The President, the Parliament, the volunteers: a losing game or compromise?

Ukrainian volunteers support the military

Ukrainian volunteers support the military 

2014/08/20 • Political News

By Anna Hulevskaya-Chernysh, director the Ukrainian Charity Forum

On August 12, on first reading, the draft of a bill on charity taxation — No. 4455a — authored by Poroshenko, was adopted [by Parliament.]

This indicates that the issue of encouraging charitable activity has become a priority for the President’s Administration.

For the charitable sector, which has been talking about existing problems for more than a year, and screaming about them in recent months, this is a very positive development.

The most important thing now is to make joint efforts so that this law really provides a solution to volunteers’ key problems and becomes a powerful stimulus for further development of philanthropy as a basis for the revival of Ukrainian society.

Problems and proposed solutions

Today, there are three key problems regarding charitable donation taxes:

  • Tax on income of individuals receiving  charitable aid has to be paid by the receivers if the sum of such aid surpasses 1710 UAH per year. For example, all the wounded or families of the deceased, who are collecting charitable donations on their credit cards from individuals, will have to pay taxes of 15-17%;
  • Volunteers who collect money on their credit cards for the army, refugees, the wounded and so forth, are also subject to the income tax. Even if all the money goes to charity needs, the act of adding funds to the account is already grounds for taxation;
  • Charitable funds and organizations sending targeted assistance in the sum of over 1710 UAH to anyone who needs it, have to pay the income tax for this person. These taxes arise when charitable funds buy prostheses, send someone to rehab and in a number of other cases of targeted aid.

The President’s bill proposed the following solutions to the problems:

  1. Exemptions from income tax for wounded servicemen and families of the deceased ATO participants who receive a sum not exceeding an average of 1 million UAH per year – one thousand times the minimum wage per year.
  2. Create an ATO volunteer registry of those who help the servicemen.  Registration would in solve the issue of income taxation for all those who are currently collecting money on their own accounts to buy equipment, medicine and food for ATO participants.

In addition, the draft law proposes that, during the ATO, the following are regarded as regular business activities without any restrictions: all types of expenditures that have to do with the purchase and transfer of protective equipment, machinery, medicine, food and so forth to the army.

Thus, the President’s Administration proposed three important instruments of tax exemption for charitable assistance aimed at developing Ukraine’s defense potential and supporting the military.

But is this enough? Why the whole picture is not appropriate:

During the vote on the bill on Tuesday, instead of the expected “standard” decision regarding priority bills, “for the basis and the whole” Parliament only voted for it only in the first reading. The decision stated that it is recommended that the bill be edited, taking into account the norms of bills #4172a, 4173a and 4176a. These are the bills that were developed by charity experts back in June and that reflect their key problems.

The official Facebook page of the President’s assessed the decision on the part of the Verkhovna Rada as a betrayal of the army.

However, according to many representatives of the charitable sector, this decision is no betrayal. On the contrary, sending the bill for editing provides the opportunity to avoid a certain kind of discrimination against volunteers and benefactors, as well as several legislative conflicts which may have emerged had the President’s bill had been passed in its entirety.

What is missing in the bill? 

1. We have over 300 wounded now who received I-III disabled status. But they were wounded not during the ATO, but in February, on Maidan. Another several hundred Maidaners need long-term rehabilitation. We also have the families of the Heaven’s Hundred. They are currently being taken care of by a number of volunteers and charitable funds.

Why were they not included on the list of those who are freed from income taxes for charity? Both the families and volunteers helping them are asking for this. But, so far, the plea has been ignored.

Meanwhile, the state has unfortunately, already managed to gain from the tragedy of the Heaven’s Hundred’s families: over eight million UAH were paid in taxes on charity assistance provided by the Pryirpenya Community Fund.

2. Today the ATO does not only include combat in Donetsk and Luhansk oblasts. There are hundreds of thousands of refugees all over Ukraine, and thousands of volunteers who shouldered the task of supporting them. And these volunteers are also collecting hundreds of thousands of UAH on their credit cards to buy basic foodstuffs, pay for temporary accommodation, provide necessary medical care.

The exclusion of these volunteers from the registry of those who will be exempted from taxes is a discriminative policy on the part of the government.

Similar is the exclusion of the volunteers who challenged the dictatorial laws in January and February of 2014 and started collecting funds on their credit cards to equip field hospitals on Maidan and provide medical aid for wounded maidaners.

3. Today the funds are limited by legislation when buying prosthetics or sending people to rehab – this activity is subject to taxation. And saying that it doesn’t have anything to do with the ATO would be a lie. This instance should also be regulated at the legislative level.

By sending the bill for revision, the Parliament created the necessary condition to right the wrong.

On the volunteer registry

The proposal to create a volunteer registry within one of the state structures is good on one side, but evokes worries on the other. Besides, it collides with the current volunteer activity law.

Why is it good: 

In light of the growing instances of machinations with money collection in the street and unverified credit cards on the Internet, the Registry is an instrument of preventing abuse by dishonest citizens.

You are not subject to the tax if you are registered and if you have accounted for all the collected and spent funds. If you are unable to produce a report, the money is taken in full by the Cabinet of Ministers: this is clearly stated by the bill.

Why is it worrisome:

  1. Who and how will make the decision to accept someone to the registry? Will it only be for the chosen and close ones? Or will it be accessible to all volunteers working in various regions on various tasks?
  2. Will the registry become a working instrument? Or will the volunteers ignore its existence to avoid fighting bureaucracy? What kind of accountability will be demanded of the volunteers?

Everyone still remembers what happened to the “Motherland Maidan” aid center for the victims, when instead of freeing the families of the Heaven’s Hundred from taxes, the Cabinet of Ministers conducted a check as to how the funds were being used and drew up four criminal cases.

The cases themselves are closed already, for the absence of any violations. But the volunteers still feel the burn. And when you know the state’s ability to conduct “humane checks,” you will consider doing something twice.

What is the conflict?

The volunteer organizations and funds, as well as volunteer centers, which have been working in the volunteer sphere for a long time, know that the current volunteer law, which was passed hastily before the Euro 2012 championship, limited the activity of individual volunteers significantly.

According to Article 7 of the law, “volunteers give voluntary aid based on a contract on volunteer activity signed with a volunteer organization.” So, without a special contract with a volunteer organization, the volunteers have no right to collect any funds and give any kind of aid whatsoever.

In the same way, receiving volunteer aid, according to Article 8 of the same law, is only possible “based on a contract regarding the provision of volunteer aid signed with a volunteer organization.”

Only the organizations that have a licence on volunteer activity from the Ministry of Social Policies can become volunteer organizations.

As of today, according to the Ministry itself, there are only 17 such organizations all over Ukraine.

Therefore, the creation of a state volunteer registry without making corresponding amendments to the volunteer law creates a legal standstill.

The situation is alleviated slightly with the fact that the volunteer sector has already developed and registered the according amendments back in November last year, and passed the profiling committee hearing on July 1.

We are convinced that the bill amending taxation on charity is best passed together with amendments to the volunteer law.

Why this is important

Unfortunately, the legal framework that regulates charity and volunteer activity in Ukraine is far from perfect. Systemic changes should be made by lawyers and tax experts, and only in close cooperation with the volunteers themselves.

Therefore, we would want the development of all political and legislative innovations to happen in close cooperation with charity experts. And then the joint decisions will not become yet another instance of ridicule but real working instruments.

The charity sector is ready to join efforts to seek an operative solution that will make systemic amendments that can not only successfully  fight but also build effectively.

We are open to the state’s proposals. The next move is up to the Parliament and the President. Let’s live together in a new way.

Source: Pravda, translated by Mariya Shcherbinina

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  • toioioio

    Why don’t Ukrainian oligarchs spent some of their money, to help the state, army, volunteers and injured?