Govt asked to revise taxation law to boost philanthropy

Leo Wahyudi S, The Jakarta Post, Jakarta

Public Interest Research and Advocacy Center (PIRAC) chairman Zaim Saidi has urged the government to review the taxation law so as to accommodate large companies that wish to set aside part of their revenue for philanthropic purposes.

"Through the revision of the taxation law, the government should establish a formal mechanism for corporate philanthropy to further promote social welfare," he said here on Thursday.

The formal mechanism was badly needed to avoid confusion in fund-raising activities between the government and nongovernmental organizations as well as private companies, he said.

The formal mechanism was also required to help speed up fund- raising mobilization, Zaim said at a public discussion on corporate philanthropy.

He explained that a formal mechanism would enable companies to prepare their accounts more easily.

Zaim reiterated that revision of the taxation law was essential because the government had failed to set up a policy dealing with the state's duty to promote social welfare.

He cited that many countries had in place a similar system, which enabled companies to benefit from a reduction in taxation for any social assistance it made.

Zaim also underlined the importance of a comprehensive study on corporate philanthropy in a bid to help optimize the large potential.

The collection of corporate donations on a large scale was considered routine as the benevolence simply involved short-term plans, he said.

"The companies are mostly motivated to help people in need instantly rather than on a long-term basis," Zaim said.

Of 180 companies shown to have fulfilled their corporate social responsibilities last year, 80 percent channeled their donations through coincidental activities, such as social service or other emergency assistance.

"The primary motivation for the philanthropy was related to religion," he said, adding that at least 42 percent of the companies' social activities took place during the Ramadhan fasting month.

The social funds collected from the 180 companies reached Rp 115 billion (US$11.5 million) last year and were spent on 279 social activities, Zaim said.

The largest contribution (amounting to Rp 34.9 billion) was from mining companies, followed by transportation and automotive companies (Rp 14.3 billion).

Zaim said the education and research sector got the highest proportion of donations, at Rp 66.8 billion, followed by social welfare, at Rp 38 billion.

He further urged the companies to set aside any promotional or other corporate motives when making donations.

He said that total social funds, including alms, in Indonesia were roughly estimated at Rp 1 trillion last year, very much lower than the Rp 2,030 trillion (US$203 billion) in the U.S. over the corresponding period.

However, Zainal Abidin, one of PIRAC's staff members, said that none of the companies had made a donation for legal aid or advocacy.

"I think that legal aid has a low priority because the companies see little benefit in it," Abidin said.