Oleksandr Klymenko Official website
Articles | 602 | 03.09.2014

In regard to kind people and useless half-measures

Oleksandr Klymenko charity Ukraine

Presidential draft law on the tax exemption of charitable assistance to ATO participants – is not just necessary step, this is a forced motion.

Current situation is worthy of the pen of Franz Kafka. If a person wants to help the country voluntarily in such areas, where authorities do not cope with problems, the power makes money on this person twice: it imposes income tax on donations, collected by a volunteer, and then – on the recipient (with the same personal income tax).

If this issue had not been raised in the legislative area, the degree of public discontent would have come to a critical point soon.

It is a pity that the same indulgences did not overtake those, who collected aid for civilian victims – for refugees and for those, who reside in ATO zone. I’m not even about those organizations and people, who were always helping people in need. They were raising funds, for instance, for expensive operations, to help hospices, orphanages, for the care of disabled.

The saddest thing is that the authorities have made half-and-half decision instead of a decisive leap forward.

The saddest thing is that the authorities have made half-and-half decision instead of a decisive leap forward.

How can we chuck away chances of resolving urgent problems over and over again? In case of the right approach, crisis becomes the time of opportunities. Even the most painful and unpopular reforms will be out if it is necessity for the country. Nowadays, it is possible to change the whole way of life in Ukraine dramatically. It will be perceived by society, unlike to the prosperous “well-fed” times.

For instance, in this case, instead of the regulatory patching of holes, the issue could have been raised more bravely and widely – to develop and offer legislative algorithms of charity stimulation. In fact, such philanthropic impulse of citizens restrains Ukraine from fast collapse. How is it possible not to observe it and not to support such tend on the state level?

Reduction of tax burden – it is clear and for good. However, it is not enough. The possibility of implementing a new (systematic and comprehensive) state policy on charity has been lost (or almost lost).

For instance, it could have been introduced a provision, which allows a taxpayer to donate to charity a specific part of the formed tax payment. Let’s suppose, it could have been 1% or 2%. It is a petty loss for the state. Meanwhile, the volunteer movements and charity funds, which save the country from a humanitarian catastrophe, and the army – from unnecessary casualties, would have had a steady stream of “live cash”. Furthermore, it would have lead to a healthy competition. Each fund, each volunteer group would have tried to become as efficient and transparent as possible in order to win the competition for donations.

Or, let’s say, expanding of the tax incentive would be a very apropos initiative. Nowadays, a legal entity in Ukraine is entitled to debit from the tax base only 4% for charitable purposes. At the same time, an individual can debit nothing at all for charitable purposes before paying taxes. For comparison, in peaceful Europe, this limit is 40%. Why our government is limiting the desire of its citizens to help fellows?

Creation of a full legal base for the work of so-called “endowments”, meaning targeted funds, by which money is being earned deliberately to finance charitable programs could have relieved volunteers from the tedious search for donations.

Creation of a full legal base for the work of so-called “endowments”, meaning targeted funds, by which money is being earned deliberately to finance charitable programs could have relieved volunteers from the tedious search for donations.  The most famous is, of course, the Alfred Nobel fund. Capital of the founder was not immediately distributed as prizes. However, it was handed over to the management of experienced financiers. And Nobel prizes themselves are being paid out of income from operating of this assets.

That is how funds operate at the most prestigious universities of the world. Educational grants are being paid to talented youth, and advance researches are being financed out of this money.

In Ukraine this practice has not become a widespread occurrence for the simple reason, namely: such fund would have been taxable on a common basis.

With regard to the army, assistance can be provided not only by imposing additional taxes. There are much more interesting and attractive mechanisms in the world practice. The British “Poppy Appeals”, for instance. The essence is simple: this is the usual deposit, but its income is divided between the investor and those, to whom he donates the money, in the pre-arranged proportions.

This is a win-win strategy in its highest manifestation, because all are the winners. Depositor earns doing charity work. His companion, being a non-profit organization, has a stable source of income for his/her charitable purposes. Bank receives money, which it, naturally, uses for lending to the real sector of economy. Well, and the state, collecting taxes from all, excluding charitable organization.

Any of these mechanisms (in case of prescribing in the Presidential Law) would bring more benefits than military tax or other administrative mechanism of covering military expenses.

Any of these mechanisms (in case of prescribing in the Presidential Law) would bring more benefits than military tax or other administrative mechanism of covering military expenses. In this case, it would be great to observe an active participation of philanthropists in saving civilians from the conflict affect and humanitarian disaster.

Unfortunately, our regulators and legislators have a reserve of creativity only for purely bureaucratic solutions, which are full of disadvantages.

The new law does not relate to (and does not resolve) the issue of international humanitarian assistance. There is a Resolution of the Cabinet of Ministers on the separate procedure of customs clearance of humanitarian cargoes that go into the ATO area. However, it has also pitfalls.

Nowadays, the Ministry of Social Policy grants the permission to import “humanitarian aid”. Usually, it does not do it quickly. As a result, a cargo is being exempted from paying taxes and customs duties, but it receives an official document and accrues debts for storage at a customs warehouse. By the way, last year, Ministry of revenue and duties​, presented an initiative in order  to exempt the goods, which were “overdue” by the fault of the Ministry of Social Policy, from payment for storage. The problem is really massive; not only Red Cross but also plethora other charities have faced it many times.

If there is an initiative on deregulation of the import of humanitarian aid, it should have been followed to its logical end on the whole chain of procedures.

If there is an initiative on deregulation of the import of humanitarian aid, it should have been followed to its logical end on the whole chain of procedures. It would be necessary  to cancel permissions from the Ministry of Social Policy for all kinds of humanitarian cargoes or introduce a declarative principle for them: to adopt that during a strictly set period of time since submission of a statement, a cargo is assumed to be humanitarian, if no objections followed on behalf of the state.

It’s not even the point, that making money off other people’s misery and other people’s kindness is bad (although it is certainly bad). The point is that everything should be done qualitatively. Nowadays, we cannot use half-measures. The time is wrong, challenges are new. It is necessary to take over the initiative and responsibility.

Link to source: Forbes

Photo: sxodim.kz

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