"Foundations Can Make a Difference - If You Let Them"
Climate Crisis, Society, Philanthropy, and Democracy - these are the main focus areas of the Annual Conference of the European Foundation Centre (EFC) which takes place from 18 to 20 October in Vienna. The spotlight, however, should also be on the - from the viewpoint of not-for-profit or public-benefit foundations - unfavourable legal framework in Austria, said Boris Marte, CEO of Erste Stiftung, in a conversation with APA-Science: "Foundations can make a difference - if you let them."
According to data from Erste Stiftung, there are currently about 740 not-for-profit foundations in Austria, distributing an estimated total of 50 to 70 million euro for philanthropic causes. Marte thinks that much more would be achievable if the foundations did not face bureaucratic obstacles and a heavy tax burden. "In terms of budget and tax law, we live in a cameralistic* system that makes it almost impossible to establish not-for-profit foundations, let alone operate them", says the expert.
One of the core issues and requirements is the implementation of a capital gains tax exemption for ecological or ethical investments, as stipulated in the current Austrian government programme. According to Marte, foundations are currently required to pay CGT if they support social institutions. "It is difficult for us as a foundation to enter into a cooperation with social organisations as we are then hit by the full tax burden." Only organisations found on the Austrian Ministry of Finance's 'list of donation-privileged institutions' are exempt from this provision. Here, Marte criticises that the decision on who is added to this list is a "sovereign one".
Furthermore, an outdated definition of the term 'public benefit' in the Austrian Fiscal Code makes supporting social organisations difficult because it ties 'public benefit' to the principle of immediacy. Boris Marte illustrates this point with the following example: If you as a foundation give out soup to people in need, this is considered to be beneficial to the public. If you fund somebody else to give out soup, this is subject to CGT payment.
In response to these hurdles, Erste Stiftung invested in two Social Impact Bonds (SIB) to have an alternative form of funding. This 'impact-oriented financing instrument for projects in the social sector', according to the Austrian Ministry of Social Affairs, is subject to measurable, binding targets, and the project in question only receives public funding upon reaching these goals. Franz Karl Prüller, Senior Advisor to the Board at Erste Stiftung, believes that this model holds promising opportunities for the future: "Promoting social entrepreneurship would unleash enormous creative potential in Austria."
Coronavirus and Collaboration
At a European level, foundations and philanthropic organisations have increased their activities during the Covid-19 pandemic, accumulating a total of 1.1 billion euro for crisis management by the end of May 2020, said Delphine Moralis, Chief Executive Officer of the European Foundation Centre (EFC), an advocacy group and thinktank, in a conversation with APA-Science.
Moralis states that these organisations have also stepped up their collaboration efforts because the current global challenges are all intertwined - be it climate, migration, the pandemic, or (social) disparities: "We are facing problems that are too big for any country, any sector, or organisation to face alone, and hence we are looking at elaborating on the collaboration of foundations." Not only is there more collaboration between philanthropic organisations; cooperation with public bodies and grantees has increased as well, according to the expert. For example, money has often been distributed much faster than usual.
According to Moralis, the numerous fiscal and legal limitations within the EU and diverging rules and regulations in the individual countries pose severe obstacles to cross-border cooperation between not-for-profit organisations. The Comparative Highlights of Foundation Laws report, compiled by the EFC and DAFNE (Donors and Foundations Networks in Europe), compares the situation in 40 different countries and highlights the complexity. "We see that there is a need to further streamline the regulations across the different EU countries and that there is a need to also modernise the regulations for foundations. And the time to do that is now," says Moralis.
Overlap with Research
In terms of research and development, not-for-profit foundations show a tendency to go beyond their traditional role as a co-funding partner and aim to be involved in the design and implementation of projects as well. "Philanthropy was included as a key partner in the Horizon Europe framework programme, and that is important for us," says Moralis.
The EFC CEO is convinced that there is considerable thematic overlap between research and philanthropy. In the context of research, foundations are engaged in a number of horizontal and vertical topics. These range from gender quality and open science to combining economic growth with regional job creation.
*As opposed to commercial accounting, cameralistic accounting only compares earnings and expenditure.
Service: The Annual Conference of the European Foundation Centre (EFC) entitled 'From crisis to opportunity - How can philanthropy accelerate sustainable change?' will take place from 18 to 20 October in Vienna. Further information and the conference programme can be found at: https://www.efc.be/annual-conference
(This story is part of a media cooperation with Erste Stiftung)