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Something now seems to ail the nongovernment
organization (NGO) sector, and it involves the
government’s grant of tax perks to groups that donate to
nonprofit and nonstock entities like charitable
organizations.
Apparently, Malacañang is opting for the restoration of
the state’s power to accredit donee-institutions,
relative to the tax deductibility of donations they
receive. It is, likewise, withdrawing the authority
extended previously to the privately run Philippine
Council for NGO Certification, or PCNC, as accrediting
entity for such donee-institutions.
Offhand,
the Palace order, dated October 22, seems on the up and
up. However, it obviously ruffled the feathers of PCNC,
which was authorized in December 1998 by the state to
determine the qualification of non-stock, nonprofit
corporations; and nongovernment organizations,
associations and foundations for accreditation as donee-institutions.
PCNC is an aggregation of NGO networks nationwide, and
is thus familiar and known throughout the NGO sector.
Moreover, it’s the private-sector authority on the NGO
sector. After all, who better to know the sector than
the sector itself?
But
under Executive Order 671, signed by President Arroyo
and Acting Executive Secretary Ignacio Bunye, it seems
the government is under the impression that it knows the
NGO sector better and, as such, orders that
accreditation of NGOs as donee-institutions would now be
done by the following government agencies:
§
Department of Social Welfare and Development: charitable
and social-welfare organizations, foundations and
associations, including, but not limited to, those
engaged in youth, child, women, family, disabled
persons, older persons’ welfare and development;
§
Department of Science and Technology: groups primarily
engaged in research and other scientific activities;
§
Philippine Sports Commission: groups primarily involved
in sports development;
§
National
Council for Culture and the Arts: groups primarily
engaged in cultural activities;
§
Commission on Higher Education: groups primarily engaged
in educational activities.
As per
the Palace, EO 671 intends to strengthen the
government’s regulation of nonstock and nonprofit
corporations, associations and foundations; and to
rationalize fiscal incentives, particularly the tax
deductibility of contributions, gifts, or donations to
such groups as donee-institutions. However, based on a
cursory reading of the order, nothing seems to indicate
any impending improvement in the “regulation” of the tax
deductibility of donations to charitable groups, save
for the withdrawal of PCNC’s authorization to accredit
donee-institutions and to put such power solely in the
hands of government agencies.
At the
heart of the issue is Section 34(H) of the 1997 Tax
Code, which provides that contributions or gifts
actually paid or made to “accredited” domestic
corporations or associations organized and operated
exclusively for religious, charitable, scientific, youth
and sports development, cultural or educational
purposes, or for the rehabilitation of veterans, to
nongovernment organizations, are allowed as “business
deductions for income-tax purposes.”
Unfortunately, as in many bureaucracies worldwide, the
exercise of regulatory powers, particularly
discretionary powers, always has the potential of
becoming a source of corruption, more so if the exercise
of such power covers the grant of tax exemptions or
other fiscal perks. Accreditation connotes exclusivity
and privilege, the grant of which now relies solely on
several government agencies, without civil-society
consultation. In contrast, with PCNC, accreditation is
recommended by the private sector, while approval is by
the government. Also, to prevent onerous accreditation,
the Bureau of Internal Revenue (BIR) is made part of the
accreditation process.
Another
issue is that the new EO can also result in some
confusion as to which government agency to approach for
accreditation, particularly in the case of nongovernment
organizations with multiple constituencies. As opposed
to the PCNC system where the NGO sector enjoys
self-regulated status, and where the council serves as a
one-stop shop for NGO needs and a centralized
clearing-house for the grant of tax privileges.
In a
November 19 letter to the President, PCNC made the
following observations:
§
The PCNC
model has been cited internationally as a laudable model
of government-private sector-civil society partnership;
§
PCNC,
together with the BIR and other concerned government
agencies, is able to weed out unscrupulous and
fly-by-night NGOs and consequently ensure that the
incentive of full-tax deductibility is not abused by
donors just to lower their tax liabilities;
§
PCNC’s
role is only recommendatory;
§
The BIR
sits in the PCNC Board to guarantee that tax regulations
are strictly followed;
§
PCNC is
using an effective evaluation and monitoring system that
donors trust; and
§
PCNC
helps protect government revenues without additional
costs to the state.
The
letter was signed by bigwigs of civil society, including
educators Dr. Patricia Licuanan of Miriam College and
Dr. Emerlinda Roman of UP; Catholic priests Marciano
Evangelista of the popularly successful Tuloy Foundation
and Anton Pascual of Caritas Manila; Carmencita Abella
of the famed and highly respected Ramon Magsaysay Award
Foundation; and business-based foundations’
representatives Mario Deriquito of Ayala Foundation and
Vitaliano Nañagas II of the Foundation for Philippine
Environment.
While
PCNC’s assessment requires further validation by the
government, it appears to raise very valid points. The
council has been working for over nine years now, and
has processed over 1,500 applications for certification
and has certified over 850 applicants. And nothing seems
to indicate that the current process is short-changing
the government. If it ain’t broke, why fix it?
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