The 12th National People’s Congress voted on March 16th to approve the proposed National Charity Law, which will serve as China’s first comprehensive law regulating the practice of charitable giving. The Center for China & Globalization (CCG), which has conducted research and provided policy recommendations on the legislation, believes the adoption of this measure is a new landmark for China in its social development that will significantly promote philanthropy and charity in the country.
“Charitable donation is thriving in China in tandem with its rapid economic and social development. From 2004 to 2014, direct donations have risen from RMB 10 billion to more than RMB 100 billion,” said Mr. Cao Dewang, Founder and Chairman of Fuyao Glass Industry Group and CCG Vice Chairman. “The review and approval of the Charity Law draft at this NPC conference serves the purpose of promoting charitable giving and protecting the rights of donors in China.”
As a member of Chinese People’s Political Consultative Conference, Mr. Cao has been actively involved in the review of and advocacy work for the Charity Law. He believes that preferential tax policies are the most effective incentives for promoting philanthropy and therefore should be a core element in the new Charity Law.
One main highlight of the Charity Law is its stipulation for preferential taxation policies to individuals, including those who can be defined as legal entities, and organizations, including businesses, donating to charity. Overseas donations to charitable activities can have their import duties cut or eliminated altogether (the same applies for the import VAT). In addition, where donors donate physical objects, securities, equity, and intellectual property right to charitable organizations, administrative fees related to transferring user rights are waived.
Noting the experience of other countries, Cao pointed out that the Charity Law alone will not boosts charitable giving unless it contains tax benefits for donors. Moving on, he expects a surge of charitable activity in China once the government follows through, as it has said it will, on formulating detailed preferential tax policies on both central and local levels after the Charity Law is released to encourage donations to charity.
The legislation process for drafting the newly passed Charity Law began years ago, in early 2006. The first draft was submitted to the NPC in October, 2015, and the second draft was opened for public consultation in January this year.
As one of the most influential independent think tanks in China, CCG has proactively undertaken study and policy advocacy during the formulation of the Charity Law. In February of 2015, CCG organized and held two 2015 China-US Philanthropy Roundtables, one at Harvard University, the other in New York City, to discuss the development of US philanthropy and its implications for the proposed Chinese Charity Law. The roundtables brought together dozens of prominent scholars and experts from both countries and shed light on the vibrant American philanthropy culture and public opinion environment. They yielded important practical advice for improving transparency and creating incentives to boost charitable activities in China. In addition to holding these roundtables, CCG released a policy proposal, titled “Advice on Using Tax Incentives to Promote Chinese Philanthropy Development.” That report argued for strengthening regulations on the registration and management of charitable organizations and reforming the tax policies for charity donation. Both of these suggestions have been incorporated into the new Charity Law.