Guest Blog: International Giving

What Stands in the Way of Globalising Transnational Giving?

For three reasons, philanthropy has become more and more important over the past thirty-odd years:

  • Increasingly, citizens realize that the welfare state is no longer a feasible option in coping with the world’s challenges – if it ever was.
  • Civil society organizations have an ongoing funding problem and are increasingly seeking professional help in approaching potential donors.
  • Giving time, ideas, reputation and financial resources to causes of common good has become part of more people’s mindset than ever before.

Given that over the same period of time, society has gone global and many people’s lives and interests no longer stop at national borders, it is now natural that philanthropic giving has become a global proposition.

In recent years, international, cross-border philanthropy has mushroomed. In an age where any news item, including major natural and manmade disasters, protest movements and the violation of human rights, spreads around the globe in almost real time, more and more citizens have first-hand experience of travelling and even living outside their own country. Empathy and compassion, followed by the urge to do something, no longer remains restricted to the local community. Voluntary action has become a common feature and indeed a decisive force in shaping social change, policy, and governance to an extent unheard of even a generation ago.

Arguably, the events in Central and Eastern Europe as much as in other parts of the world from the 1980s created more awareness for what may be achieved when citizens take action. Equally, more insight into practices that emphasize every human being’s obligation to put aside part of one’s wealth for charitable purposes (as is common in the Muslim tradition), may well have induced others to revisit the notion of the welfare state that purported to care for all the citizen’s needs while in fact being less and less able to live up to its obligations. Finally, disenchantment with the performance of the state has certainly done more to empower civil society than any government programme. In short, philanthropy and giving, and civil society have gained momentum and gone global, and it seems high time to live up to this simple fact. More and more donors are ready to do so.

49353808_mIn practice, matters are not so easy. Enormous differences exist when it comes to whether donations across national borders are legal, technically possible, and tax deductible. A growing number of governments, Russia being a case in point, are successfully clamping down on any foreign donations coming into the country. The reason given for doing so commonly has to do with foreign agents, suspected of supporting local initiatives set on causing trouble for the government. Frankly, this is exactly what civil society on occasion actually does and should do; an open society however should not just bear this out, but actively encourage citizens’ involvement in shaping policy and bringing about social change, recognizing the fact, that in the 21st century, society and the economy have gone global.

National governments the world over however, seem to live in a different age. They still see themselves in the driver’s seat and believe they are able to suppress what they don’t approve of and act as they see fit, more often than not to preserve their own power structure rather than pursue the happiness of the people. Even within the European Union, whose members for better or worse agreed many years ago to encourage a free flow of capital as well as goods and services, there are only few countries that grant philanthropists full “philanthropic freedom“. Affirmative European court rulings have had virtually no effect, as national revenue services have always invented some new administrative hurdle to circumvent them. Based on the dated notion that charitable giving when carrying a tax benefit to the donor and a loss of tax income to the state should benefit his or her national compatriots exclusively, they look askance at any donation to a charity abroad. In Germany a few years ago, a clause was added to the law that said any activity of a charity outside the country must also carry a benefit to the interests of the Federal Republic. This is neither compatible with the principles of an open society, nor is a local tax official in a position to judge whether a donation to a charity in say East Asia is beneficial to government policy or not.

In recent years some of these hurdles have had to do with an obscure supranational body called the Financial Action Task Force (FATF) which was set up to fight money laundering and terrorism. FATF has been busy making recommendations to the effect that non-governmental organisations are prime suspects and need to be closely watched. As a result, reporting requirements have been stepped up. To give one example, German law requires any donation or grant to a beneficiary abroad that exceeds 10,000 Euro to be reported to the Central Bank (Bundesbank).

When donating money to charities abroad first became popular, some large organisations that wished to fundraise abroad set up subsidiaries in each country they considered worth while. More often than not these were a mixed blessing to the original charity. Cumbersome legal procedures, battling administrative regulations in different legal environments, different languages, stewarding members and attracting new ones, safeguarding the endowment and streamlining governance and administrative expenses to make the whole effort worthwhile, was in many cases a considerable burden. Church affiliated charities made use of existing partners to channel funds from one country to the next. But with reporting standards rising at least as quickly as the level of donations, these partners began to shy away from accepting an intermediary role. In a very few countries, notably The Netherlands, foreign receipts from EU member countries are universally accepted as deductible; and in a few others such as Finland, donations – domestic or foreign – are never tax deductible.

None of this is very satisfactory: Civil society has lobbied for a pan-European regulation to no avail. Even the minimal remainder of the proposed European Foundation Statute was turned down by the European Council in November of 2014. The establishment of Transnational Giving Europe however has facilitated cross-border giving in a growing network of European countries which has helped to widen the geographic scope of European philanthropy.

In Rupert’s next post, learn about how European countries including Germany have overcome some giving restraints through the creation of Transnational Giving Europe (TGE).

Dr. Rupert Graf Strachwitz, a political scientist and historian by training, with ample personal experience in the governance of not-for-profit organisations in Germany and abroad, was the founder of Maecenata Management, of which he was the managing director until 2011. Today, he is a free-lance philanthropy consultant as well as being the director of the Maecenata Institute for Philanthropy and Civil Society, an academic think tank. In his professional career and through his many volunteer activities, he has committed himself to the concept of a strong civil society as a third arena of societal activity beside the market and the state. This concept was totally new in the German environment of political theory and practice in the 1990s and is even now only gradually being seen as a serious conceptual alternative to the theory of a strong and overruling state.