PUBLISHED: JULY 22, 2002

In both Lithuania and Slovakia the parliaments have recently adopted changes in legislation permitting taxpayers to designate a portion of their taxes to be paid over to not-for-profit organizations. As the Hungarian “1 percent law” has found favor in more Central and Eastern European (CEE) countries, these are important developments.

Slovakia. In April 2002, the Parliament passed an amendment to the Act on Income Tax, which will enable legal entities to designate to Slovak NGOs 1 per cent of the income tax they have paid. The minimum amount that may be designated is 250 SK (5 USD). A company may split its designation amount among several entities.

This amendment to the law was prepared in co-operation with representatives of non-governmental organizations. In addition, many citizens indicated their support for such a change in the tax laws by answering a questionnaire on this topic at www.rozhodni.sk (‘decide.sk’). Jana Kadlecova of Rozhodni.SK and SAIA has written an article about these developments in the next issue of the International Journal of Not-for-Profit Law (IJNL).

Lithuania. After a real struggle, described by Vaidotas Ilgius in an article also to be published in the next issue of IJNL, the Parliament in Lithuania last month enacted a new law on Private Income Tax. This law contains a provision allowing Lithuanian taxpayers to dedicate 2 percent of their income tax to public benefit organizations (i.e., all public and private non-profit entities that are entitled to receive tax-free charitable donations). Unfortunately, the currently available charitable contribution deduction for individuals was eliminated in the bargain.

Both of these developments are significant – in Lithuania, because the amount that may be designated is 2%; and in Slovakia, because companies may now participate in the designation system. As the experience in Hungary has shown, this is a means to bring important new resources into the hands of civil society organizations. It also shows that governments in the region are more responsive to the wishes of the public about prioritizing social spending. It remains to be seen whether the designation schemes will catch on outside CEE.