Charity in Ukraine: From conscious empathy to interest philanthropy
The longer my team and I have been doing charity work in Ukraine, the more interesting it is to observe and analyze the experience of more developed countries in the field of patronage, philanthropy and other forms of helping people and supporting culture.
They say that if people do not have culture in their hearts, then it cannot be anywhere. Therefore, the world practice in these areas for our country is priceless. In future.
And being tied to the realities of today’s Ukraine, I would supplement this formula as follows: the future of the nation is based on timely and affordable medical care, a radically new approach to education and, of course, preserving and strengthening the culture of our country.
Today I’ll start with culture. Tied to charity.
World charity: how are they doing it?
In most European countries, over the past 20 years, various economic instruments have been used to support culture, namely: the mechanisms of tax policy are being improved and additional sources of financing in the form of profitable cultural industries and special taxes are being intensively developed.
All over the world, the development of the infrastructure of charitable activities is moving towards the emergence of new forms that allow attracting more people to donation. Therefore, it is especially interesting to identify a certain part of public income, which can be directed to both the state and non-profit cultural sector: for example, by means of a mechanism for allocating a share of citizens’ tax funds.
This approach is maximally implemented in the model of the so-called “interest philanthropy” based on the principle of “tax assignment”. What does it mean?
The legislation gives the taxpayer the right to transfer part of the paid amount (usually from 0.5 to 2%) of the personal income tax to any budgetary or non-profit organization that is entitled to receive such donations, either independently or by submitting an application to the tax authorities.
It is important that the payer himself chooses one or more of the organizations indicated in a special list, according to his taste, according to his heart.
If the taxpayer failed or did not want to choose a specific recipient organization, his funds are sent to a special fund, which will be formed precisely at the expense of these funds, and their distribution will be carried out on the basis of granting grants, scholarships and subsidies.
In this case, the taxpayer loses the opportunity to directly track the movement of his money and their use, he will only be given the opportunity to influence the activities of the fund and get acquainted with its activities.
For those who do not want to participate in financing the social sphere, everything remains the same: their taxes will be credited in full to the budget and distributed by the relevant ministry (usually the Ministry of Finance). But, as practice shows, every year the amount of people like that is declining.
European experience of “interest” philanthropy
Today in France there are 13 types of special taxes in the field of culture and about 40 benefits for various types of cultural activities. This practice is widespread in Hungary, Lithuania, Poland, Romania, Slovakia and Italy. In 1996, it was Hungary that became the first country to introduce the “interest” philanthropy model at the legislative level. It was followed by Slovakia, then followed by Poland with a 1% system and Lithuania with a 2% system.
The model of “interest philanthropy” helps to solve several important problems at once: it grants citizens the right to participate in the administration of part of their tax, gradually but confidently increases the resources of organizations in the social and cultural sphere, develops a culture of charity among taxpayers and the level of financial literacy of the population.
Despite the positive aspects, it should be borne in mind that the functioning of this mechanism is associated with a number of potential problems. For example, at the outset, a clear disadvantage is the high costs of administering the deductions, along with the small amount of revenue to support the organizations themselves.
“Interest philanthropy” as part of charity
At the same time, “interest philanthropy” does not replace other forms of donations and does not stop their development.
It’s just that charitable activity is acquiring another invaluable facet, another form, which, with a properly built system in the country, will support the work and development of organisations in the social and cultural sector.
According to the majority of experts, legislative regulation is primarily required cover the taxation of charitable aid and the introduction of precisely “percentage philanthropy”. It is necessary to give the taxpayer the right to redirect a certain percentage of his tax to public needs, that he wants: whether it is the social sphere and helping people or interests in the form of culture and art.
That is why it is necessary to investigate the possibility of introducing the institution of “percentage philanthropy” in Ukraine, taking into consideration the necessary legislative and other changes. Moreover, experts state that the level of development of charity in our country is steadily growing, and focus the public’s attention on the need to adopt a law.
But.
Since 2006, Ukraine has been lobbying for the introduction of “interest philanthropy”. The project gives the opportunity for each Ukrainian to transfer 2% of the personal income tax paid by him to finance the activities of non-profit organisations: universities, museums, public hospitals. However, the law has not yet been submitted for wide discussion, let alone for consideration by the Verkhovna Rada.
For now, we can only study the experience of Europe and implement charitable projects aimed at the most acute needs of the population. As my colleague, who maintains the life support of several nursing homes in Kiev and Zhytomyr regions, once said, culture will wait, and we need to provide adequate nutrition for abandoned old people and the required number of adult diapers.
More about this in the next blog.
Andrey Dotsenko,
entrepreneur, philanthropist, founder of ICF MANUS DEI