A public consultation exercise on the implementation details for the Budget 2007 changes to promote philanthropy was held from 18 July 2007 to 17 August 2007. Members of the public were invited to give their views on the following:
the proposed guidelines to distinguish between private donations and donations raised from the public, so as to facilitate the waiver of the 80:20 fund-raising rule for private donations; and
the proposed conditions to be applied to qualifying grantmaking philanthropic organizations that are allowed to issue double tax deduction (DTD) receipts to donors for donations that are subsequently channeled to local IPCs.
2 The consultation paper on implementation details for the Budget 2007 changes to promote philanthropy may be downloaded here.
PARTICIPANTS OF THE CONSULTATION EXERCISE
3 A total of 23 responses were received. 6 were from individuals while 17 were from organizations. We would like to thank all who have given us their feedback.
SUMMARY OF COMMENTS
4 A summary of the key comments received, together with our responses, is shown in this table. The comments pertained to the following key areas:
Waiver of 80: 20 fund-raising rule for private donations
a. Remove 80:20 fund-raising rule for foreign charitable causes for public donations;
b. High administrative cost of obtaining the permit for fund-raising for foreign charitable causes;
c.Clarifications on the definition of private and public donations;
d. Avoid over-prescriptive guidelines for public and private donations;
Grant DTD for donations to grantmakers which are subsequently channelled to local IPCs
e. Requirement for grantmakers that allow DTD at the point of donation to disburse the monies to IPCs within 2 years;
f. Requirement for grantmakers that allow DTD at the point of disbursement to distribute a minimum percentage of its funds annually;
g. Tracking of donations until they are disbursed to an IPC;
h. Safeguards against abuse by grantmakers; and
i. Allowing DTD for in-kind donations made to IPCs through grantmakers.
WAIVER OF 80: 20 FUND-RAISING RULE FOR PRIVATE DONATIONS
a. Remove 80:20 fund-raising rule for foreign charitable causes for public donations
While most respondents supported the relaxation of the 80:20 fund-raising rule for foreign charitable causes for private donations, many also felt that this should be further extended to public donations. The reasons cited were:
It is unnecessarily restrictive as the public interest can be safeguarded via the requirement for a permit;
Raising awareness will be more effective in preventing fraud; and
Reputable local and international charities which raise donations for meaningful causes like relief and development work in low-income
developing countries should not be subject to the 80:20 fund-raising rule as this will show Singapore’s “heart”.
COC’s Response: The 80:20 rule is retained for public donations because of the fundamental policy premise that charity should begin at home and monies raised from the general public should be applied more to local charitable causes than foreign charitable causes. Public vigilance is a good way to detect and prevent fraud. We encourage members of the public to alert the authorities if there are suspect fund-raising practices.
The COC’s office has waived the 80:20 rule for fund-raising appeals to assist in overseas disaster-relief work. However, charity should begin at home and any fund-raising appeal targeted at the general public, unless for major disaster relief work, would be subject to the 80:20 rule. The 80:20 rule should not prevent Singaporeans who wish to donate to worthy foreign charitable causes from doing so. In fact, many Singaporeans today are already contributing their time, talent and resources to overseas charitable causes.
b. High administrative cost of obtaining the permit for fund-raising for foreign charitable causes
A number of respondents noted that the extent of the burden imposed by the requirement for the permit depended on how onerous the application process was. They suggested that a once-off COC permit could be granted such that applicants would have to apply for it only once over a specified period.
COC’s Response: Noted. COC’s office would work with relevant agencies to explore the suggestion for a renewable annual permit.
c. Clarifications on the definition of private and public donations
A number of respondents sought clarifications on the following:
Whether privately-owned money would be subject to the 80:20 fund-raising rule;
What the definition of “direct” relationship is. For example, if a fund-raiser knows a person within a particular category and that person introduces the fund-raiser to other persons within that category, is the relationship with the “other persons” then considered to be a “direct relationship”;
Whether bequeathed assets were categorized as fund-raising; and
Whether appeals via text messages were considered public fund-raising.
COC’s Response: Privately-owned money will not be subject to the 80:20 fund-raising rule unless the money is solicited under a fund-raising appeal for foreign charitable causes targeted at the general public. If the funds (public or private) are donated without having been solicited, then a permit is not required.
COC has amended the word “direct” to “defined” in the guidelines. Defined relationships can include acquaintances made through first-degree (or higher) introductions.
Bequeathed assets are private assets that can be donated to a charitable or philanthropic cause. This would not constitute fund-raising as long as the assets are bequeathed according to the individual’s will. Hence, any bequests to an organization for foreign charitable purposes do not require a fund-raising permit unless the organization intends to solicit such bequests as part of their fund-raising appeal.
Mass fund-raising appeal via sms-es would also constitute public fund-raising.
d. Avoid over-prescriptive guidelines for public and private donations
Some respondents felt that the definitions of public and private donations were too broad, and would create uncertainty over how to classify fund-raising activities in the future. However, other respondents asked that the definitions not be too narrow, so to minimize administrative red-tape and control. There was no clear consensus on how defined the definitions should be.
COC’s Response: The guidelines have been kept broad so as not to be overly prescriptive and to ensure regulatory flexibility in dealing with more innovative forms of fund-raising. Any attempt to narrowly define such terms would be subjective at best, and hence guidelines should be kept as they are and refined along the way where necessary.
GRANT DTD FOR DONATION TO GRANTMAKERS WHICH ARE SUBSEQUENTLY CHANNELLED TO LOCAL IPCs
e. Requirement for grantmakers that allow DTD at the point of donation to disburse the monies to IPCs within 2 years
A majority of respondents felt that donors would prefer DTD to be granted at the point of donation, but that the requirement for the monies to be disbursed within 2 years was too restrictive. The reasons given were that:
The limit of 2 years did not encourage long-term sustainable giving;
There may be insufficient worthy projects during the 2 year period; and
If the donations were large, it may not be advisable to require that all of it be disbursed within 2 years.
MOF’s Response: The intention of requiring the monies to be disbursed within a specified timeframe was to ensure that the donations are properly channeled to the intended beneficiaries, and that there is no hoarding of funds. Nevertheless, MOF acknowledges the feedback that the 2 year timeframe may be insufficient to ensure effective and sustainable use of the donations, particularly if the amount of donations is large. MOF has decided to increase the timeframe to 5 years. Grantmakers would be required to keep proper records of their donations for up to 7 years, so as to facilitate checks and audits by the administrator of the DTD scheme.
f. Requirement for grantmakers that allow DTD at the point of disbursement to distribute a minimum percentage of its funds annually
A number of respondents felt that the requirement for a minimum percentage of funds to be distributed annually was impractical, for the following reasons:
Grantmakers may wish to time the disbursement based on the milestones of specific projects or the performance of the IPCs, which will vary from year to year;
There may not be any worthy projects in a particular year; and
It discourages sustainable giving.
MOF’s Response: The original intention of allowing grantmakers the option to allow DTD at the point of disbursement to IPCs was to give them more flexibility to ensure that donations are used effectively and in a sustainable manner. With the timeframe for disbursement of donations to IPCs for those who chose to allow DTD upfront at the point of donation being increased from 2 years to 5 years, there is much less of a need for this option. As such, all grantmakers will now be required to disburse their donations within 5 years, and they will benefit from the upfront granting of DTD.
g. Tracking of donations until they are disbursed to an IPC
Some respondents suggested that DTD be allowed at the point of donation, and that there be no requirement to track whether the donations are ultimately used by an IPC, as long as the donations are kept in a fund meant for IPCs only. This would minimise administrative cost.
MOF’s Response: Grantmakers who grant DTD at the point of donation now have up to 5 years to disburse the donations to an IPC. In granting a DTD, the Government foregoes tax revenue that could have otherwise been used for the benefit of the community. As such, there is a need for the donations to be tracked to the point of disbursement to the IPC, so as to ensure that they are indeed properly used for the benefit of the Singapore community and donors’ intent of supporting IPC causes are met.
h. Safeguards against abuse by grantmakers
Some respondents asked for clarification on whether the DTD will be recovered from the donor or grantmaker, in the event that the grantmaker fails to meet the stipulated conditions, e.g. failure to disburse donations within 5 years. They also asked about the recourse of action that donors may have if the grantmakers use the funds improperly.
MOF’s Response: If the grantmaker does not channel the donations to IPCs within the 5 year timeframe, the DTD that has been given to donors for the un-disbursed donations will be recovered from the grantmaker. The donor will not be affected by the tax recovery.
Any misuse of the donations given to grantmakers will be treated seriously. IRAS, which is the administrator for the DTD scheme, reserves the right to revoke the privilege of the grantmaker to make use of the DTD scheme. The grantmakers may also have their charity status or approved status under the NPO tax incentive scheme revoked. Donors who feel that the grantmaking organisation they have donated their monies to is acting improperly should inform IRAS.
i. Allowing DTD for in-kind donations made to IPCs through grantmakers
One respondent asked whether the DTD scheme could also be applied to in-kind donations such as art pieces. Currently, donors of art pieces to IPCs can receive a DTD on the value of the art pieces.
MOF’s Response: Today, DTD is granted for a specified list of in-kind donations to IPCs. We have noted the feedback to extend the DTD for in-kind donations to grantmaking organizations and will consider allowing this when we next review the DTD initiative.
5 The finalized guidelines for private vs public donations can be downloaded here, and the finalized conditions for the DTD initiative can be downloaded here.
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