Civil Society Regulations and Effects: Sustainability and Operation of NGOs Influenced by Tax System: The Case of Slovakia

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International Journal of Not -for -Profit Law / vol. 1 6, no. 1, September 2014 / 8

Civil Society Regulations and Effects
Sustainability and Operation of NGOs
Influenced by Tax System:
The Case of Slovakia
Mária Svidroňová 1
Helena Kuvíková 2

In this article we summarize and analyze the tax system affecting
nongovernmental organiz ations in the Slovak Republic. We chose the field of tax
law based on results from questionnaire research with Slovak nongovernmental
organizations, results from an expert evaluation employing the Delphi method
used in the dissertation “Self -Financing Stra tegy and Sustainability of Non -Profit
Organizations,” and rankings of the American agency USAID. The most
important elements of the tax system which affect the sustainability and operation
of NGOs are, first, exemption of their core work from income/profit tax, and,
second, tax assignation – the mechanism of distributing a percentage of the
income tax to a qualifying NGO. The second element is enacted in only few
countries.
Slovakia is one of the four countries in the CEE region to adopt tax
assignation. T he article analyzes the reasons for the introduction of the
mechanism in 2001, as well as the reasons for the amendments adopted since
then. We focus on the option for corporations to assign a share of their income
tax. The corporate income tax accounts fo r an important part of tax revenues, and
this option has undergone major changes since its first adoption. Our aim is to
analyze the tax laws affecting the sustainability and operation of NGOs in
Slovakia, as well as the changes in tax assignation and thei r impact on both
public finance and NGOs.

1. Introduction
One of the principles of the financing of nongovernmental organizations (NGOs) is tax
exemption. This principle is applied in two directions: it can refer to the legal form of the
organization, or i t can refer to the activities of an organization irrespective of its legal form.
In this article we will focus on public funding of nongovernmental organizations,
especially the form of indirect support where the state waives certain income and thus enable s
NGOs to “save.” This category includes the following:
• exemption from taxes (e.g., value added tax, customs fees)
1 Department of Public Economics and Regional Development, Faculty of Economics, Matej Bel
University, Tajovského 10, 975 90 Banská Bystrica, Slovakia. maria.svidronova@umb.sk
2 Department of Public Economics and Regional Development, Faculty of Economics, Matej Bel
University, Tajovského 10, 975 90 Banská Bystrica, Slovakia. helena.kuvikova@umb.sk

International Journal of Not -for -Profit Law / vol. 1 6, no. 1, September 2014 / 9

• tax reductions for NGOs
• tax reductions for donors (who can deduct donations from their tax base) and others
(Stejskal et al, 2012)
Indirect p ublic support of NGOs confers advantages on these organizations in the field of
taxation as well as on those individuals and corporations that support the NGOs through
donations. NGOs must heed the non -distribution constraint principle: i.e., they can make a profit,
but it must be fully reinvested in their operations to support the mission and purpose for which
they were founded; it cannot be used to enrich the owners, members, or employees. Weisbrod
(1988) considers tax relief as a form of compensation for this restriction on profit distribution.
Other authors indicate different reasons for tax exemption, such as the fact that exemption based
on the character of NGOs’ activities enables them to fund charitable or generally beneficial
services in education , health, social care, or other areas (Anik et al., 2009; Billis & Glennerster,
1998; Hansmann, 1996; Sokolowski, 2012; Markowska -Bzducha, 2012).
This article analyzes the changes in the exemption of NGOs from different types of taxes
and the changes in th e mechanism of assignation of the income tax, as well as the outcome of
primary research conducted for the dissertation “Self -Financing Strategy and Sustainability of
Non -Profit Organizations.” The outcome of the dissertation confirms the importance of the tax
laws that affect NGOs.
According to the U.S. Agency for International Development (USAID, 2013), which has
been assessing the sustainability of nongovernmental organizations in Central and Eastern
Europe since 1997, the legal environment should suppor t the needs of the nonprofit sector, allow
the entry of new organizations, prevent political interference with NGOs, and provide conditions
under which NGOs can conduct entrepreneurial activities to ensure income and to enhance their
stability. Among the m onitored factors are the difficulty of registering new organizations and the
laws governing their operations, their taxation, and their access to information.
The importance of the legal environment in general and the tax laws in particular is
confirmed no t only by USAID but also by the results of the primary Delphi research, as
presented later in this article.
We examine the tax laws that affect the operation of NGOs, with emphasis on the law on
income tax. The article further provides an overview of chan ges in tax laws, particularly those
providing for tax assignation. Here we focus on the impact of this change o n public finance and
the state budget. In the end we develop models to predict the amounts that NGOs in Slovakia
will receive from income tax ass ignation, and on the basis of these models we propose
recommendations for NGOs to ensure their financial stability.
2. Methodology
The aim of this article is to analyze the tax system affecting the operation and
sustainability of NGOs in Slovakia, the changes in tax assignation, and the impact on both public
finance and NGOs.

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The material consists of primary and secondary information on NGOs and the Slovak tax
laws. As secondary data we use the NGO Sustainability Index 3 compiled annually by USAID,
which rates NGOs in Central and Eastern Europe and Eurasia on seven dimensions : legal
environment, organizational capacity, financial viability, advocacy, service provision,
infrastructure, and public image of NGOs . The scale runs from 1 to 7, where 1 means a very hig h
level of sustainability of a nongovernmental sector and 7 is a very poor level. According to their
scores on NGO sustainability, countries fall in three basic stages of development: Sustainability
Enhanced, Sustainability Evolving, and Sustainability Imp eded (USAID, 2013).
Primary data was obtained though a structured questionnaire sent to 670 NGOs; 182
respondents completed the questionnaire with applicable information. Appropriate structure and
scope of the sample were confirmed by statistical significa nce of the results of a Chi -quadrate
test.
We also collected primary data by the Delphi method. We addressed a group of experts
on the nonprofit sector and NGOs with a questionnaire. Based on the analysis of the NGO
sustainability index and our research re sults, we confirmed the importance of the legal
environment on the operation of NGOs, particularly tax laws. The result led us to compose two
regression models for the development of the percentage of income tax assignation as stated in
the amendment of Ac t No. 595/2003 on Income Tax. The first model presumes that corporations
will provide an additional percentage from their own sources (direct donation); the second model
presumes that corporations will not give any direct donation.
The expert group in the Delphi research was made up of specialists from scientific,
public , and nongovernmental spheres. From the nongovernmental sector, we chose
representatives of the so -called umbrella organizations as well as significant figures in this field
who examine the issue from a practical point of view. We asked experts from all three spheres to
assess the significance of various factors that affect the sustainability of NGOs and to assess the
state of the six selected dimensions in Slovakia. The expert group was asse mbled based on
citation analysis (the most frequently cited names in scientific publications) and purposeful
selection (our own decision after consultation with another expert).
Electronically we contacted 40 experts. Of them, 22 responded to the questionn aire, four
did not want to be involved in the research, and three indicated by marking “other” that they did
not consider themselves experts in the field. After the first round we addressed 33 experts, of
whom 15 answered (for more detailed description of the selection process see Svidroňová,
2014). The participation of experts in both rounds of research and their expertise are shown in
Table I and Table II:
Table I: Number of participating experts in both rounds
TOTAL Public sphere Nongovernmental
sphere Scientific sphere other
Round 1 22 6 27% 8 36% 5 23% 3 14%
Round 2 15 4 27% 5 33% 5 33% 1 7%
Source: own research, 2012.
3 In 2011 it was renamed the CSO Sustainability Index (Civil Society Organizations) , but the subject of
analysis, methodology , and content remain the same. W e use the term NGO to correspond with the abbreviation in
this article.

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The experts evaluated the significance of the selected determinants as well as the current
state of Slovak NGOs in terms of sustai nability in accordance with the USAID methodology.
To examine the rating of the sustainability by the expert group we compiled a
questionnaire, which asked the experts first to identify the significance of the selected
determinants according to their impac t on the sustainability of nongovernmental
Table II: Expertise of participating experts
Criteria of
expertise
TOTAL Public sphere Nongovernmental
sphere Scientific sphere
Round 1 Round 2 Round 1 Round 2 Round 1 Round 2 Round 1 Round 2
Years of
experienc e 4.5 4.6 5.5 5.5 5.2 5.5 4.4 3.9
Number of
expert
publications
6 7.2 4 6.6 7 8.6 9 7.7
Source: own research, 2012.
organizations, and, second, to assess the level of the determinants in Slovakia on a scale from 1
to 5, where 1 means the most important determinant and 5 the least important. The determinants
were grouped into six dimensions corresponding to those in the Index (legal environment,
organizational capacity, financial viability, service provision, infrastructure, public image). The
experts als o had an option to propose their own determinant.
Based on the responses in the first round we evaluated the importance of the determinants
as ordinal variables using median and variance. We added other determinants stated by experts in
the first round. Af ter one month we again sent the questionnaire to the experts with the results
from the first round. Experts could modify their opinions or could argue their original opinion.
After the second round we conducted an overall evaluation, and the changes of opi nions resulted
in the changes of values of median and variance (Table III).
3. Legal environment affecting operation of NGOs in Slovakia
The U.S. Agency for International Development (USAID) annually publishes the NGO
Sustainability Index. It is a key analyt ical tool that measures the development of the civil sector
in Central and Eastern Europe and Eurasia. The Index analyzes and assigns scores to seven
interrelated dimensions: legal environment, organizational capacity, financial viability,
advocacy, servic e provision, infrastructure, and public image of NGOs.
The Index is always published retrospectively for the previous year; the currently
available document, from July 2013, evaluates the year 2012. In that year, the sustainability
index (overall score) fo r Slovakia was 2.7, which ranked Slovakia in the top five of the 29
countries from Central and Eastern Europe and Eurasia. In Slovakia, USAID has implemented
sustainability research since 1997 in cooperation with the Pontis Foundation. Individual
dimension s and their scores are in Chart 1.
In this arti cle we focus only on the dimension of the legal environment. As mentioned
above, the legal environment should allow the entry of new organizations, prevent political
interference in NGOs, establish conditions under which NGOs are able to conduct
entrepre neurial activities to ensure income, and enhance their stability. Among the monitored

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factors are the difficulty of registering new organizations and the laws governing the
organizations ’ operation, taxation, and access to information. The index score for the Slovak
legal environment in 2012 reached 2.8, unchanged since 2009.
This score is affected by the acceptance of the proposal of the Ministry of Finance to
change the rules for the assignation of 2 percent of the income tax; the organizations expected a
reduction in income from this source. The need for legislation on volunteering has been filled by
Act no. 406/2011 Statuses on Volunteering. One positive factor in the score is the simple
procedure of establishing NGOs without unnecessary bureaucratic ste ps, although the report
suggests that the global trend is to place the documents for establishing NGOs online, which
Slovakia has not yet done. One negative influence is the changes in the Labour Code at the end
of 2012, which modified the conditions for v arious part -time workers other than contractual
employees . According to the amendments , the wages of these workers will be levied by
contributions to social insurance and health insurance as if they were employee s on regular
contract s, which has increased the costs for NGOs. On the other hand, a positively perceived
factor is the activities of the first Slovak nonprofit center, which provides legal advice as well as
information on its website concerning legislative changes and proposals affecting NGOs.
Char t 1: NGO sustainability index for Slovakia, 2012
Source: USAID, 2013.
The respondents in the structured questionnaire evaluated (among other areas of
sustainability ) legislation, especially the tax system in Slovakia. On a scale from 1 to 5, n early 48
percent of NGOs said they consider Slovak tax laws complicated and unclear. On the other hand,
56 percent of respondents consider these laws favorable in terms of NGOs’ operation s and
sustainability, or at least as neutral in this respect. Only 16 percent of respondents see the tax
laws as totally unfavorable, and 28 percent see them as more restrictive than favorable. From the
responses we calculated a rating for Slovak legislation environment, in the opinion of NGOs, as
2.78.
The evaluation of t he experts in terms of significance and development (current state) of
determinants of the legal environment in Slovakia is summarized in Table III.
We can compare the three scores for the Slovakian legal environment. The experts scored
it at 3.4, placing it in the transit phase (Sustainability Evolving). USAID’s NGO Sustainability
Index scored it at 2.8, placing it in the consolidated phase (Sustainability Enhanced). The Slovak
NGOs assigned a score very close to USAID’s, 2.78. In other words, USAID and S lovak NGOs

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place Slovakia in the consolidated phase, whereas the expert group puts it in the transit phase.
This disparity underscores the need to examine the legal environment and its influence on the
operation on NGOs closely. Because the topic is very b road, we focused on those determinants
that scored the worst median (in our case a value of 4). As shown in Table III, those determinants
Table III: Significance of the determinants influencing NGO sustainability
Determinants
Significance
Round 1 Round 2 Total significance of
the determinant
median variance median variance Round 1 Round 2
Legal environment 2,3 x 2,4 x 62% 60%
Suitability of laws
governing the operation of
NGOs
1,5 0,45 2 0,42 70% 60%
Clarity of laws governing
the operation of NGOs 2 0,62 2 0,49 60% 60%
Tax laws (allowances for
NGOs) 2 0,53 2 0,53 60% 60%
Availability of legal
advice for NGOs 3 0,6 3 0,46 40% 40%
Opportunities to apply for
government / public
contracts
3 0,55 3 0,43 40% 40%
Determinants
State in the SR
Round 1 Round 2
median variance median variance
Legal environment 3,4 x 3,4 x
Suitability of laws
governing the operation of
NGOs
3 0,41 3 0,37
Clarity of laws governing
the operation of NGOs 3 0,37 3 0,51
Tax laws (allowances for
NGOs) 4 0,44 4 0,29
Availability of legal
advice for NGOs 3 0,48 3 0,45
Opportunities to apply for
government / public
contracts
4 0,49 4 0,44
Source: own research, 2012.

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are “Tax laws” and “ Opportunities to apply for government / public contracts.” We focus here on
the first determinant, reflecting its significance. In addition to the expert evaluation regarding the
current state of sustainability of NGOs, t he r esearch by the Delphi method provided an
assessment of the significance of individual determinants and dimensions. The significan ce of
the legal environment for the operation of NGOs reached the value of 60% after the second
round. Among the other surveyed dimensions, a higher ranking was achieved only by public
image, at 67%, and by organizational capacity and financial viability, both at 63% (on the
outcome of research, see Svidroňová, 2013; on enhancing financial viability with modern
managerial tools, see Vaceková, 2013).
We focused on determinants where the significance on NGO activities was identified as
important and deemed to be underdeveloped currently in Slovakia. From Table III it is clear that
the category of tax laws represents such a determinant. For this determinant, the difference
between significance and current state was 2 points . (Besides the legal environm ent, other
dimensions were financial viability, service provision, and public image, but these are not the
focus of this article .) Based on this result, we selected the tax laws affecting NGO activities and
sustainability for closer analysis.
Table IV: Taxation of NGOs in Slovakia
Revenue from the
perspective of income tax Definition of the income
Income subject to tax (§ 12) income from activities that generate a profit for NGOs
income from activities that may lead to generating a profit
Income not subject to tax (§
12)
income gained from the tax assignation
income gained from donation or inheritance
Income exempted fro m tax
(§ 13)
income from activities for which the NGOs (taxpayers) were
founded or activities that are their core work, except income
from business activities and income on which withholding tax
is levied
income from church collections, religious acts, a nd allowances
for registered churches and religious societies
income from membership fees stated in statute or constituent
documents received by civic associations, including
professional associations, trade unions, political parties, and
political movem ents
income from grants provided by international treaties by which
the Slovak Republic is bound
Income subject to
withholding tax (§ 43)
interest, win, or other income accrued on deposit saving books
or cash balances on current accounts
income from a ssets in a mutual fund, income from shares
obtained from redemption (repayment), income from deposit
certificates, income from bonds and treasury bills
Source: Own processing based on DUBIELOVÁ, V. 2011. Entrepreneurial activity and the taxation of non -profit
entities.

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4. Tax laws affe cting the operation of NGOs in Slovakia
Due to their nature as organizations or the nature of their activities, NGOs are either
totally or partially or conditionally exempted from most taxes in the Slovak Republic. Tax
exemptions are mainly regulated in Act no. 595/2003 Statutes on Income Tax, as amended.
Table IV categorizes the types of NGO income and their tax status.
In the past, NGOs enjoyed additional tax benefits, including relief on property taxes,
VAT, income tax, and road tax. Income from entrepreneurial activities was also exempted up to
300,000 SKK, with income over this amount taxed (abolished in 2006). Amendments to the Act
on Income Tax in the years 2001 to 2006 eliminated these tax benefits and provided for the
possibility of tax assignation to NGOs, which will be discussed further below.
The current tax system of the Slovak Republic influenc ing NGO activities consists of the
major tax types listed in Table V.
Exemptions from the Income Tax are described in Table IV . Except for the motor vehicle
tax, the Acts allow tax exemption or tax relief for legal entities not founded or constituted for
business purposes, i.e., NGOs. The tax exemption or relief is regulated in some Acts; in other
cases, it can be established by a local tax collector applying a regulation to local conditions (local
taxes are determined by the municipality or higher te rritorial unit).
Table V:
Overview of selected taxes affecting the function of NGOs in the tax system in Slovakia
Type of tax Act
Income tax from individuals and legal
entities
Act no. 595/2003 Statutes on Income Tax as
amended.
Tax on transfer of proper ty Act no. 554/2003 Statutes on Tax on Transfer
of property
Property tax Act no. 582/2004 Statutes on Local Taxes and
Fees for municipal waste and construction
waste
Motor vehicle tax (road tax)
Gift tax Abolished from 1 January 2004
Inheritance tax Abolished from 1 January 2004
Value added tax Act no. 222/2004 Statutes on Value Added
Tax
Source: Own processing based on relevant Slovak legislation valid to 31 August 2013
Act no. 563/2009 Statuses on Tax Administration (Tax Code) is also important. It
governs tax management, tax collection, tax control, filing of tax returns, remedies, and sanctions
that the tax authorities may impose.
5. Tax assignation
Tax assignation is a mechanism that allows individuals and corporations to assign a
percentage of t he paid income tax to benefit a selected NGO. Tax assignation can be regarded as
a mixed source: it has the characteristics of public funding ( the state foregoes part of the income
tax) and private funding ( the allocations are based on the private choice s of individuals and
corporations). In the event that they do not decide on a particular NGO, the entire amount of the

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paid income tax remains in the state budget. Tax assignation thus can be seen as a unique form of
support , at the crossroads between public funds and private funds.
The tax assignation in Slovakia has been developed thanks to an initiative of the NGOs
themselves. The first impulse was at a conference in Stupava (1997) which brought together
representatives of the nonprofit sector. After the 1 998 elections and the onset of a coalition led
by Mikulas Dzurinda, the representative of the Committee of the Third Sector succeeded with
the proposed amendments to the Income Tax and tax assignation. The main argument was a
gradual withdrawal of foreign foundations that had previously supported the Slovak NGOs but
now shifted their support to NGOs in the less developed countries of Eastern Europe.
Philanthropy was still underdeveloped in Slovakia , and NGOs sought further sources of funding.
Inspiration wa s found in implementing the tax assignation mechanism in Hungary.
In 1996, Hungary enacted a unique “tax designation” law that permits taxpayers to
designate 1% of taxes paid to be turned over to civil sector organizations, and an additional 1%
to be turn ed over to churches, provided that each of the two designated amounts is at least 100
HUF. In 2001, this law resulted in $25 million USD worth of 1% designations by 1.4 million
taxpayers. In the next three years, Slovakia, Lithuania , and Poland followed Hu ngary’s lead and
enacted 1% type laws , though Lithuania ’s law allow ed for a 2% designation (International
Center for Not -for -Profit Law, 2003).
This funding mechanism appeared to be successful , and the conditions were similar in
these countries. The goal w as not only to bring additional resources to the nonprofit sector but
also to help build relationships between NGOs and citizens – the assignation of a percentage of
income tax would give corporations and individuals to participate a more significant way t o
participate in financ ing NGOs.
The mechanism of tax assignation has undergone several important changes since its
introduction in 2001 , which we briefly summarize.
Act no. 561/2001 Statutes on Income Tax amended the Act no. 366/1999 , and one of the
chang es allowed individual taxpayers to assign 1% of their personal income tax to the public
benefit services provided by defined nonprofit organizations which operate in the fields of
education, health care, social services, physical education and sport, envir onment, culture , and
restoration of cultural monuments. This amendment abolished t he option of tax relief on the
value of th e donations for public purposes, which had been up to 10% of the tax base for
individuals and up to 2% of the tax base for corporati ons.
In 2003 , Act no. 595/2003 Statutes on Income Tax changed the amount to 2% of the paid
income tax and gave corporations as well as individuals the option of assign ing this percentage
of income tax (hereinafter also referred as “2% law”). By allowing ta x assignation to
corporations , Slovakia became unique in the world. Other amendments in this Act established
criteria for determining which organizations and which activities would be eligible for the tax
assignation. A tax assignation recipient must be re gistered by a notary . T he received funds must
be used by the end of the next year for advancing the organization’s core work. If the recipient
fails to fulfill these obligations, it must return the funds within 90 days to the state budget , and it
is subjec t to a breach of budgetary discipline under a special regulation. A n organization that
receives more than €3,319.39 from tax assignation in one year is required to specify precisely
the use of the received funds in the Business Journal (Obchodný Vestník) within 16 months from
the date that the Tax Directorate publish es the list of recipients . The organization must specify in

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the amount of received funds and the purpose for which they were use d, as well as provide an
auditor ’s statement that conforms to spe cial regulation.
Based on this amendment, the Ministry of Finance estimated that funds from the tax
assignation for nonprofit organizations should have been around 300 mil lion SKK
(approx imately 10 mil lion Euros ). The estimation of the 1 st Slovak Non -profi t Service Centre
doubled the sum, i.e. 600 mil lion SKK (approx imately 20 mil lion Euros ). There was shock when
the total amount of tax assigned was 845,222,347 SKK (over 28 mil lion Euros) (Marček, 2007).
Act no. 504/2009 Statutes on Income Tax , which came i nto effect in 2010, amended the
responsibilities of recipients . Under it, a recipient of more than €33,000 in one calendar year
must within 30 days open a special account used only for the funds from tax assignation . T he
recipient can use the funds for adv ertising but only for the purposes defined in Act no. 504/2009
and for the purpose for which the NGO was established . T he recipient can also use the funds to
purchase movable and immovable property, if these are to be used for the core work of the NGO .
The core work is certified by a notary at registration for tax assignation.
A major change in the Act was the reduction of the percentage from 2% to 0.5% starting
in 2010. The main reasons for these changes were outl ined in 2006 by Jan Počiatek , the Finance
Minister at that time, who argued that 2% of corporate income tax was too high ; it threatened the
core goal of the tax assignation , which was to build relationships between NGOs and taxpayers.
Although research ind icates that tax incentives help involve business es with the nonprofit sector
(Guthrie, 2008) , the tax assignation was not seen as the optimal tool for enhancing this
invol ve ment. Another argument was that large companies established and assigned their 2% o f
tax to their own foundation s. An example is the SPP foundation , whose income from the
corporate tax assignation was on average about €3,375,590 ( www.rozhodni.sk ). Jan Počiatek
originally proposed the abolition of assignation of the corporate income tax. NGO
representatives campaigned to preserv e the 2% assignation. Thereafter, a compromise was
implemented, under which the limit for corporate income tax assignation will gradually reduce
from 2% to 0.5% during the years 2011 to 2019.
This amendment also seeks to ensure that large corporations support the NGOs
established for public purposes from their own resources , and not solely via tax assignation. The
main aim of this amendment is thus to encourage corporate philanthropy. The state will assign an
Table VI : Possible development of Corporate Income tax assignation
Year
If corporations do not
donate directly, they can
assign:
NGOs
get:
If corporatio ns
donate directly
State assigns
additionally:
NGOs
can get:
2012 1,5% 1,5% 0,5% 0,5% 2,5%
2013 1,5% 1,5% 0,5% 0,5% 2,5%
2014 1,0% 1,0% 1,0% 0,5% 2,5%
2015 1,0% 1,0% 1,0% 0,5% 2,5%
2016 0,5% 0,5% 1,5% 0,5% 2,5%
2017 0,5% 0,5% 1,5% 0,5% 2,5%
2018 0,5 % 0,5% 1,5% 0,5% 2,5%
2019 0,5% 0,5% 1,5% 0,5% 2,5%
Source: Own processing based on Act no. 504/2009 amending Act no. 595/2003 Statutes on Income Tax.

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additional percentage of corporate income tax if a company provides a direct donatio n in that tax
year as a corresponding percentage of the tax paid . An overview is provided in Table VI .
Act no. 504/2009 also changed the percentage for individuals for 2012. An individual
who volunteer ed for at least 40 hours in 2012 could assign 3% of their income tax instead of 2%.
The overview of funds raised through the tax assignation for the period since the
introduction of the mechanism is shown in Table VII. From Table VII it is clear that the
mecha nism of tax assignation is very popular among NGOs . T he number of NGOs registered has
been growing since 2005 which corresponds to the development and increasing number of NGOs
in Slovakia (see more in Kuvíková & Svidroňová, 2013). The use of tax assignati on is also
confirmed by the results of the primary research in 2011 focused on NGO funding, which found
that 92% of respondents received funds through tax assignation (Svidroňová & Vaceková, 2012).
Another obvious reason for the abolition or reduction in t he percentage of tax assignation
mechanism , so far unmentioned, was the government’s effort to keep the full amount of the tax
in the state budget instead of assigning any percentage to registered NGOs. This trend was
associated with the economic crisis an d efforts to sustain economic growth, which was reflected
in several countries (Izák, 2011). According to an estimate by the state , the decrease in the
percentage of corporate income tax assignation should have brought to the state budget about
€6.7 million in 2011 and about €7.3 million in 2012 (Faiglová, et al., 2010). Table VII shows
that in 2011 the amount assigned by corporations dropped by €3.15 million, which was less than
half of the estimated amount that should have remained in the state budget. This fact is due to
both a decrease in economic growth , which reduced the state revenue from corporate income tax ,
and a decrease of 745 corporations that participated in tax assignation in 2010 (i.e. their income
tax automatically became part of the state budget; the state did not consider any percentage that
should be assigned to NGOs and Table VII does not show this amount).

Table V II: Income tax assignation from individuals and corporations , 2002 -2012
Year Number of
recipients
Number of
participating
individuals
Number of
participating
legal entities
Personal
Income tax
assignation
(thousands
€)
Corporate
Income tax
assignation
(thousands
€)
Total amount
of Income tax
assignation
(thousands €)
2002 4 042 341 776 – 3 382 – € 3 382
2003 3 398 286 164 – 3 222 – € 3 222
2004 3 829 402 057 8 364 9 15 9 19 792 28 951
2005 5 746 418 241 14 063 10 371 20 525 30 896
2006 7 100 446 973 17 740 11 713 25 629 37 342
2007 7 662 408 277 21 632 12 819 29 306 42 125
2008 7 759 449 909 26 691 15 036 34 144 49 180
2009 9 098 503 253 30 078 17 684 37 496 55 180
2010 9 585 467 983 26 172 15 553 28 592 44 145
2011 10 049 475 843 25 427 16 526 25 444 41 970
2012 10 565 n/a n/a 18 548 26 146 44 694
Source: Own processing based on data the Tax Directorate of the Slovak Republic – Annual reports on the activities
of tax authorities for years 2004 – 2011( www.drsr.sk )

International Journal of Not -for -Profit Law / vol. 1 6, no. 1, September 2014 / 19

W e cannot determine the number of corporations involved in the mechanism of tax
assignation for 2012, but from the overall tax collection on corporate income tax , the st ate
transferred €26.1 million for public purposes, i.e. the annual increase was € 0.7 million (2.8%).
Compared to 2010 (before the amendment) the total amount of corporate income tax assigned
declined by just €2.5 million, which is only about a third of th e planned volume that had been
supposed to stay in the state budget.
From the above , it can be deduced, first, that the amendment has not had the expected
effect; and , second, that revenues from corporate income tax that actually stayed in the budget
and d id not have to be transferred to the NGOs were not particularly high. The argument that
corporations support mainly their own foundation s (founded by the corporations themselves)
contradict ed by data from the Centre for Philanthropy , which finds that more than two -thirds of
the 2% of the corporate income tax is assigned to NGOs that are not directly linked to,
established by, or controlled by these corporations. That the tax assignation is not an enrichment
of corporations via their foundation s can be prove d by another fact : among the 200 largest
recipients of the assignment in 2011 were 16 corporate foundations which together received the
amount of €7.6 million. In the same year, however, the top 20 corporate foundations reallocated
grants to a total amount of more than €9 m illion (www.cpf.sk ).
6. Models of development of raising funds from the tax assignment
Based on the experience with the corporate income tax assignation from 2004 to 2011,
we created two models to estimate the income for NGOs from the tax assignment up to 2015 .
From a statistical point of view , an attempt to estimate beyond 2015 would decrease the
reliability of the model , given the relatively short period for which data is available.
The first model estimates the income if all corporations make direct donation s to the
amount as shown in Table VIII , such that the total amount that NGOs can receive would increase
from 2% to 2.5%. To calculate the model we used a linear regression ; because the share is fixed
(2.5%) , it would not m ake sense to calculate a regression model based on the change in the
percentage. We therefore modeled the state budget revenues from corporate tax , which we
estimated up to 2015 , and from that amount we calculated 2.5% , on the assumption that all
corporati ons would engage in tax assignment. We recalculated this amount using the coefficient
of 64.76% , which was the actual usage of the maximum allowable amount in 2011.

Table VIII : Estimated Development of Corporate Income Tax Assignation
Combined with Direct Donations from Corporations
Year
State budget revenues
(in €)
percentage
of corporate
income tax
paid
theoretical assignation
of corporate income
tax paid : maximum
possible amount
total amount if
participation remains
unchanged from
previous year
percent age of
maximum
possible
amount
2011 1 946 920 981,62 € 2% 38 938 419,63 € 25 216 755,00 € 64,76%
2012 2 048 692 491,43 € 2,5% 51 217 312,29 € 33 168 639,81 €

2013 2 150 464 001,24 € 2,5% 53 761 600,03 € 34 816 335,88 €
2014 2 252 235 51 1,05 € 2,5% 56 305 887,78 € 36 464 031,94 €
2015 2 354 007 020,86 € 2,5% 58 850 175,52 € 38 111 728,00 €
Source: Own processing based on data by the Tax Directorate of the Slovak Republic and own calculation.

International Journal of Not -for -Profit Law / vol. 1 6, no. 1, September 2014 / 20

Table VIII shows that the total amo unt that NGOs could receive would be gradually
increased to €38 million in 2015. The significance of the model as a whole was confirmed at
level α = 0.05. The reliability of the model is 67%, and we can interpret it as follows: annually,
the volume of reve nues to the state budget from corporate income tax increases by €101.77
million due to the time component. It will influence the increase of the corporate income tax
assigned by €1.65 million per year. The problem is that the model assumes 100% involvement of
corporations in the direct donation from their own sources (financial or non -financial) , so the
total percentage for tax assignation would be 2.5%.
The second linear regression model estimates the income from the tax assignation for NGOs
if corporation s do not allocate additional funds from their budgets, i.e. the total amount that
NGOs could receive would be gradually reduced from the original amount of 2% of the tax paid
to 0.5%. The significance of the model as a wh ole was confirmed at the level α = 0.05, the
reliability of the model is 90.6% and it can be interpreted as follows: 82% of the changes in the
total amount of assigned corporate income tax can be explained by the change in the percentage
of tax assignation (other changes can be explained , e.g. , by a smaller volume of corporate
income tax due to a decrease in their income or by reducing the number of corporations , but we
do not know how to illustrate these influences in the model). The estimated amount of th e
income that NGOs c an acquire is shown in Table IX.
Table IX illustrate s the real development of the percentage of corporate income tax paid
in years 2004 to 2011. As we can see , it rose until 2009 and then dropped in 2010 and 2011. In
the event that cor porations would not support NGOs by additional direct donation s, this drop
would continue. In 2015, the model estimates that the amount for NGOs would be less than a
third of what NGOs received in 2011. The model assumes that no corporation would support
NGOs with direct donations , which is probably exaggerated; corporate philanthropy is at least
partially developed in the Slovak Republic.

Table IX : Estimated D evelopment of Corporate Income Tax Assignation
W ithout Direct Donations from Corporations
Year
percentage of corporate income
tax paid
corporate income tax assignation –
total amount
2004 2% 19 686 174,00 €
2005 2% 20 525 144,00 €
2006 2% 25 629 046,00 €
2007 2% 29 306 225,00 €
2008 2% 34 144 247,00 €
2009 2% 37 495 973,00 €
2010 2% 28 591 712,00 €
2011 2% 25 216 755,00 €
2012 1,5% 20 680 807,25 €
2013 1,0% 13 787 204,83 €
2014 1,0% 13 787 204,83 €
2015 0,5% 6 893 602,42 €
Source: Own processing based on data by the Tax Directorate of the Slovak Republic and own ca lculation.

International Journal of Not -for -Profit Law / vol. 1 6, no. 1, September 2014 / 21

Comparing the calculated and real data available for 2012 from the Finance Directorate
of the SR , we can conclude the following: the first model , which assumes that all corporations
would engage in the tax assignation and also donate 0.5% from their own sources , indicated that
the amount which NGOs could have received in 2012 should have been €33.168 million.
However, the actual amount in that year was €26.148 million, which is 7 million less than the
estimation of model 1. The second model, which s keptically cal culates that no corporation
involved in the tax assignation would donate the percentage from their own sources, forecasts for
2012 that NGOs should have received €20.68 million. The reality in 2012 shows that this amount
is lower by almost €5.5 million, i. e., model 2 underestimates the amount obtainable from the tax
assignment. The second model is closer to reality ; however, a comparison based on one year
cannot draw decisive conclusions. It is interesting that averag ing the amounts of model 1 and
model 2 c omes to €26.924 million , which differs from the real amount in 2012 by only
approximately €778,000.
We believe the second model is more likely to apply to the development of raising funds
from the tax assignment, i.e. , corporations will not be motivated t o make up the percentage from
their own sources as direct donation s to NGOs. The mere amendment in the legislation as an
incentive for corporations to undertake more philanthropic activities is not enough. NGOs must
have the reputation of credible and tran sparent organization s in order to attract more corporate
philanthropy. We therefore recommend that NGOs regularly inform their donors about their
activities and involve donors in the activities in order to raise awareness. We also recommend
that NGOs build long -term strategic partnerships with corporations identified with the values and
missions of NGOs. The long -term partnerships can be created either through networking or
through cooperation in the field of corporate social responsibility (CSR). These a nd other steps
based on the initiative of NGOs may lead to corporations willing to fund NGO activities from
their own resources.
7. Conclusion
NGOs are favored in many areas of the tax system of the Slovak Republic. One of the
benefits is the tax exemption, t he terms of which we stated in the article. Another benefit is the
possibility of obtaining funds from tax assignation. After 12 years of the existence of this
mechanism , the NGOs have grown used to , it and the number of registered organizations as
recipie nts has been increasing since 2005. Therefore, NGOs will observe and comment on any
changes to the mechanism. Lobbying may seem to be the optimal solution regarding the tax
laws. This could improve the NGO Sustainability Index evaluation of the legal envir onment as a
whole from the current score of 2.8. On the other hand, the legal environment includes other
factors in addition to the tax laws, e.g. Labour Code , which the USAID evaluates for their impact
on the sustainability of NGOs.
NGOs may be able to st abilize their income from tax assignation by changes to the tax
laws. But doing so requires long -term effort , and the results are volatile ; a new government may
disregard the previous government ’s promises to the NGOs. Then there are the other possibilitie s
of cooperation between NGOs and corporations (networking, CSR, shared marketing) which
help to build long -term partnerships. In our opinion , these partnerships are more effective than
tax assignment. However, NGOs also have to make an effort if they want to be involved in the
mechanism of tax assignation; they must comply with the administrative regulations (register for
the tax assignation at a notary), and they have to persuade corporations and individuals to assign
the 2% of their taxes, e.g. , by provi ng their reputation, transparency and credibility. Registering

International Journal of Not -for -Profit Law / vol. 1 6, no. 1, September 2014 / 22

as a recipient for the tax assignation might be sort of “lesson” for NGOs to learn how to act in a
transparent and credible way , which is another positive aspect of this mechanism. We
recommend that NGOs continue in their efforts to obtain funds from tax assignation , as these
activities contribute to building their sustainability.
There is only a short time series of data available for further expert analysis using the
relevant mathematical and statistical methods. We want to continue to monitor these issues in the
coming years and conduct more detailed analys es to establish the effects of the legislation.

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e are tired of tolerating IBIS’ political
interference in Bolivia.” 119
 A September 2014 article in the New York Times asserted that foreign “money is
increasingly transforming the once -staid think -tank world into a muscular arm of foreign
governments’ lobbying in Washington.” 120 The following week, United States
Representative Frank Wolf wrote a letter to the Brookings Institution, in which he urged
them to “end this practice of accepting money from … foreign governments” so that its
work is not “compromised by the influence, whether real or perceived, of foreign
governments.” 121
Some governments assert that foreigners are not only seeking to meddle in domestic
political affairs, but also seeking to destabilize the country or otherwise engage in “regime
change.” Accor dingly, they argue that foreign funding restrictions are necessary to thwart efforts
to destabilize or overthrow the government currently in power.
 In 2013 in Sri Lanka , the government justified a recent registration requirement for all
CSOs on the grounds that it was necessary to “thwart certain NGOs from hatching
117 Jonathan Lis, “Draft bill: NGOs with foreign funding to be defined ‘foreign agents,’” Haaretz , May 26,
2013, accessed September 8, 2014, https://www.haaretz.com/news/national/.premium -1.592754 .
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119 Agence France -Presse, “Bolivia expels Danish NGO for meddling,” Global Post , December 20, 2013,
accessed September 16, 2014, https://www.gl obalpost.com/dispatch/news/afp/131220/bolivia -expels -danish -ngo –
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120 Eric Lipton, Brooke Williams, & Nicholas Confessore, “Foreign Powers Buy Influence at Think Tanks,”
New York Times , September 6, 2014, accessed September 17, 2014,
https://www.nytimes.com/2014/09/07/us/politics/foreign -powers -buy -influence -at-think -tanks.html?_r=0 .
121 Letter from Representative Frank Wolf to Strobe Talbott of the Brookings Institution, September 9,
2014, accessed September 17, 2014, https://s3.amazonaws.com/s3.documentcloud. org/documents/1301186/rep –
frank -wolfs -letter -to-strobe -talbott -at.pdf .

International Journal of Not -for -Profit Law / vol. 17 , no. 1, March 2015 / 23

conspiracies to effect regime change by engaging in politics in the guise of doing social
work.” 122
 A drafter of the Russian “foreign agents” law justified the initiative when it was pending
in pa rliament, stating, “There is so much evidence about regime change in Yugoslavia,
now in Libya, Egypt, Tunisia, in Kosovo — that’s what happens in the world, some
governments are working to change regimes in other countries. Russian democracy needs
to be prot ected from outside influences.” 123
 In 2005, the Prime Minister of Ethiopia expelled civil society organizations, explaining,
“there is not going to be a ‘Rose Revolution’ or a ‘Green Revolution’ in Ethiopia after the
election” 124 — a reference to the so -called “color revolutions” that had recently occurred
in Georgia and elsewhere.
 In June 2012, Uganda’s Minister for Internal Affairs justified the government’s threats to
deregister certain CSOs, stating that CSOs “want to destabilize the country because that
is what they are paid to do…. They are busy stabbing the government in its back yet they
are supposed to do humanitarian work.” 125
 In the process of driving civil society organizations out of Zimbabwe , President Mugabe
justified his policies by claiming that the CSOs were fronts for Western “colonial
masters” to undermine the Zimbabwean government. 126 Similarly, the central committee
of Mugabe’s party claimed, “Some of these NGOs are working day and night to remove
President Mugabe and ZANU PF from power. They are being funded by Britain and
some European Union countries, the United States, Australia, Canada and New
Zealand.” 127
 In a March 2014 interview justifying a draft “foreign agents” law, Kyrgyzstan’s
President Atembaev argued, “Activities conducted by CSOs are obviously aimed at
destabilization of the situation in the Kyrgyz Republic…. Some CSOs do not care about
how they get income, whose orders to fulfill, which kind of work to execute…. There are
122 Xinhua, “Sri Lanka to Investigate NGOs Operating in Country,” Herald , June 13, 2013, accessed
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forces interested in destabilizing the situation in Kyrgyzs tan and spreading chaos across
Central Asia and parts of China.” 128
 In July 2014, the vice chairman of the China Research Institute of China -Russia Relations
argued that China should “learn from Russia” and enact a foreign agents law “so as to
block the way for the infiltration of external forces and eliminate the possibilities of a
Color Revolution.” 129
2. Transparency and Accountability
Another justification commonly invoked by governments to regulate and restrict the flow
of foreign funds is the importance of upholding the integrity of CSOs by promoting transparency
and accountability through government regulation. Consider, for example, the following
responses by government delegations to the UNSR’s Resource Report:
 Egypt : “We agree with the principles of accountability, transparency, and integrity of the
activities of civil society organisations and NGOs. However, this should not be l imited to
accountability to donors. National mechanisms to follow -up on activities of such entities,
while respecting their independence have to be established and respected.” 130
 Maldives : “While civil societies should have access to financing for effective operation
within the human rights framework, it is of equal importance that the organizations must
also ensure that they work with utmost integrity and in an ethical and responsible
manner.” 131
 Azerbaijan : “The changes and amendments to the national legisl ation on NGOs have
been made with a view of increasing transparency in this field…. In that regard, these
amendments should only disturb the associations operating in our country on a non –
transparent basis.” 132
Similarly, in response to a United Nations Hum an Rights Council panel on the promotion
and protection of civil society space in March 2014, the following government delegations
responded with justifications invoking transparency and accountability:
128 “Алмазбек Атамбаев: “Хочу максимально успеть,” Slovo.kg , March 23, 2014, accessed September
9, 2014, translated by Aida Rustemova, https://slovo.kg/?p=35019 .
129 Simon Denyer , “China taking the Putin approach to democracy,” Washington Post, October 1, 2014,
A7.
130 UN Office of the High Commissioner for Human Rights, “Clustered ID with the WG on HR and
Transnational Corporations and the SR on The Rights to Freedom of Assembly an d Association: Intervention
delivered by the Permanent Delegation of Egypt,” May 30, 2013, accessed September 9, 2014,
https://extran et.ohchr.org/sites/hrc/HRCSessions/RegularSessions/23rdSession/OralStatements/Egypt_10_1.pdf .
131 UN Office of the High Commissioner for Human Rights, “Interactive Dialogue with the Special
Rapporteur on the Rights to Peaceful Assembly and of Association, M aldives Oral Statement,” May 31, 2013,
accessed September 9, 2014,
https://extranet.ohchr.org/sites/hrc/HRCSessions/RegularSessions/ 23rdSession/OralStatements/Maldives_12.pdf .
132 UN Office of the High Commissioner for Human Rights, “Remarks by Azerbaijan,” May 31, 2013,
accessed September 9, 2014,
https://extranet.ohchr.org/sites/hrc/HRCSessions/RegularSessions/23rdSession/OralStatements/Azerbaijan_12.pdf .

International Journal of Not -for -Profit Law / vol. 17 , no. 1, March 2015 / 25

 Ethiopia , on behalf of the African Group: “Domestic l aw regulation consistent with the
international obligations of States should be put in place to ensure that the exercise of the
right to freedom of expression, assembly and association fully respects the rights of
others and ensures the independence, accou ntability and transparency of civil society.” 133
 India, on behalf of the “Like Minded Group”: “The advocacy for civil society should be
tempered by the need for responsibility, openness and transparency and accountability of
civil society organizations.” 134
 Pa kistan , on behalf of the Organisation of Islamic Cooperation members : “It may be
underscored that securing funding for its crucial work is the right of civil society,
maintaining transparency and necessary regulation of funding is the responsibility of
sta tes.” 135
Kyrgyzstan has also employed this argument to justify a draft “foreign agents” law. The
explanatory note to the draft law claims that it “has been developed for purposes of ensuring
openness, publicity, transparency for non -profit organizations, inc luding units of foreign non –
profit organizations, as well as non -profit organizations acting as foreign agents and receiving
their funds from foreign sources, such as foreign countries, their government agencies,
international and foreign organizations, fo reign citizens, stateless persons or their authorized
representatives, receiving monetary funds or other assets from the said sources.”
3. Aid Effectiveness and Coordination
A global movement has increasingly advocated for greater aid effectiveness, including
through concepts of “host country ownership” and the harmonization of development
assistance. 136 However, some states have interpreted “host country ownership” to be
synonymous with “host government ownership” and have otherwise co -opted the aid
effectivene ss debate to justify constraints on international funding. For example:
133 UN Office of the High Commissioner for Human Rights, “Statement by Ethiopia on behalf of the
African Grou p at the 25th session of the Human Rights Council On the Panel Discussion on the Importance of the
Promotion and Protection of Civil Society Space,” March 11, 2014, accessed September 9, 2014,
https://extranet.ohchr.org/sites/hrc/HRCSessions/RegularSessions/25thSession/OralStatements/Ethiopia%20on%20b
ehalf%20of%20African%20Group_PD_21.pdf .
134 UN Office of the High Commissioner for Human Rights, “Joint Statement: India on behalf of like –
minded countries,” March 11, 2014, accessed September 9, 2014,
https://extranet.ohchr.org/sites/hrc/HRCSessions/RegularSessions/25thSession/OralStatements/India_on%20behalf
%20of%20LMG_PD_21.pdf . The “Like Minded Group” consists of Algeria, Bahrain, Bangladesh, Belarus,
Chi na, Cuba, Egypt, India, Indonesia, Malaysia, Pakistan, Russia, Saudi Arabia, Singapore, South Africa, Sri
Lanka, Sudan, Uganda, United Arab Emirates, Vietnam , and Zimbabwe .
135 UN Office of the High Commissioner for Human Rights, “Statement by Pakistan on be half of OIC:
Panel Discussion on Civil Society Space,” March 11, 2014, accessed September 9, 2014,
https ://extranet.ohchr.org/sites/hrc/HRCSessions/RegularSessions/25thSession/OralStatements/Pakistan%20on%20b
ehalf%20of%20OIC_PD_21.pdf .
136 See the Aid Effectiveness Agenda of the Paris Declaration (2005), the Accra Agenda for Action (2008),
and the Busan Partn ership for Effective Development Cooperation (2011).

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 In July 2014, Nepal ’s government released a new Development Cooperation Policy 137
that will require development partners to channel all development cooperation through
the Ministry of Fi nance, rather than directly to CSOs. The government argued that this
policy is necessary for aid effectiveness and coordination: “Both the Government and the
development partners are aware of the fact that the effectiveness can only be enhanced if
the owne rship of aid funded projects lies with the recipient government.” 138
 Sri Lanka ’s Finance and Planning Ministry issued a public notice in July 2014 requiring
CSOs to receive government approval of international funding. Justifying the
requirement, the Ministry claimed that projects financed with international funding were
“outside t he government budget undermining the national development programmes.” 139
 In response to the UNSR’s Resource Report, the representative of Egypt stated, “The
diversification of the venues of international cooperation and assistance to States towards
the fund ing of civil society partners fragments and diverts the already limited resources
available for international assistance. Hence, aid coordination is crucial for aid
effectiveness.” 140
 At the recent Africa Leaders Summit, the Foreign Minister of Benin s poke a t a workshop
on closing space for civil society. He asserted that CSOs “don’t think they are
accountable to government but only to development partners. This is a problem.” He said
Benin needs “a regulation to create transparency on resources coming from a broad and
the management of resources,” stating that the space for civil society is “too wide.” 141
 The Intelligence Bureau of India released a report in June 2014 claiming that foreign –
funded CSOs stall economic development and negatively impact India’s GDP growth by
2 to 3 percent. 142 The report stated, “a significant number of Indian NGOs, funded by
some donors based in the US, the UK, Germany, the Netherlands and Scandinavian
137 Government of Nepal Ministry of Finance, “Development Cooperation Policy, 2014,” unofficial
translation, accessed September 9, 2014,
https://www.mof.gov.np/uploads/document/file/DCP_English_20140707120230_20140721083326.pdf .
138 Government of Nepal Ministry of Finance, “Development Cooperation Policy, 2014,” unofficial
translation, Article 2.2, acces sed September 9, 2014,
https://www.mof.gov.np/uploads/document/file/DCP_English_20140707120230_20140721083326.pdf .
139 “No foreign funds without approva l: Ministry,” Daily Mirror , July 22, 2014, accessed September 9,
2014, https://www.dailymirror.lk/news/50038 -no -foreign -funds -without -approval -ministry.html .
140 UN Office of the High Commissioner for Human Rights, “Clustered ID with the WG on HR and
Transnational Corporations and the SR on The Rights to Freedom of Assembly and Association: Intervention
delivered by the Permanent Delegation of Egypt,” May 30, 2013, accessed September 9, 2014,
https://extranet.ohchr.org/sites/hrc/HRCSessions/RegularSessions/23rdSession/OralStatements/Egypt_1 0_1.pdf .
141 Personal notes of author.
142 “Foreign -funded NGOs stalling development: IB report,” Times of India , June 12, 2014, accessed
September 9, 2014, https://timesofindia.indiatimes.com/india/Foreign -funded -NGOs -stalling -development -IB –
report/articleshow/36411169.cms .

International Journal of Not -for -Profit Law / vol. 17 , no. 1, March 2015 / 27

countries, have been noticed to be using people centric issues to create an enviro nment
which lends itself to stalling development projects.” 143
4. National Security, Counterterrorism, and Anti -Money Laundering
As discussed above, governments also invoke national security, counterterrorism, and
anti -money laundering policies to justify restr ictions on international funding, including cross –
border philanthropy. For example, the Financial Action Task Force (FATF), an
intergovernmental body that seeks to combat money laundering and terrorist financing, stated:
The ongoing international campaign against terrorist financing has unfortunately
demonstrated however that terrorists and terrorist organisations exploit the NPO
sector to raise and move funds, provide logistical support, encourage terrorist
recruitment or otherwise support terrorist organi sations and operations. This
misuse not only facilitates terrorist activity but also undermines donor confidence
and jeopardises the very integrity of NPOs. Therefore, protecting the NPO sector
from terrorist abuse is both a critical component of the globa l fight against
terrorism and a necessary step to preserve the integrity of NPOs. 144
Governments have leveraged concerns about counterterrorism and money laundering to
justify restricting both the inflow and outflow of philanthropy. For example: 145
 The governm ent of Azerbaijan justified amendments relating to the registration of
foreign grants, stating that the purpose of the amendments was, in part, “ to enforce
international obligations of the Republic of Azerbaijan in the area of combating money –
laundering.” 146
143 Rake sh Krishnan Simha, “Why India Should Follow Vladimir Putin’s Lead on NGOs,” Russia & India
Report, June 15, 2014, accessed September 9, 2014,
https://in.rbth.com/blogs/2014/06/15/why_india_should_follow_vladimir_putins_lead_on_ngos_35945.html .
144 Financial Action Task Force, “International Standards on Combating Money Laundering and the
Financing of Terrorism & Proliferation: The FATF Recommendations,” Financial Action Task Force Report, 2013,
54, accessed September 9, 2014,
https://www.fatfgafi.org/media/fa tf/documents/recommendations/pdfs/FATF_Recommendations.pdf . See also
Financial Action Task Force, “Risk of Terrorist Abuse in Non -Profit Organisations,” Financial Action Task Force
Report, June 2014, https://www.fatf -gafi.org/media/fatf/documents/reports/Risk -of-terrorist -abuse -in-non -profit –
organisations.pdf .
145 Constraints by donor governments on the outflow of cross -border donation s, albeit beyond the scope of
this article, similarly present significant barriers to cross -border philanthropy. These states assert that they have an
international responsibility to regulate the outflow of cross -border donations in order to ensure that fu nding destined
for other countries will not support criminal or terrorist activities in those foreign jurisdictions. For more information
about the justifications employed and the implications for civil society, please see: Ben Hayes, “Counter -Terrorism,
‘Policy Laundering’ and the FATF: Legalizing Surveillance, Regulating Civil Society,” Transnational
Institute/Statewatch Report, February 2012, https://www.statewatch.org/analyses/no -171 -fafp -report.pdf .
146 Charity & Security Network, “How the FATF Is Used to Justify Laws That Harm Civil Society,
Freedom of Association and Expression,” Charity & Security Network , May 16, 2013, accessed September 9, 2014,
https://www.charityandsecurity.org/analysis/Restrictive_Laws_How_FATF_Used_to_Justify_Laws_That_Harm_Civ
il_Society .

International Journal of Not -for -Profit Law / vol. 17 , no. 1, March 2015 / 28

 The British Virgin Islands (BVI) enacted a law requiring that CSOs with more than five
employees appoint a designated Anti -Money Laundering Compliance Officer. 147 The
law also imposes audit requirements for CSOs that are not required of businesses. These
burdens were justified with explicit reference to FATF’s recommendation on nonprofit
organizations and counterterrorism. 148
 In response to the UNSR’s Resource Report, a group of thirteen African states responded,
“It is the responsibility of governments to ensure that the origin and destination of
associations’ funds are not used for terrorist purposes or directed towards activities which
encourage incitement to hatred and violence.” 149
 In 2013, a Sri Lankan government representative similarly stated, “While w e agree that
access to resources is important for the vibrant functioning of civil society, we observe
that Mr. Kiai does not seem to adequately take into account the negative impact of lack of
or insufficient regulation of funding of associations on natio nal security and counter –
terrorism.” 150
 In a National Security Analysis released in August 2014, Sri Lanka’s Ministry of
Defence claimed that some civil society actors have links with the Liberation Tigers of
Tamil Eelam, a group with “extremist separatist i deology,” and that these CSOs thereby
pose “a major national security threat.” 151 During the same period, the Sri Lankan
government announced that it was drafting a law requiring CSOs to register with the
Ministry of Defence in order to have a bank account and receive international funding.
5. Hybrid Justifications
While these categories and examples represent the types of justifications offered by
governments for restricting foreign funding, in practice, official statements often combine
multiple justifications. A recent example is the statement made at the UN Human Rights Council
by India on behalf of itself and twenty other “like minded” states, including Cuba, Saudi
147 “Non -Profit Organisations,” British Virg in Islands Financial Investigation Agency, accessed September
9, 2014, https://www.bvifia.org/non -profit -organisations .
148 Charity & Security Network, “How the FATF Is Used to Justify Laws That H arm Civil Society,
Freedom of Association and Expression,” May 16, 2013,
https://www.charityandsecurity.org/analysis/Restrictiv e_Laws_How_FATF_Used_to_Justify_Laws_That_Harm_Civ
il_Society
149 UN Office of the High Commissioner for Human Rights, “Oral Statement — Gabon on behalf of the
African Group,” 30 May 2013, accessed September 9, 2014,
https://extranet.ohchr.org/sites/hrc/HRCSessions/RegularSessions/23rdSession/OralStatements/Gabon%20on%20be
half%20ofAG_10_1.pdf .
150 UN Office of the High Co mmissioner for Human Rights, “23rd Session of the HRC Statement by Sri
Lanka —Item 3: Clustered ID with the SR on the rights to peaceful assembly & of association,” May 31, 2013,
accessed September 9, 2014,
https://extranet.ohchr.org/sites/hrc/HRCSessions/RegularSessions/23rdSession/Pages/OralStatement.aspx?MeetingN
umber=12.0&MeetingDat e=Friday,%2031%20May%202013 .
151 Gotabaya Rajapaksa, “Sri Lanka’s National Security,” Ministry of Defence and Urban Development of
Sri Lanka, August 19, 2014, accessed September 9, 2014,
https://www.defence.lk/new.asp?fname=Sri_Lankas_National_Security_20140819_02 .

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Arabia , Belarus, China, and Vietnam ,152 which weaves together a number of different
justifications, including foreign interference, accountability, and national security:
[C]ivil society cannot function effectively and efficiently without defined
limits…. Civil society must also learn to protect its own space by guarding against
machinations of donor groups guided by extreme ideologies laden with hidden
politicized motives, which if allowed could potentially bring disrepute to the civil
society space…. There have also been those civil society organizations, who have
digressed from their original purpose and indulged in the pursuit of donor -driven
agendas. It is important to ensure accountability and responsibility for their
actions and the consequences thereof and also guard against compromising
national and international security. 153
Similarly, Ethiopia, in its statement in response to the UNSR’s Resource R eport,
referenced justifications relating to state sovereignty, aid coordination, and accountability and
transparency:
It is our firm belief that associations will play their role in the overall
development of the country and advance their objectives, if a nd only if an
environment for the growth of transparent, members based and members driven
civil society groups in Ethiopia providing for accountability and predictability is
put in place. We are concerned that the abovementioned assertion [about
lightening the burdens to receive donor funding] by the special rapporteur
undermines the principle of sovereignty which we have always been guided by. 154
Similarly constructed statements have also been put forward by Pakistan and other states. 155
152 The “Like Minded Group” consisted of Algeria, Bahrain, Bangladesh, Belarus, China, Cuba, Egypt,
India, Indonesia, Malaysia, Pakistan, Russia, Saudi Arabia, Singapore, South Africa, Sri Lanka, Sudan, Uganda,
UAE, Vietnam, and Zimbabwe. UN Office of the Hig h Commissioner for Human Rights, “Joint Statement: India on
behalf of like -minded countries,” March 11, 2014, accessed September 9, 2014,
https://extranet.ohchr.org/sites/hrc/HRCSessions/RegularSessions/25thSession/OralStatements/India_on%20behalf
%20of%20LMG_PD_21.pdf .
153 Ibid.
154 UN Office of the High Commissioner for Human Rights, “Oral Statement: Ethiopia,” May 31, 2013,
accessed September 9, 2014,
https://extranet.ohchr.org/sites/hrc/HRCSessions/RegularSessions/23rdSession/OralStatements/Et hiopia_12.pdf .
155 See, e.g., UN Office of the High Commissioner for Human Rights, “Statement by Pakistan on Behalf of
OIC: Panel Discussion on Civil Society Space,” March 11, 2014, accessed September 9, 2014,
https://extranet.ohchr.org/sites/hrc/HRCSessions/RegularSessions/25thSession/OralStatements/Pakistan%20on%20b
ehalf%20of%20OIC_PD_21.pdf : “By virtue of its dynamic role civil society is well poised to build convergences
with the view to develop synergies between state institutions and their own networks. These synergies would
facilitate proper utilization of resources at the disposal state institutions an d civil society actors. In this regard, it
may be underscored that securing funding for its crucial work is the right of civil society, maintaining transparency
and necessary regulation of funding is the responsibility of states…. Within this social space, the civil society can
play its optimal role by working in collaboration with state institutions. Better coordination between civil society
actors and state institution [sic] would also facilitate enhancement of international cooperation in the field of hu man
rights.”

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In this section, the a rticle briefly surveyed justifications presented by governments to
constrain the inflow of international funding, including philanthropy. In the following section,
we analyze constraints and their justifications under international law.
International Legal Framework
1. International Norms Protecting Access to Resources and Cross -Border Philanthropy
Article 22 of the International Covenant on Civil and Political Rights (ICCPR) states,
“Everyone shall have the right to freedom of association with others….” 156 Acco rding to the
UNSR: 157
The right to freedom of association not only includes the ability of individuals or legal
entities to form and join an association 158 but also to seek, receive and use resources 159 —
human, material and financial — from domestic, foreign and in ternational sources. 160
The United Nations Declaration on Human Rights Defenders 161 similarly states that
access to resources is a self -standing right:
“[E]veryone has the right, individually and in association with others, to solicit, receive
and utilize reso urces for the express purpose of promoting and protecting human rights
and fundamental freedoms through peaceful means….” 162
According to the Office of the United Nations High Commissioner for Human Rights, this right
specifically encompasses “the receipt of funds from abroad.” 163
156 United Nations International Covenant on Civil and Political Rights, Article 22, December 16, 1966,
https://www.ohchr.org/en/professionalinterest/pages/ccpr.aspx .
157 While reports of the UNSR are not binding international law, his reports are referenced here because
they provide a comprehensive articulation and explanation of international law.
158 International law generally recognizes the freedom of association, and t his section follows that
formulation. Addressing the applicability of international law to non -membership organizations is beyond the scope
of this article, but for more information, please see: International Center for Not -for -Profit Law & World Movement
for Democracy Secretariat, “Defending Civil Society Report, Second Edition,” June 2012, 35,
https://www.icnl.org/research/resources/dcs/DCS_Report_Second_Editi on_English.pdf .
159 The UNSR defines “resources” as a broad concept that includes financial transfers (e.g., donations,
grants, contracts, sponsorship, and social investments), loan guarantees, in -kind donations, and other forms of
support. See United Nation s Human Rights Council, Report of the Special Rapporteur on the rights to freedom of
peaceful assembly and of association, Maina Kiai, para. 10, UN Doc. A/HRC/23/39 (April 24, 2013) at
https://freeassembly.net/wp -content/uploads/2013/04/A.HRC_.23.39_EN -funding -report -April -2013.pdf .
160 Ibid., para. 8.
161 The UNSR notes that while “the Declaration is not a binding instrument, it must be recalled tha t it was
adopted by consensus of the General Assembly and contains a series of principles and rights that are based on
human rights standards enshrined in other international instruments which are legally binding. Ibid., para. 17.
162 United Nations General Assembly, Declaration on the Right and Responsibility of Individuals, Groups
and Organs of Society to Promote and Protect Universally Recognized Human Rights and Fundamental Freedoms ,
UN Res. 53/144, Article 13, https://www.un.org/Docs/asp/ws.asp?m=A/RES/53/144 .
163 United Nations Office of the High Commissioner for Human Rights, “Declaration on Human Rights
Defenders,” UN OHCHR, accessed September 9, 2014,
https://www.ohchr.org/EN/Issues/SRHRDefenders/Pages/Declaration.aspx .

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Reinforcing this position, 164 in 2013 the United Nations Human Rights Council passed
resolution 22/6, which calls upon on States “[t]o ensure that they do not discriminatorily impose
restrictions on potential sources of funding aimed at supporting the work of human rights
defenders,” and “no law should criminalize or delegitimize activities in defence of human rights
on account of the origin of funding thereto.” 165
The freedom to access resources extends beyond human rights defenders. For example,
the Declaration on the Elimination of A ll Forms of Intolerance and of Discrimination Based on
Religion or Belief states that the right to freedom of thought, conscience, and religion includes
the freedom to “solicit and receive voluntary financial and other contributions from individuals
and in stitutions.” 166 Access to resources is also an integral part of a number of other civil,
cultural, economic, political, and social rights. As the UNSR states: 167
For associations promoting human rights, including economic, social and cultural rights,
or those involved in service delivery (such as disaster relief, health -care provision or
environmental protection), access to resources is important, not only to the existence of
the association itself, but also to the enjoyment of other human rights by those benef itting
from the work of the association. Hence, undue restrictions on resources available to
associations impact the enjoyment of the right to freedom of association and also
undermine civil, cultural, economic, political and social rights as a whole. 168
Acc ordingly, “funding restrictions that impede the ability of associations to pursue their statutory
activities constitute an interference with article 22” of the International Covenant on Civil and
Political Rights. 169
2. Regional and Bilateral Commitments to Pro tect Cross -Border Philanthropy
164 This article briefly examines international norms governing global philanthropy. But it also recogniz es
that there are distinct limits to the impact of international law. For example, there is often an implementation gap
between international norms and country practice. In addition, there are few binding international treaties, such as
the ICCPR, and de tails are often left to “soft law,” such as the reports of the UNSR. At the same time, there is
concern that any effort to create a new global treaty on cross -border philanthropy or foreign funding would lead to a
retrenchment of existing rights.
165 United Nations General Assembly, Protecting Human Rights Defenders, March 21, 2013, UN Human
Rights Council, Resolution 22/6, para. 9, https://ap.ohchr.org/documents/dpage_e.aspx?si=A/HRC /RES/22/6 .
166 United Nations General Assembly, Declaration on the Elimination of All Forms of Intolerance and of
Discrimination Based on Religion or Belief , November 25, 1981, UN General Assembly Resolution A/RES/36/55,
Article 6(f), https://www.un.org/documents/ga/res/36/a36r055.htm .
167 In similar fashion, the UN Committee on Economic, Social and Cultural Rights recognized the link
between access to resources and economic, social and cultural rights, when it expressed “deep concern” about an
Egyptian law that “gives the Government control over the right of NGOs to manage their own activities, including
seeking external funding.” See Egypt, ICESCR, E/2001/22 (2000) 38 at paras. 161, 176,
https://www.bayefsky.com/themes/public_general_concluding -observations.php .
168 United Nations Human Rights Council, Report of the Special Rapporteur on the rights to freedom of
peaceful assembly and of association, Maina Kiai, para. 9, UN Doc. A/HRC/23/39 (April 24, 2013) at
https://freeassembly.net/wp -content/uploa ds/2013/04/A.HRC_.23.39_EN -funding -report -April -2013.pdf .
169 Human Rights Committee, communication No. 1274/2004, Korneenko et al. v. Belarus, Views adopted
on October 31, 2006, para. 7.2.

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While this article is focused on global norms, cross -border philanthropy is also
protected at the regional level. For example:
 The Council of Europe Recommendation on the Legal Status of NGOs states:
“NGOs should be free to s olicit and receive funding — cash or in -kind donations —
not only from public bodies in their own state but also from institutional or
individual donors, another state or multilateral agencies ….” 170
 According to the Inter -American Commission on Human Rights, “states should allow and
facilitate human rights organizations’ access to foreign funds in the context of
international cooperation, in transparent conditions.” 171
 In May 2014, the African Commission on Human and Peoples’ Rights (ACHPR)
adopted, in draft for m, a report of the ACHPR Study Group on Freedom of Association
and Peaceful Assembly, with a specific recommendation that States’ legal regimes should
codify that associations have the right to seek and receive funds. This includes the right to
seek and re ceive funds from their own government, foreign governments, international
organizations and other entities as a part of international cooperation to which civil
society is entitled, to the same extent as governments.
 The European Court of Justice (ECJ) has issued a series of important decisions about the
free flow of philanthropic capital within the European Union. 172
In addition, many jurisdictions have concluded bilateral investment treaties, which help
protect the free flow of capital across borders. Some treaties, such as the U.S. treaties with
Kazakhstan and Kyrgyzstan, expressly extend investment treaty protections to organizations not
“organized for pecuniary gain.” 173 Indeed, the letters of transmittal submitted by the White
House to the U.S. Senate sta te that these treaties are drafted to cover “charitable and non -profit
entities.” 174
170 Council of Europe, “Recommendation CM/Rec (2007)145 of the Committ ee of Ministers to member
states on the legal status of non -governmental organisations in Europe,” adopted October 10, 2007, Article 50,
https://wcd.coe.int/ViewDoc.jsp?id=1194609 .
171 Inter -American Commission on Human Rights, Report on the Situation of Human Rights Defenders in
the Americas , March 7, 2006, Recommendation 19, https://www.icnl.org /research/resources/assembly/oas -human –
rights -report.pdf .
172 For more information on these decisions, see: European Foundation Center and Transnational Giving
Europe, “Taxation of Cross -Border Philanthropy in Europe After Persche and Stauffer: From landloc k to free
movement?”, European Foundation Center Report, 2014,
https://www.efc.be/programmes_services/resources/Documents/TGE -web.pdf ; European Foundation Centre, “ECJ
rules in favour of cross -border giving ,” EFC briefing, January 27, 2009, accessed September 9, 2014,
https://www.efc.be/programmes_services/resources/Documents/befc09 08.pdf .
173 U.S. -Kyrgyz Bilateral Investment Treaty, Article 1(b); U.S. -Kazakh Bilateral Investment Treaty, Article
1(b). See also Article 1(2) of the China – Germany BIT: “the term ‘investor’ means … any juridical person as well
as any commercial or other c ompany or association with or without legal personality having its seat in the territory
of the Federal Republic of Germany, irrespective of whether or not its activities are directed at profit.”
174 Letters of Transmittal available at the U.S. State Departm ent website:
https://www.state.gov/documents/organization/43566.pdf and
https://www.state.gov/documents/organization/4 3567.pdf .

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A detailed discussion of investment treaty protection for cross -border philanthropy is
beyond the scope of this article. This issue is presented in brief form, however, beca use it is a
significant avenue for further exploration, as it expands the international legal argument beyond
human rights and implicates bilateral investment treaties with binding enforcement
mechanisms. 175 For further information on this issue, please see International Investment Treaty
Protection of Not -for -Profit Organizations 176 and Protection of U.S. Non -Governmental
Organizations in Egypt under the Egypt -U.S. Bilateral Investment Treaty. 177
3. Restrictions Permitted Under International Law
Continuing the discussion of global norms, ICCPR Article 22(2) recognizes that the
freedom of association can be restricted in certain narrowly defined conditions. According to
Article 22(2):
No restrictions may be placed on the exercise of this right other than those wh ich are
prescribed by law and which are necessary in a democratic society in the interests of
national security or public safety, public order (ordre public), the protection of public
health or morals or the protection of the rights and freedoms of others. 178
In other words, international law allows a government to restrict access to resources if the
restriction is:
(1) prescribed by law;
(2) in pursuance of one or more legitimate aims, specifically:
o national security or public safety;
o public order;
o the protection of public health or morals; or
o the protection of the rights and freedoms of others; and
175 In addition, the European Court of Human Rights has held that Article 1 of the First Protocol of the
European Convention on Human Rights protects the right to peaceful enjoyment of one’s possessions. (Article 1 of
the First Protocol of the Euro pean Convention reads: “Every natural or legal person is entitled to the peaceful
enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to
the conditions provided for by law and by the general p rinciples of international law. The preceding provisions shall
not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of
property in accordance with the general interest or to secure the payment o f taxes or other contributions or
penalties.” In addition, the right to property includes the right to dispose of one’s property (Clare Ovey & Robin
White, The European Convention on Human Rights , 3rd edition (Oxford: Oxford University Press, 2002)), which
would seem to embrace the right to make contributions to CSOs for lawful purposes.
176 Luke Eric Peterson & Nick Gallus, “International Investment Treaty Protection of Not -for -Profit
Organizations,” International Journal of Not -for -Profit Law 10(1) (December 2007),
https://www.icnl.org/research/journal/vol10iss1/art_1.htm .
177 Nick Gallus, “Protection of U.S. Non -Governmental Organizations in Egypt under the Egypt -U.S.
Bilat eral Investment Treaty,” International Journal of Not -for -Profit Law 14(3) (September 2012),
https://www.icnl.org/research/journal/vol14iss3/art2.html .
178 United Nations International Covenant on Civil and Political Rights, Article 22, December 16, 1966,
https://www.ohchr.org/en/professionalinterest/pages/ccpr.aspx . Article 22, ICCPR

International Journal of Not -for -Profit Law / vol. 17 , no. 1, March 2015 / 34

(3) “necessary in a democratic society to achieve those aims.” 179
Moreover :
States should always be guided by the principle that the restrictions must not im pair the
essence of the right … the relations between right and restriction, between norm and
exception, must not be reversed. 180
The burden of proof is on the government. 181 In addition:
When a State party invokes a legitimate ground for restriction of freed om of expression,
it must demonstrate in specific and individualized fashion the precise nature of the threat,
and the necessity and proportionality of the specific action taken, in particular by
establishing a direct and immediate connection between the [ activity at issue] and the
threat. 182
The following section amplifies this three -part test contained in Article 22(2).
A. Prescribed by law
The first prong requires a restriction to have a formal basis in law. This means that:
restrictions on the right to free dom of association are only valid if they had been
introduced by law (through an act of Parliament or an equivalent unwritten norm of
common law), and are not permissible if introduced through Government decrees or other
similar administrative orders. 183
As discussed above, in July 2014, the Sri Lankan Department of External Resources of
the Ministry of Finance and Planning disseminated a notice to the public, declaring that any
organization or individual undertaking a project with foreign aid must have appro val from
relevant government agencies. Similarly, in July 2014, Nepal’s government released a new
Development Cooperation Policy that will require development partners to channel all
development cooperation through the Ministry of Finance, rather than directly to civil society. In
both cases, the restriction s were based on executive action and not “introduced by law (through
179 Case of Vona v. Hungary (A pp no 35943/10) (2013) ECHR para. 50,
https://hudoc.echr.coe.int/sites/eng/pages/search.aspx?i=001 -122183 .
180 United Nations Human Rights Council, Report of the Special Rappo rteur on the rights to freedom of
peaceful assembly and of association, Maina Kiai, para. 16, UN Doc. A/HRC/20/27 (May 21, 2012),
https://www.ohchr .org/Documents/HRBodies/HRCouncil/RegularSession/Session20/A -HRC -20 -27_en.pdf .
181 UN Office of the High Commissioner for Human Rights (OHCHR), Fact Sheet No. 15, Civil and
Political Rights: The Human Rights Committee, May 2005,
https://www.ohchr.org/Documents/Publications/FactSheet15rev.1en.pdf .
182 United Nations Human Rights Committee, General Comment No. 34, para. 35, UN Doc.
CCPR/C/GC/34 (September 12, 2011), https://www2.ohchr.org/english/bodies/hrc/docs/GC34.pdf .
183 See UN Special Rapporteur on the situation of human rights defenders, Commentary to the Declaration
on the Right and Responsibility of Individuals, Groups and Organs of Society to Promote and Protect Universally
Recognized Human Rights and Fundamental Fre edoms, July 2011, 44,
https://www.ohchr.org/Documents/Issues/Defenders/CommentarytoDeclarationondefendersJuly2011.pdf : “It would
seem reasonable t o presume that an interference is only “prescribed by law” if it derives from any duly promulgated
law, regulation, order, or decision of an adjudicative body. By contrast, acts by governmental officials that are ultra
vires would seem not to be ‘prescribe d by law,’ at least if they are invalid as a result.”

International Journal of Not -for -Profit Law / vol. 17 , no. 1, March 2015 / 35

an act of Parliament or an equivalent unwritten norm of common law).” Accordingly, they
appear to violate the “prescribed by law” standard required under Article 22(2) of the ICCPR.
This prong of Article 22(2) also requires that a provision be sufficiently precise for an
individual or NGO to understand whether or not intended conduct would constitute a violation of
law. 184 As stated in the Johannesburg Principles, “The law must be accessible , unambiguous,
drawn narrowly and with precision so as to enable individuals to foresee whether a particular
action is unlawful.” 185
This prong helps limit the scope of permissible restrictions. As discussed above, certain
laws ban funding of organizations that cause “social anxiety,” have a “political nature,” or have
“implied ideological conditions.” These terms are undefined and provide little guidance to
individuals or organizations about prohibited conduct. Since they are not “unambiguous, drawn
narrowl y and with precision so as to enable individuals to foresee whether a particular action is
unlawful,” there is a reasonable argument that these sorts of vague restrictions fail the
“prescribed by law” requirements of international law.
B. Legitimate aim
The second prong of Article 22(2) requires that a restriction advance one or more
“legitimate aims,” 186 namely:
 national security or public safety;
 public order;
 the protection of public health or morals; or
 the protection of the rights and freedoms of others.
This prong provides a useful lens to analyze various justifications for constraint. For
example, governments have justified constraints to promote “aid effectiveness.” As the UNSR
notes, aid effectiveness “is not listed as a legitimate ground for restricti ons.” 187 Similarly, “[t]he
protection of State sovereignty is not listed as a legitimate interest in the [ICCPR],” and “States
cannot refer to additional grounds … to restrict the right to freedom of association.” 188
Of course, assertions of national security or public safety may, in certain circumstances,
constitute a legitimate interest. Under the Siracusa Principles, however, assertions of national
security must be construed restrictively “to justify measures limiting certain rights only when
184 Though not a fully precise comparison, this concept is somewhat similar to the “void for vagueness”
doctrine in U.S. constitutional law.
185 Article 19, Johannesburg Principles on National Security, Fre edom of Expression and Access to
Information (London: Article 19, 1996), Principle 1.1(a),
https://www.article19.org/data/files/pdfs/standards/joburgprinciples.pdf . The Johannesburg Principles were
developed by a meeting of international experts at a consultation in South Africa in October 1995.
186 Case of Vona v. Hungary (App no 35943/10) (2013) ECHR para. 50,
https://hudoc.echr.coe.int/sites/eng/pages/search.aspx?i=001 -122183 .
187 United Nations Human Rights Council, Report of the Special Rapporteur on the rights to freedom of
peaceful assembly and of association, Maina Kiai, para. 40, UN Doc . A/HRC/23/39 (April 24, 2013) at
https://freeassembly.net/wp -content/uploads/2013/04/A.HRC_.23.39_EN -funding -report -April -2013.pdf .
188 Ibid., pa ra. 30.

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they are taken to protect the existence of the nation or its territorial integrity or political
independence against force or threat of force.” 189 In addition, a state may not use “ national
security as a justification for measures aimed at suppressing opposition … or at perpetrating
repressive practices against its population.” 190 This includes defaming or stigmatizing foreign
funded groups by accusing them of “treason” or “promoting regime change.” 191
Accordingly, under international law, governments cannot rely on generalized claims of
“state sovereignty” to justify constraints on global philanthropy. In the words of the UNSR:
Affirming that national security is threatened when an association receives funding from
foreign sources is not only spurious and distorted, but also in contradiction with
international human rights law. 192
This brief analysis is not intended to explore the details of the aid effectiveness and
sovereignty justifications. Rather, the goal is to illustrate how the “legitimate aim” requirement
of in ternational law can help inform the analysis of certain justifications presented by
governments, such as arguments based on “aid effectiveness” and “sovereignty.”
C. Necessary in a Democratic Society
Even if a government is able to articulate a legitimate aim , a restriction violates
international law unless it is “necessary in a democratic society.” As stated by the Organization
for Security and Co -operation in Europe, the reference to necessity does not have “the flexibility
of terms such as ‘useful’ or ‘conv enient’: instead, the term means that there must be a ‘pressing
social need’ for the interference.” 193 Specifically, “where such restrictions are made, States must
demonstrate their necessity and only take such measures as are proportionate to the pursuance of
legitimate aims in order to ensure continuous and effective protection of Covenant rights.” 194
As stated by the UNSR:
In order to meet the proportionality and necessity test, restrictive measures must be the
least intrusive means to achieve the desired ob jective and be limited to the associations
189 See the “Siracusa Principles” [United Nations, Economic and Social Council, U.N. Sub -Commission on
Prevention of Discrimination and Protection of Minorities, Siracusa Principles on the Limitation and Derogation of
Provisions in the International Covenant on Civil and Political Rights, Annex, UN Doc E/CN.4/1985/4 (1984)],
which were adopted in May 1984 by a group of international human rights experts convened by the International
Commission of Jurists, the International Association of Penal Law, th e American Association for the International
Commission of Jurists, the Urban Morgan Institute for Human Rights, and the International Institute of Higher
Studies in Criminal Sciences. Though not legally binding, these principles provide an authoritative s ource of
interpretation of the ICCPR with regard to limitations clauses and issue of derogation in a public emergency. They
are available at: https://graduateinstitute.ch/f aculty/clapham/hrdoc/docs/siracusa.html .
190 Ibid.
191 United Nations Human Rights Council, Report of the Special Rapporteur on the rights to freedom of
peaceful assembly and of association, Maina Kiai, para. 27, UN Doc. A/HRC/23/39 (April 24, 2013) at
https://freeassembly.net/wp -content/uploads/2013/04/A.HRC_.23.39_EN -funding -report -April -2013.pdf .
192 Ibid., para. 30
193 OSCE/Office for Democratic Institutions and Human Rights (ODIHR), Key Guiding Principles of
Freedom of Association with an Emphasis on Non -Governmental Organizations , para. 5
194 United Nations Human Rights Committee, General Comment No. 31 (2004), para. 6, UN Doc.
CCPR/C/21/Rev.1/Ad d. 13, May 26, 2004.

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falling within the clearly identified aspects characterizing terrorism only. They must not
target all civil society associations…. 195
Consider, for example, Ethiopian legislation imposing a 10 percent cap on the for eign
funding of all CSOs promoting a variety of objectives, including women’s rights and disability
rights. As discussed above, Ethiopia has asserted a counterterrorism rationale to justify foreign
funding constraints. Ethiopia does not establish a “ direct and immediate connection between the
[activity at issue] and the threat.” 196 In addition, the cap is not the “least intrusive means to
achieve the desired objective and … limited to the associations falling within the clearly
identified aspects characterizi ng terrorism.” Accordingly, the counterterrorism objective fails to
justify the Ethiopian cap on foreign funding.
The UNSR also applied this test to the “aid effectiveness” justification. In response, he
stressed that:
even if the restriction were to purs ue a legitimate objective, it would not comply with the
requirements of “a democratic society.” In particular, deliberate misinterpretations by
Governments of ownership or harmonization principles to require associations to align
themselves with Government s’ priorities contradict one of the most important aspects of
freedom of association, namely that individuals can freely associate for any legal
purpose. 197
In addition, “longstanding jurisprudence asserts that democratic societies only exist
where ‘pluralis m, tolerance and broadmindedness’ are in place,” 198 and “minority or dissenting
views or beliefs are respected.” 199
Applying this test, the UNSR has note