Non profit
Belgium: Philanthropy across borders
An interview with Ludwig Forrest, an expert in European philanthropy, highlights what can be done to overcome unfair taxation when donating abroad
?Today the capital of European philanthropy is Amesterdam.? Ludwig Forrest, who works for the King Baudouin foundation in Belgium, has no doubts about this: ? In January 2006 Holland voted a law that not only makes donations exempt from taxes so that the entire sum donated makes it to the local non profit, but that also extends tax exemption abroad. All this it has done without prompting. That is, without having to be reprimanded by the European Commission for discriminating against foreign charities.? Discrimination, says Forrest, that is expensive for the non profit sector: on a donation that is made in France, a 6% tax is paid by the beneficiary, but the percentage rises to 60% if the beneficiary is an organisation registered in another European country. How can this work in a frontier-less Europe?
The King Baudouin foundation fights against this injustice since 2002 with a network of foundations called Transnational Giving in Europe (TGE) which extends across 7 member States and enables people to support foreign non profit organisations without having to renounce to the national tax incentives that apply in the country in which the donor resides. This battle, in the first months of 2007, has seen TGE move funds for a total of more than 1 million euros. They also now count with a powerful ally: the European Commission.
Vita: How does the Commission support you in your battle?
Ludwig Forrest: In March 2006 Peter Schonewille, who is from the EU Tax Directorate, presented a document, intended for the general public, that explains how to set in motion and use the ?infringement procedure? under article 226 of the European Treaty which and allows countries who discriminate between national and international philanthropy, to be cited before the Court of Justice. This is a clear invitation to all charities that operate within Member states: the Commission is on your side.
Vita: How many infringement procedures are there at present that have to do with philanthropy?
Forrest: Four. The Commission has issued recalls to the UK, Belgium, Ireland and Poland. To date concrete results have only been achieved in the Polish case. Initially, Warsaw?s reaction to the admonishments from Brussels was to threaten to cancel incentives and tax breaks for local donations too, but the Polish non-profit sector went up in arms and now Poland offers tax cuts for foreign donations too.
Vita: How did Belgium, Ireland and the U.K react?
Forrest: The English government is biding its time; usually a country has 2 months to answer Brussel?s calls, which were sent out to the UK in July 2006, so the deadline has already passed. The same is true for the Irish case. Belgium?s case is different – the recall was sent in July 2005 but was temporarily suspended in order to wait and see the outcome of the so called Stauffer Case. Walter Stauffer is an Italian foundation and musicology centre that is obliged to pay enormous taxes on donations it receives in Germany as German law only allows tax breaks for organisations that are resident in Germany. The court of Justice, however, ruled that the difference in treatment of German charities and foreign ones violates the free circulation of capital that is foreseen by the European Treaty. This is an important precedent. Following this announcement the Commission reopened the Belgian case, that initially only dealt with taxes on donations and gifts paid by beneficiaries, and extended it to cover also fiscal deductibility for donators. Now it is up to the Belgian government to respond. And the other European governments? I am sure that it is only a matter of time before Rome, Paris, Berlin and the other capitals of Eurolandia will have to answer to their citizens and the Commission about the issue of discrimination towards trans-border philanthropy.
Vita: Who uses your network?
Forrest: There are 405 beneficiaries, which includes both donators and organisations that are interested in fundraising abroad. In 2006 a philanthropic capital of 1.350.000 euros was moved.
