Domestic corporations and individual philanthropists are soon set to get tax incentives for their donations.

Fan Baojun, chairman of the China Charity Federation, said yesterday that a tax-free policy will be adopted nationwide to encourage giving, but did not say when it would be implemented.

That policy will help remove the biggest barrier to donations by Chinese companies which are often accused of being miserly when it comes to social responsibility.

Some surveys show that about 99 percent of domestic enterprises have never donated to charity.

Much criticism for that parsimony  centres around the current tax law, under which corporations' donations are exempted from income tax if the amount is within 3 percent. The ratio is 30 per cent for individuals.

"It is commonly accepted that that the ratio is too low to encourage greater donations to charity," said Wang Zhenyao, a senior official with the Ministry of Civil Affairs.

In the United States, the ratio is 10 percent, he said.

However, any donations made by foreign-funded companies in China are totally exempt from tax. In 2003, the State tax watchdog allowed full tax exemption on donations to only seven designated charity organizations.

Such a restriction narrows channels for potential donors, said Wang, director of the ministry's Disaster Relief Department. In addition, all the tax policies are poorly implemented, due to "the ignorance of domestic companies and complicated procedures," said Wang.

He said it took him two months to complete tax-exemption procedures after he donated 500 yuan (US$40). "People in our country have not realized they can enjoy tax exemptions if they make donations, which is also a reason why the tax policy is lagging behind," Wang said.

At the two-day China Charity Conference which began yesterday, the government promised to provide a convenient and standardized service in donation-related tax reduction and exemption.

Ministry of Civil Affairs figures show China has more than 289,000 registered private organizations including 1,016 foundations of which 731 are fully engaged in charity work.

But statistics also indicate the donations received by these charitable organizations each year are small.

The China Charity Federation, the largest of them, says it only gets 80 million yuan (US$988,000) a year in donations.

It was estimated that by the end of 2004, about 5 billion yuan (US$617 million) had been donated to domestic charitable organizations, accounting for 0.05 per cent of the gross domestic product. In comparison, it was 2.17 percent in the United States.

   
(China Daily November 21, 2005)