europe: Bosnia and Herzegovina | Czech Republic | Hungary | Lithuania | Macedonia | Slovakia

Latin America & The Caribbean: Chile | Peru

Middle East and North Africa: Kuwait

Newly Independent States: Armenia | Azerbaijan | Kyrgyzstan

North America:
Canada | United States

South Asia:
India | Pakistan

Sub-Saharan Africa:
Nigeria | South Africa | Tanzania

Western Europe:
Regional | Belgium | Germany | Italy | United Kingdom

- - - - - - - - - -

Editorial Board

Country Reports: Asia Pacific

Regional

Conference on Legal Enabling Environment for NPOs
in East and Southeast Asia

In April 2002, a conference was held at the Catholic University of America to discuss the legal enabling environment for NPOs in East and Southeast Asia.  It was co-sponsored by CUA, the Asia Foundation, and ICNL and attended by scholars and activists from the DC area.  Speakers included Dr. Barnett Baron, Executive Vice President of the Asia Foundation (whose keynote address is included in this issue), Dr. Leon Irish, President Emeritus of ICNL, and Prof. Zhao Liqing, Visiting Scholar at the Catholic University of America.  Dr. Joyce Yen Feng of National Taiwan University sent a paper, but she could not attend. 

In the discussion following the presentations, the conference participants elaborated on the following issues:

  1. Whether other countries in the region should adopt participation legislation, such as that in the Philippines?  This legislation mandates a role for civil society with respect to the adoption of various policies at the local, regional, and national levels of government.  Other countries in the region do not have such legislation and their civil societies are not as strong as civil society in the Philippines.
  2. There is a definite link between granting tax advantages to NPOs and their being willing to register to obtain legal status.  The recent legal changes in Japan (discussed in both of the two previous issues of IJNL) suggest this close linkage.
  3. While self-regulation is a good idea, will it work as it has been designed in the Philippines?  Unfortunately the PCNC (Philippine Council of NGO Certification, which has been established to determine whether organizations are permitted recipients of deductible donations) has only investigated 220 and approved 135 NGOs out of some 60,000 that are eligible for tax deductibility.  What the PCNC has done is design a system of elaborate evaluation procedures for the qualification process, which seems to have occasioned the serious delays.  In addition, the Philippine Parliament, in a rather ominous retreat from the legislation that created the PCNC, has before it a bill that would eliminate tax deductibility altogether!
  4. Whether it is necessary or beneficial to have legislation for NPOs or whether a simple system of regulations would be sufficient, as in China?  Although the Chinese government has been discussing the prospect of legislation, it has not yet produced a draft law.  The Vietnamese government, while discussing a draft law, has permitted NPOs to develop under outmoded and very minimal legislation from the 1950’s. There was disagreement among the participants about the general principle of whether it is better to have laws enacted by the legislative body as opposed to regulations adopted by the government.
  5. The importance of one regulatory system for NPOs as opposed to several different regimes under which they can become registered and are then regulated.  Prof. Feng’s paper highlighted this as an important issue under consideration in the debates about legal reform in Taiwan.
  6. Developing new ways to encourage philanthropy in East/Southeast Asia by looking to traditional patterns of giving.  The Asia Pacific Philanthropy Consortium has recently published a multi-nation study of these issues in Asia, and it suggests that Asian values have always supported philanthropy, but not always along the lines that are traditional in the West.  See Investing in Ourselves: Giving and Fund Raising in Asia, published by APPC in 2002.
  7. The paramount importance of tax advantages in promoting philanthropy.
  8. The importance of having a legal framework that encourages the role of advocacy organizations because of their significance in modern civil society (see also #10).  Although E/SEA governments have traditionally been wary of or even hostile to advocacy organizations, the group at the conference was clear about the need for a change of attitude in this regard throughout the region.
  9. The importance of impartial enforcement of legislation.  Although good laws may be written, they are only as good as their enforcement.  There is a strong need in the region for better training of government officials, both as to their general duties and as to their awareness of the roles that NPOs should play in society.
  10. The role of NPOs in policing government corruption should be emphasized.
  11. NPOs should be encouraged to develop codes of conduct in all of the countries of the region.  There does not seem to be much of a movement toward the adoption of such codes by national NPO representative organizations.  In fact, in many countries, the NPO representative organizations are fairly weak, which limits their capacity to act as sector representatives when lobbying for legal change is necessary.
  12. NPOs in the region should become more convinced of the benefits of transparency in their operations.  Because of the suspicion of governments, many NPOs in many countries (e.g., Indonesia) have not seen transparency as an objective.  This has in turn led to corruption within the sector and a distrust of the sector not only by the government but also by the public.

Papers presented at the conference are available from Prof. Karla Simon, Professor of Law and Co-Director of CUA’s Center for International Social Development. 

Australia

Tax Treatment of Gifts to Disaster Funds 

The Australian Taxation Office (ATO) has issued guidance on the tax treatment of gifts to disaster funds established in Australia. Gifts to such funds will be deductible for income tax purposes if the fund:

A “necessitous circumstances fund” is a public fund established and maintained exclusively for the relief of persons in Australia who are in financial need in the sense that their resources are insufficient to sustain a modest standard of living in Australia. These requirements are interpreted strictly and will not cover, for example, gifts to family members of disaster victims who have no financial dependants or gifts to victims of disasters outside Australia. A fund will only be treated as a public fund if its founding documents provide that:

(“Providing assistance to victims of natural and other disasters in Australia”, Australian Tax Office fact sheet, 31 October 2001) PB

Indonesia

Law on Management of Zakat

The 1999 law on the management of zakat came into force on 1 January 2002. [Editor’s note: Zakat, a religious tax similar in concept to the Christian tithe, is one of the five pillars of Islam; all Muslims are obliged to pay at least 2.5% of their annual income and wealth in zakat.] Although the law states that it is obligatory for Muslims to pay zakat, it does not provide for any means of enforcing this obligation. To date, most Muslims in Indonesia have paid zakat to government-appointed bodies, mosques, orphanages or directly to the poor, and even collection by government bodies has been undertaken essentially on a voluntary basis without any requirement to produce financial reports or be subject to independent audit. The 1999 law provides for the establishment of a new zakat management agency, which will become a parent organization for all provincial, regional and district agencies that collect and distribute zakat funds, and will report to the House of Representatives. It also allows Muslims to deduct for personal or corporate income tax purposes zakat payments based on income (but not zakat on wealth). Christian-based organizations have complained that the law is discriminatory, since non-Muslim donations do not currently qualify for income tax relief.

(Jakarta Post, 1 December 2001) PB

Japan

Special Tax Status Granted  

On 10 December 2001 the National Tax Agency named the first two NPOs to be granted preferential tax treatment under the new tax laws introduced earlier in 2001 (see IJNL Volume 4, Issue 1 and Issue 2/3). These are Project HOPE Japan, which supports medical activities in Asia (particularly in Indonesia and Thailand), and the Japan Tennis Wellness Association, which offers free tennis lessons for children and people with disabilities. It is reported that to date some 300 NPOs have enquired about applying for approval.

(Kyodo News Service, 10 December 2001) PB

New Zealand

Proposals Regarding Sport as a Charitable Purpose

On 30 January 2001 the Minister of Sport, Fitness and Leisure released the report of the Ministerial Taskforce on Sport, Fitness and Leisure. Its recommendations include:

The Taskforce also proposed the introduction of a levy on organizations holding rights to televise sporting events with the proceeds being distributed to recreation and sport organizations with no ability to generate funds from television rights. Including sport as a charitable purpose has been controversial in many common law countries.

(“Getting set for an active nation”, Report of the Sport, Fitness and Leisure Ministerial Taskforce, January 2001) PB

 

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