The Association for Community Relations (ARC Romania) in partnership with the Dăruiește Viață (Give Life) Association, the HOSPICE Casa Speranței Foundation, the MagiCAMP Association, the Niciodată Singur (Never Alone) - Prietenii Vârstnicilor (Friends of the Elderly) Association and the Hope and Homes for Children Foundation have proposed to the Ministry of Finance a mechanism to enable companies who pay income tax instead of corporate tax to be eligible for deductible sponsorship: the possibility to direct 20% of their income tax to social cases in the communities they are active in.

The Association for Community Relations (ARC Romania) in partnership with the Dăruiește Viață (Give Life) Association, the HOSPICE Casa Speranței Foundation, the MagiCAMP Association, the Niciodată Singur (Never Alone) - Prietenii Vârstnicilor (Friends of the Elderly) Association and the Hope and Homes for Children Foundation have proposed to the Ministry of Finance a mechanism to enable companies who pay income tax instead of corporate tax to be eligible for deductible sponsorship: the possibility to direct 20% of their income tax to social cases in the communities they are active in.

The applicable legislation in Romania is the 1994 Sponsorship Law, a mechanism whose underlying philosophy presupposes that the state is aware that there are community needs which it cannot tackle fast or efficiently enough. Therefore, the state has allowed profit making companies to direct a part of their corporate tax to projects that have an impact in society. In this way, companies can direct 20% of their corporate tax to various social causes, through sponsorship. If the sponsorship value does not exceed 0.5% of the company turnover, then the entire amount is deductible from the corporate tax. It is a tool enabling companies in Romania to support the non-governmental sector with no additional costs. Micro-enterprises, which do not pay corporate tax, but turnover tax, do not benefit from this mechanism.

According to data provided by ANAF (the National Tax Agency in Romania), in 2016, of a total of 119,594 companies that paid the corporate tax, one third used the 20% fiscal facility and directed over 270 million EUR to eligible organisations.

Unfortunately, in early 2017, Ordinance 3/2017 to amend the Tax Code increased the maximum turnover in the definition of micro-enterprises from 100,000 to 500,000; this dramatically decreased the number of companies that can access the facility. Almost 50,000 companies that were eligible were affected, according to estimates by the Community Relations Association based on data available for financial year 2016, for over 108,000 companies, data referring to turnover, profit, number of employees, field of activity and share capital.

This companies, whose pooled sponsorship would have amounted to approximately 40 million EUR, now have to pay income tax instead of corporate tax, and consequently no longer have the possibility to direct a percentage of their corporate tax to social causes.

Given the Minister of Finance’s statement on 26.10.2017 on the changes in tax conditions for companies whose turnover is below 1 million, the future financing for projects with thousands of beneficiaries, children, elderly persons, people with disabilities and other vulnerable groups is severely threatened.

These changes have dramatically decreased the number of companies that were able in the past to use the fiscal facility to direct part of their corporate tax to social causes, by means of sponsorship, and who were thus able to act directly and immediately for the well-being of the communities where they are active.

The amendments to the Tax Code have led to a 40% decrease in the number of companies that can access the fiscal facility and to an 8% decrease in the amount that can be directed to social causes through sponsorship.

Even though the value itself does not decrease dramatically, the negative impact on the non-governmental sector is great.

These changes will mostly affect smaller organisations, in smaller towns, who do not have access to sponsorship from large corporations or to public funds and who depend precisely on sponsorship from local economic agents, mostly micro-enterprises. This distorts the level playing field for small enterprises who meet the same conditions, but do not benefit from the same fiscal facilities as companies paying corporate tax. In addition, we believe that it is precisely these small enterprises who need these patterns of solidarity and social involvement the most.

“The associations who attended the press conference today illustrated through concrete examples the financing they have managed to obtain so far through the 20% of the corporate tax mechanism. In many cases, we were able to bring about significant change in the lives of so many people precisely through the financing obtained by this segment of small and medium enterprises offering approximately 1,000 EUR on average. In some cases, important projects already initiated by NGOs risk being blocked”, said Mădălina Marcu, Resource Development Director with ARC Romania.

Together, ARC Romania and the partner associations have proposed to the Ministry of Public Finance an alternative mechanism, to enable micro-enterprises whose turnover is between 100,000 EUR and 500,000 EUR to sponsor NGOs by directing up to 20% of their income tax. On October 11, we sent to the Ministry of Public Finance a petition on this topic, together with some questions. The deadline for an official reply is 11 November. You can find out more here.

Carmen Uscatu – President, the Dăruiește Viață (Give Life) Association:

In 2016, the Dăruiește Viață Association obtained sponsorship amounting to over 1,9 million EUR, from 987 companies, through the 20% fiscal facility. In the past two years, our funds were similar. This will be invested in our most challenging project, which is at the same time the most ambitious social responsibility project today: we aim to build from scratch the first integrated oncology and radiotherapy centre, for children who have been diagnosed with cancer, at the Marie Curie Hospital in Bucharest. Starting on September 12, works will start on the demolition of annexes and the rerouting of utilities networks. We are still waiting for the permits issued by PUD (detailed urban planning), ISC (State Construction Inspectorate) and ISU (Emergency Situations Inspectorate). We will then apply for the building permit from the Sector 4 municipality. Statistical data show that in Romania, 1 in 2 children suffering from cancer dies. In Europe, 80% of them live. We want to help change this dramatic reality!

Beatrice Culda – Executive Director, the Niciodată Singur - Prietenii Vârstnicilor (Never Alone – Friends of the Elderly) Association

For small organisations, the 20% fiscal facility is a major source of financing. The Niciodată Singur – Prietenii Vârstnicilor Association and its partners are running fundraising campaigns based on this corporate facility every year. In 2016, our association has managed to raise over 100,000 EUR from 100 profit-making companies in Romania. This money enabled us to help almost 1,000 elderly people, both in residential homes and in their own homes; we organise activities with our volunteers, in order to ease their loneliness, but we also provide material support – food or other products, anniversary and festive holiday meals, or short trips.  Our mission is to ease the loneliness and the feeling of uselessness amongst elderly people. According to a 2015 GfK study commissioned by the Princess Margaret of Romania Foundation, one in two elderly people in Romania feel lonely to a smaller or larger extent.

Mirela Nemţanu, Executive Director, HOSPICE Casa Speranţei (House of Hope)

This fiscal facility has enabled HOSPICE Casa Speranței to attract in 2016 over 2,6 million RON, which is 16% of our Foundation’s yearly budget. This money has allowed us to provide free and complete palliative care services to a number of 671 patients suffering from incurable diseases and to their families. Unfortunately, at national level, over 160,000 children and adults suffering from incurable diseases need such care services yearly, but only 8% of this need is covered. Given all this, we cannot help but wonder what is to be the fate of those people struggling in Romania with an incurable disease, since the state cannot tackle the real needs of these patients. Even more, through these fiscal amendments, the state is blocking the tools that previously enabled us to get help for those in need. Who will be responsible for these destinies?

Robert Ion - Head of Fundraising, Hope and Homes for Children

For most non-governmental organisations in Romania, Hope and Homes for Children included, the sponsorship obtained through the 20% mechanism is an important source of financing for projects in various fields of activity. Reducing the number of companies that can use this mechanism means reducing the financing and reducing the number of cases where these organisations can intervene in the social sector, which is not always supported by the state, as it should be. Given that the contributions of private companies are important for the social investment that can bring about significant changes in the Romanian society, reducing the amounts that reach NGOs and the number and the complexity of NGOs’ social projects means refusing access to a better life for those who benefit from these projects. To give a concrete example, with over 1,860,000 EUR raised from 110 private companies through the 20% mechanism, in the past two years Hope and Homes for Children has helped 7,097 children and 1,520 adults to leave the orphanage system or to return to their families or to better integrate in society or to receive better professional training. I do not think we can afford to lose these sources of financing.  

Melania Medeleanu – President, MagiCAMP:

Corporate sponsorship is the most important source of financing for our projects. 60% of all our funds come from companies. In 2016, we received almost 150,000 EUR directly through the 20% fiscal mechanism. These fiscal amendments that will reduce the number of companies that can access this facility and the potential for donations in general will simply put a stop to some of our plans to help children suffering from serious illnesses! The contribution of associations such as MagiCAMP is not and cannot be replaced by the state. In this way, the state is depriving these children and their families of our support and will reduce access to treatment, as well as the physical and psychological recovery of sick children.

ARC Romania (www.arcromania.ro) has been active for more than 15 years encouraging philanthropy as a social change mechanism. We are working together with all those who are seeking resources to help others, with those who want to offer resources to change lives and we are building mechanisms to make this transfer of resources simple and efficient.