TUSEV calls for tax and legal changes to stimulate third sector growth

 

Alliance magazine

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The existing tax system ‘makes it difficult for foundations and associations to operate and grow; discourages establishment of new organizations and slows the growth of the sector, even hindering it,’ concludes a new report from Turkey’s Third Sector Foundation (TUSEV). Tax Legislation Related to Foundations and Associations in Turkey and Public Benefit Status calls on the government to revise the fiscal regime for both foundations and NGOs in order to promote the growth of the country’s civil society sector. Currently, there are limited tax advantages for tax–exempt foundations (not all of them are – see below) and they are exempt from corporate tax, however, any economic enterprises they set up aren’t. The report makes a number of recommendations, including separate financial reporting standards for NPOs, equalisation of tax treatment of donations to foundations and associations and those to state and public institutions (currently tax exemption on donations to the former is limited to 5 per cent), the removal of obstacles hindering donations by individuals and an increase in the amount of donations deductible against tax. In addition, the concept of income-generating activity by foundations should be redefined so that, among other things, these should be exempt from corporate tax and that those foundations that enjoy tax exempt status should be freed from other taxes they are currently subject to, such as VAT and motor vehicle tax.

In terms of tax exempt and legal status, the report calls for ‘an inclusive definition for all civil society organisations working for public benefit’ rather than the present distinction between foundations and associations. The areas of work for which Public Benefit Status (which allows foundations and associations to claim tax exemption) is currently conferred should be widened and interpreted more flexibly, and the body which confers that status should be independent and easily accessed, rather than an adjunct of the President’s powers.


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