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.