Private Philanthropy

Studies of and prospects for the revision of the tax laws governing non profit organizations | Protecting Human Rights Defenders Analysis of the newly adopted Declaration on Human Rights Defenders | Las Asociaciones Civiles en el Derecho Venezolano (Qué son y cómo funcionan) | Philanthropy and Law in Asia

The International Journal
of Not-for-Profit Law

Volume 1, Issue 3, March 1999

This important volume contains a series of articles and essays analyzing and discussing the provisions and the effects of the recent legislation on “Socially Useful Nonprofit Organizations,” known generally as “ONLUS.” The legislative decree law, No. 460, which was promulgated on 4 December 1997, provides a comprehensive new regime for the granting of tax benefits to ONLUS. For a description of the law in IJNL, see THE ITALIAN ACT OF 4TH DECEMBER 1997 RELATING TO THE TAX TREATEMENT OF ONLUS by Dr. Santuari.The ONLUS legislation is part of a more comprehensive revision in the decree law of the general legislation affecting non-commercial organizations (NPOs).

This book can be characterized as belonging to the literature on tax regimes for the not-for- profit sector. It contains helpful technical analysis of the legislation itself (particularly in the chapters written by Profs. Matacena and Pinto). There is also useful theoretical analysis of the role of the not-for-profit sector – specifically organizations that provide socially beneficial services — in modern society and how that leads to the grant of tax benefits. In addition, several of the chapters include comparative discussions (e.g., those written by Profs. Zamagni and Lipari), which help to place the issues in context for readers who are more familiar with other legal regimes.

One interesting aspect of the new ONLUS legislation is that it is superimposed on what many of the authors stress refer to as an out-dated and philosophically outmoded Civil Code regime. The provisions of the law relating to associations and foundations date back to 1942, and are said to be in great need of revision. In addition, many authors think that the not-for-profit sector in Italy is quite young and that NPOs are not particularly numerous, that are not well-integrated into society, and that are not well-understood. They also refer to the development of studies of the not-for-profit sector as being relatively recent – yet, judging by the quality of the work presently being undertaken (as evidenced by this book as well as a recent international conference held in Parma – see the discussion in this issue of IJNL), Italian researchers have made considerable progress in a short time. There is, however, a sense throughout the book that NPOs are a “new social experiment” in Italy.

This theme comes through over and over – various essays make clear that the ONLUS legislation must be understood in the context of the Italian welfare state and the view – now declining — that the state must perform all socially beneficial services. This is important because the decline in the role of the state clearly set the stage for the ONLUS legislation. Without a major shift in thinking (the history of how the legislation came about is discussed in the introduction by Dr. Tavazza, General Secretary of the Italian Foundation for Volunteer Service), it is unlikely that the legislation would have been enacted. But welfare is its context, and that clearly makes the approach similar to approaches in other European countries. In fact, Prof. Donati coins a new term, which may well be more broadly useful, when he refers to what ONLUS do as ” private welfare.”

In looking at what this background means for the sector and its regulation, several of the volume’s authors are critical of the generally negative definitional approach to the sector, and the belief that its nature is essentially residual. They stress that the sector has primarily associational or solidarity roots in Italy, as opposed to the philanthropic roots it has in Anglo-Saxon countries. This leads to the view, expressed by Prof. Zamagni, that reciprocity is what characterizes the sector in Italy. He clearly believes that reciprocity of relationships between NPOs and those they serve, and not a government or market failure rationale, should inform the regulation of the sector. Prof. Donati make a similar point, when he emphasizes the principle of subsidiarity – an hence non-interference — in the regulation of NPOs. And Prof. Miccinesi, writes about a related issue, which is the strong role that volunteerism plays in what organizations are recognized as per se ONLUS by the decree law.

Nonetheless, the authors stress that the grant of tax benefits contemplated by the ONLUS legislation necessarily carries with it a strong state interest in ensuring that ONLUS are appropriately responsive to the social needs they are designed to perform. These benefits are quite substantial, and the regulation of ONLUS is therefore placed with the Ministry of Finance, which is empowered to levy sanctions and deregister ONLUS that cease to meet the legal requirements. But the decree law emphasizes self-regulation as well. Prof. Fiorentini discusses the rules for internal governance contained in the ONLUS legislation, stressing that they are provided because they are not in the Civil Code. Prof. Matacena’s long essay on how the new accountability mechanisms are designed is quite useful not only from the standpoint of technical compliance but also because of his more theoretical discussion of what reporting rules are designed to accomplish. He criticizes the overlap between the reporting provisions for all NPOs and those specifically applicable only to ONLUS.

One of the strengths of the ONLUS legislation is that it clarifies the nondistribution constraint for these organizations. Thus, the provisions of Article 10 of the decree law prohibit even indirect distributions of profits, etc. if such distributions are not in pursuance of social utility. This is important because the decree law also makes it possible for an NPO to lose that status only if its commercial activities are predominant. It is now possible for NPOs to engage in economic activities for their support, and one assumes that ONLUS will do so as well.

All in all this volume is useful for anyone engaged in comparative analysis of the tax regimes within which the not-for-profit sector operates. It is a welcome addition to the literature in English on the subject, which has not adequately stressed recent legislative developments in Italy.

Protecting Human Rights Defenders Analysis of the newly adopted Declaration on Human Rights Defenders

The UN Declaration on Human Rights Defenders, adopted by the General Assembly on December 8, 1998, is a classic example of an evolutionary step in the development of accepted human rights norms. Although this is a non-binding declaration and one that was achieved only as a result of rather substantial compromise, it nonetheless helps to clarify issues that needed clarification. And it adds to the body of principles that should guide the actions of states with respect to the protection of the rights of those who act as watch-dogs for human rights.

The Lawyers Committee for Human Rights (LCHR), in this monograph authored by Mireille Hector, has given us a welcome look not only into the development of the document itself but also into the analytical framework that supports it. The report is organized along thematic lines, looking first at the rights of the defenders, then the duties of States, the responsibilities of the defenders, the role of domestic law, and finally, the interpretation of the Declaration. This review focuses on the first of the topics, the rights of defenders.

Perhaps the most important aspect of the Declaration with respect to those rights is that it recognizes the right of defenders to act in concert – to come together to learn about and discuss human rights issues in groups legally formed and recognized as non-governmental organizations. Speaking repeatedly of rights which can be exercised “individually and in association with others,” the Declaration helps to clarify the freedom of association recognized under Article 22 of the International Covenant on Civil and Political Rights (ICCPR).

In addition, the new Declaration clarifies that everyone has the right to promote and protect human rights, to have access to information about human rights, to publish information about human rights and criticize governments’ actions with respect to human rights, and to develop new human rights ideas. As the LCHR booklet points out, the explicit enumeration of these rights in Articles 1, 5-9, and 12 of the Declaration, is significant because it gives states an indication of what activities are appropriate and protected. But it is also clear that some states object to aspects of these articles, in particular the right to develop new human rights ideas, because they believe that such activities must be done “in conformity with domestic law” and within the understanding of the UN Charter.

Another contentious article defining rights, Article 13 (guaranteeing that human rights defenders have a right to seek and have access to funding), also forces consideration of Article 3, which provides important limitations on the way in which the Declaration is likely to be interpreted. This article is quite significant because it states that “domestic law consistent with the Charter of the United Nations and other international obligations is the juridical context within which human rights and fundamental freedoms should be implemented and enjoyed….” Because much domestic law is potentially more restrictive than the rights of defenders discussed in the Declaration, this article must be see as a limitation. As the LCHR report notes, this was resisted by many states because rights should be seen as universal. Nonetheless, it was important that the Declaration contain this article, or it presumably would not have been adopted.

What does Article 3 mean? LCHR is careful to stress that the article contemplates that enjoyment of human rights by defenders can be restricted only within the context not only of the UN Charter but also of the Universal Declaration of Human Rights, the ICCPR, and other international instruments. The language of Article 17, which says that the rights in the Declaration are subject only to limitations contained in applicable international obligations, such as ensuring respect for the rights and freedoms of others and meeting “the just requirements of morality, public order and the general welfare in a democratic society” helps to bolster this position. This language suggests to LCHR that the restrictions on the exercise of political rights contained in the UDHR and the ICCPR – an reiterated in similar language in Article 17 of the Declaration — are what will channel any state law limitations within clear bounds. That may in fact be what the language “juridical framework” in Article 3 and “just requirements” in Article 17 were intended to accomplish, but the language is unclear enough to be susceptible to other interpretations and most surely will be interpreted otherwise by states in some instances.

It is obvious that these articles resulted from compromises about some of the most contentious issues faced by the drafters of the Declaration. Other parts of it are much clearer and less susceptible to interpretations that might be more limiting than one would think would be desirable. All aspects of the LCHR report are well-developed and pleasingly presented, in a fashion that makes the it eminently readable and a helpful analysis of the Declaration.

Las Asociaciones Civiles en el Derecho Venezolano (Qué son y cómo funcionan)

By Miguel Angel Itriago and Antonio L. Itriago
Reviewed by Caroline L. Newman, Project Associate

The Itriago brothers write that the purpose of their book is to describe the nature, character, purposes and functioning of Civil Associations in Venezuela.

In developing this description, the authors stress the problems encountered in the Venezuelan legislation, make comparisons with the legislation of other countries, and try to give practical recommendations to civil associations. (Some of these recommendations can also be found in their bulletins; for example, see the previous issue of IJNL for their report regarding registration of names of organizations (chapter 11).)

From their work it appears that the main problem facing civil associations in Venezuela is the fact that they are not regulated by a general, national regulation but instead by special state regulations. As a general practice, the provisions for commercial organizations from the Civil Code are being applied to Civil Associations. This is evidenced for example in the rules regarding the establishment of organs (Chapter 3).

The lack of an overriding national legislation regulating civil associations also leads to misinterpretation of what available legislation there is: the authors point out that it is often believed that civil associations should not engage in commercial activities, when in fact the civil code does not prohibit such activity (chapter 10), whereas the possibility of redistribution of assets to members or founders upon liquidation is open since the civil code addresses only the liquidation of commercial entities (chapter 7).

In addition to their treatment of the regulatory environment, the authors also give practical advice on the management of civil associations, covering such matters as “advice on admitting a high number of members without risk of losing control of the association.” (chapter 7).

Although the authors point out the some problems need to be regulated, (e.g. the need for a national register (chapter 11), or the need to include youth associations in the Venezuelan legislation (chapter 9)), they do not believe that the present environment is appropriate for the adoption of national legislation regulating civil associations. In their first chapter, they explain the disagreement amongst NGOs on this issue and suggest a series of measures which should be taken before considering the adoption of such law. The most fundamental and prescient of which being the need to reform certain provisions in the tax legislation and the law on public registers.

Philanthropy and Law in Asia

Edited by Thomas Silk

Philanthropy and Law in Asia, ably written by a group of Asian experts on the laws affecting not-for-profit organizations, with a focus on philanthropy, and ably edited by Tom Silk, is a welcome addition to the literature on the development of civil society in Asia (for a list of the authors and their affiliations, see IJNL, Vol. 1, Issue 1, September 1998). The book helps us to understand the legal frameworks within which philanthropic organizations operate in ten Asian countries. In addition, the useful introduction by Tom Silk, which looks at the issues more comparatively, puts many of them into a broader context that aids the reader’s analysis.

The ten countries covered by the book are: Australia, China, Indonesia, Japan, Korea, Philippines, Singapore, Taiwan, Thailand, and Vietnam. Thus, the types of legal systems that govern philanthropic activities vary widely – from the Australian version of English-inspired rules on companies and charitable trusts, to the German-influenced civil code foundations and associations in Japan, to the socialist law approach taken in China and Vietnam. Making sense of the comparative issues involved is no easy task. But it is one that Tom Silk and his partners have mastered quite well!

One of the strengths of the project is that the writers worked from the same template, which was developed in advance, and which they were able to refine and discuss in meetings held for that purpose. The book was seen as a collaborative project from the outset, and thus it exhibits wonderful qualities of unity of approach and insight that are the marks of a good contribution to the literature in this field. (In that regard the project is remarkably similar to studies by local lawyers of the laws affecting NGOs in two other regions – Latin America and Central and Eastern Europe – that have been published by ICNL and its partners in recent years.)

The issues that are dealt with in the ten country chapters are the following: The Legal Context; Registration – Requirements, Legal Forms and Procedures; Registration Obstacles and Restrictions; Tax Exemptions; Tax Deductions; Capital Formation; Internal Governance; Accountability and Reporting; and Dissolution. Ways in which governments approach some of the more contentious questions of course are quite various. In general, however, it can be said that the laws in the region tend to exhibit less flexible approaches to regulation of the not-for-profit sector than exist in some other regions. Indeed in China, where there has been significant legal change since the analysis was done, the recently adopted rules do not do much to open up opportunities for the sector. And in Japan, where the new law on NPOs in Japan was published in the book but was promulgated too late for the analytical section to reflect it, while the changes are good and helpful, they do not go as far as one would like toward creating a true enabling environment for the sector (see the review of the new Japanese legislation in IJNL, Vol.1, Issue 2, December 1998). Only in the Philippines has recent legislation actually created more space within which not-for-profit organizations can operate. For discussions of this new legislation, which delegates the decision-making with respect to tax preferences to an independent self-regulatory body, See IJNL, Vol. 1, Issue 2, December 1998, and a second piece in this Issue.

Given that fact, many issues discussed in the book, particularly those that deal with the obstacles to registration and with possibly onerous reporting requirements, point to the need for legal reform in various of the countries. For example, many countries have a pre-approval process for the registration and creation of a legal entity. In addition, a good deal of administrative discretion exists in some countries, which permits the government authorities to exercise undue influence over which organizations are registered and which are not. With respect to accountability, legislation in the region requires quite strict reporting to and oversight by the authorities, including not only police departments in some instances but also line ministries and the finance authorities. In general, forms of government intrusion into the activities of the sector are inconsistent with international good practice, as discussed in the World Bank Handbook on Good Practices for Laws Relating to Nongovernmental Organizations (Discussion Draft published by the World Bank, 1997). They should thus be avoided, and where they exist governments should be seeking to find less intrusive means to regulate.

Another significant issue that suggests the need for legal reform is the present complexity inherent in some legal regimes, particularly those in Australia, Japan, and Singapore. This too is to be avoided, as the book makes clear, because it simply make the legal regime opaque and difficult to comply with. Still another issue comes up in Indonesia, where there is considerable confusion about what the law actually is in some instances. That again, is a major flaw in any legal system. In addition, the tax preferences available for not-for-profit organizations are generally limited in the region, and the laws of some countries make it difficult for some organizations to engage in economic activities for their support. Both of these problems make it difficult for the sector to be self-supporting. The country by country analysis details the manner in which each of these issues arise in the various countries, and each report suggests possible legal reforms that will more clearly encourage the development of civil society in Asia.

Philanthropy and Law in Asia offers a welcome overview of these important issues and how they arise in the region, and it suggests ways to consider what the future might hold for civil society in Asia. It is apparent from the careful studies in the book that the systems are in fact too diverse to imagine a “regional” approach to law reform. The cultural contexts are too divergent, and the social and economic roles played by the sector differ greatly from country to country. Nonetheless, the book does suggest that open and frank discussions among people interested in law reform in the various countries of Asia may lead to comparative analysis that can influence national decision-making. One fairly major problem with the book, however, is that it is published in hard copy rather than in another fashion that would be easier to update. As the foregoing discussion indicates, the legal situation is in flux in many of the countries, and some of what appeared in this book that came out in early 1999 is already out-of-date.

Nevertheless, the book deserves praise for what it has done so admirably – it has given us a look at the legal systems affecting philanthropy in Asia that will be useful for anyone engaged in research in this field. The Asia Pacific Philanthropy Consortium, which sponsored the project, the Sasakawa Peace Foundation, which was its principal funder and, most particularly ,Tom Silk and his partners are all to be congratulated for their efforts in producing Philanthropy and Law in Asia.