Govt should provide incentives to promote donations
Govt should provide incentives to promote donations
The Jakarta Post, Jakarta
Charity is not, and should not be, about getting something in
return.
Based on this premise, it is not surprising that there are no
laws or regulations in Indonesia that offer incentives to
individuals and corporations for setting aside some of their
profits for social activities.
"There aren't any tax incentives, nothing to deduct
whatsoever," GE Consumer Finance's corporate citizenship leader
for Asia, Ani Rahardjo, told The Jakarta Post recently.
"That's one of the reasons why a lot of multinational
companies do not channel their funds directly to organizations
here," she said.
The other reason, she said, is that many foundations in the
country lack transparency, accountability and good human
resources.
Gozali Situmorang of the Ministry of Social Services'
Directorate General of Social Assistance and Security confirmed
that there were no regulations concerning incentives for
charitable donations.
There is, however, a regulation requiring state enterprises to
set aside a portion of their earnings for community development,
said Situmorang.
"But the private sector is not regulated," he added.
Some countries, such as the United States, offers incentives,
mostly in the form of tax deductions, as experienced by Inggita
Notosusanto, GE's communications manager in Indonesia, during her
studies there.
The U.S. government has a list of foundations with good
transparency and accountability, and corporations and individuals
who make donations to these foundations can claim tax deductions.
"When my husband and I donated some money to Orphan
International -- an accredited organization -- we received a
small tax discount on our annual taxes," said Inggita.
The Indonesian government is currently preparing a revision of
the tax law, and the revised law is expected to include tax
deductions for social activities. Donations for scholarships and
community development programs will, under the new law, be
deductible.
However, not all contributions for natural disaster relief
will be deductible. Only funds going to disasters of a national
scale, such as the terrifying earthquake and tsunami in Aceh and
North Sumatra, can be deducted.
Ani said that during the recent tsunami, the government showed
its goodwill by waiving all taxes on goods being used to assist
the victims.
"All the things that we donated -- water purifiers, CT scans
and X-ray machines, etc. -- were exempted from taxes," she said.
Aside from import duties, the government usually charges a 10
percent value added tax and a 2.5 percent income tax, said Ani.
GE backed off from a plan to send similar goods to India,
which also suffered in the December tsunami, because the country
insisted on taxing the items.
"The transportation costs alone were about US$1 million. Taxes
would have only added more," she said.
Ani urged the government to expand the practice of waiving
taxes on donations to other social activities.
After all, providing an incentive for social assistance does
not mean asking for something in return. Incentives, be they in
the form of tax deductions or import duty exemptions, serve only
to show that the government, representing the recipients,
appreciates the gesture.