Looking back into the future of Austrian public benefit foundations

 

Franz Karl Prüller

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According to the Association of Public Benefit Foundations (Verband für Gemeinnütziges Stiften), of which ERSTE Foundation is a founding member, 2016 could in retrospect become a pivotal year for the development of philanthropic foundations in Austria.

On January 1 2016, the new law on public benefit (Gemeinnützigkeitsgesetz) came into force, making it easier for philanthropic foundations to be established and at the same time granting them tax benefits: foundations with an exclusive public benefit remit can now be established with much less bureaucratic effort (in essence – faster) and having a minimum endowment of only €50,000.

The founder can distribute €500,000 over a period of five years (€100,000 per annum) as a tax deductible endowment for the foundation. Furthermore, a number of measures were introduced, easing tax and other regulations regarding the actual work of philanthropic foundations as well as reporting requirements.

The new law now stands beside the existing law governing ‘private’ foundations – or, as they are called in other countries, ‘family foundations’.Its intention clearly is to activate and mobilise private wealth in support of public purposes be they social, cultural or scientific.

As the law governing ‘private’ foundations in Austria was mainly intended to protect wealth and keep it in Austria (thus enabling large family foundations to be established and to hold ownership of large businesses and real estate), the new law was a first step towards a legal environment more akin to that of Germany or Switzerland.

In these countries, public benefit foundations make up the vast majority of foundations whereas in Austria they constitute less than a fourth of all the around 3,000 registered foundations. This figure shows that Austria still has a long way to go before we can truly speak of a ‘culture of engagement’ of private wealth, particularly in social development. Even with the new law in place, however, the reformed as well as still existing regulations continue to speak a language of mistrust and suspicion by pubic authorities and political parties vis-à-vis the involvement of private wealth in social processes.

We are unfortunately still far away from a mind-frame that would create an encouraging and enabling environment. Private initiative and philanthropic creativity for public benefit need space to grow and bear fruits by which the foundations in question should then be judged.

The effect of this attitude can be seen in the actual number of public benefit foundations established in Austria in 2016 – only 18 were newly founded, and of those, only five used the legal form possible under the new law, whereas the other 13 still preferred the more cumbersome but familiar ‘private’ foundation law.

This is not exactly a surge of private people pouring their wealth into all the challenging, interesting and crucial social topics that our societies are facing today. The main purposes of those with a social orientation were stated as fighting poverty, actions for disadvantaged children, aid for people in need, and other rather conventional aims.

The main reason for this lies in the regulatory environment that still does not provide tax benefits when supporting education or innovation by social entrepreneurs.

To give you an example for untapped potential in this regard – in November 2016, Ashoka, the Austrian Red Cross, ERSTE Foundation, Hil Foundation, amongst others, organised a public conference, presenting 15 ideas for integration and work with refugees and migrants. Brilliant ideas, many of them tried and tested, providing results and delivering excellent models that others could and should adopt were presented. However, none of them are qualified to receive tax deductible donations, neither from individuals, nor from philanthropic foundations under the current regulations.

The Association of Public Benefit Foundations therefore considers the new law as a first – albeit encouraging – step which must be followed by solid measures, which will help to build trust between private philanthropists, public administration and politicians by providing tax and other incentives (e.g. public recognition) for wealthy individuals and corporations who engage in support for social action and innovation. Only when a comprehensive and furthering package for private philanthropic action becomes reality, will it be possible to reach the potential that rests with the population of one of the richest societies in Europe.

Franz Karl Prüller is the Senior Advisor to the Board of ERSTE Foundation.


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