Focus on: central and eastern Europe

A double-headed eagle: Russias philanthropic environment

By Nyegosh Dube, EFC

Russias national emblem is a double-headed eagle, at once looking east and west. This has become a metaphor for the countrys dual Medvedev-Putin leadership. But it is also an apt symbol of the environment for philanthropy in todays Russia. This became clear to me at this years EFC annual conference during conversations with two representatives of Russian philanthropy, Natalya Kaminarskaya, Executive Director of the Russia Donors Forum, and Maria Chertok, Director of Charities Aid Foundation (CAF) Russia. Philanthropy is in ferment in Russia. Corporate philanthropy is surging ahead, and the community foundation sector is expanding, while the legal framework is being reshaped and pulled in different directions. But the philanthropic environment presents two FRQWUDVWLQJ IDFHV OLNH WKH HDJOHV WZR KHDGV SURJUHVV DQG enablement versus restriction and suspicion.
An encouraging state
There is a much better understanding of what philanthropys about at the federal level, says Chertok. An important sign is that sessions on philanthropy are included in major events such as the St Petersburg Economic Forum. The federal government encourages philanthropy, and is a philanthropist itself, giving grants to NGOs. The Public Chamber, an advisory body that analyses laws, includes a charity commission chaired by Vladimir Potanin, founder of the Vladimir Potanin Foundation. When Russias new endowment law (in force since January 2007) was being drafted, it was a process very much based on dialogue and consultation, according to Chertok. The Russia Donors Forum was involved in developing the law, and is now part of a government working group preparing a concept paper on philanthropy and volunteerism. The paper is seen as a framework for legislative development in the coming years. The rst draft already includes changes in taxation and registration, and action points on state support of philanthropic infrastructure development. It also introduces the category of public-benet organisation, something new for Russia.

Nyegosh Dube, EF

only a question of rising spending: the level of strategic thinking is [also] going up in the corporate sector. Corporate philanthropy primarily operates directly through companies, but that is likely to change. Kaminarskaya foresees a separation where owners set up private foundations, leaving companies to stick purely to business activities. Some private foundations have recently sprung up with feel-good names rather than the names of their founders. But many are not very transparent, and recipients are often unsure where exactly their money comes from. But at least the number of philanthropic institutions is growing and in a few years we will have a normal number like in Western countries, says Kaminarskaya. Community foundations are also on the upswing. This rapidly growing sector now has 32 operating across Russia. They have formed a Partnership of Community Foundations with members also in other post-Soviet states. The Government recognises how important community foundations are, says Chertok, theyre included in various strategic planning papers. Chertok expresses pride in the Togliatti Community Foundation, the rst such body in Russia. It was set up with CAF Russia support and is celebrating its tenth anniversary. In the area of individual giving, CAF Russia has just launched an online giving facility, a rst for Russia, enabling people to donate to NGOs whose legitimacy it guarantees.

A philanthropic boom
There is also encouraging news for philanthropy itself. For the past three years, the Donors Forum has run a Top Corporate Philanthropist Award competition in the framework of the multi-country CEENERGI project. The number of companies participating has grown steadily. In 2007 the competition showed that the top ten spent 168m, an average of 2-11% of their net income. Its a huge amount of money spent on corporate philanthropy, especially considering there are no tax benets, notes Kaminarskaya. But Chertok points out its not

The number of philanthropic institutions is growing and in a few years we will have a normal number like in Western countries.

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European Foundation Centre | www.efc.be

A problematic law
While the endowment law is a step forward, it is not quite what the foundation sector in Russia was hoping for. In line with Russian legal norms, it includes tax breaks for organisations that receive endowment gifts. It also does away with tax on endowment income interest. But the gifts donors do not enjoy tax breaks, so efforts are in train to change this: benets for donors would be unprecedented.

The Ministry backs tax breaks for individual donors, but not for corporates, which are the main donors.
A more serious problem is that the law is much more targeted at public institutions, like museums, universities and hospitals, than foundations. The law species certain areas that organisations must operate in, like culture and education, so foundations are not jumping at the idea, says Chertok. It was designed this way because the state cant support all the public institutions and so hopes to inject private money into them, Kaminarskaya explains. There are further problems: foundations need to set up a separate entity to create an endowment, contributions to endowments can only be in cash, and the law does not recognise existing endowments of community foundations, which are currently the only organisations to have them. So far, only 20 organisations have registered for endowments, and only two of these actually have money in them, as setting one up is long-winded. According to Kaminarskaya, President Medvedev, who has a strong interest in this law, keeps asking why do we have only 20 endowments in two years, why dont we have thousands? But there is some good news. Both Chertok and Kaminarskaya speak positively about the Ministry of Economic Development, which is in charge of this legislation. Theyre very open to suggestions and discussions and amendmentsthey talk to donors, NGOs, and experts, enthuses Chertok. Kaminarskaya is also upbeat: The Ministryis assisting us, they understand the situation and are ready to support us on tax breaks. But the double-headed eagle is ever-present. The Ministry backs tax breaks for individual donors, but not for corporates, which are the main donors. And the Ministry of Taxation is dead set against any tax benets. They are really tough guys!, says Kaminarskaya.

the authorities want to use it, they can of course use itits a hammer hanging over our heads, says Chertok. Things have grown more complicated with the signing of a decree in July by the Prime Minister, reducing the number of foreign organisations allowed to make tax-free grants from 101 to just 12. However, many western foundations can give grants only if they are not subject to tax. On the plus side, foreign foundations can still apply for inclusion on the tax-exempt list before the decree comes into force next year, although they must prove they deserve to be included.

A word on western funding

So the Russian legal environment presents an uncertain picture for foreign foundations active in the country. But how signicant is foreign private funding in Russias overall philanthropic scene? Non-Russian money is a tiny partyou cant even compare the international and domestic funds which go into the sector, says Chertok. She adds: international funding is really drying up[western funders] all have their exit strategies, and those still there no longer indulge in anything smacking of democracy promotion. For further information see: www.donorsforum.ru/eng

A mixed picture
As the endowment law shows, the political and legal environment for philanthropy and civil society in Russia is complex. The complexity extends also to the NGO law of 2006, which at the time caused a lot of concern in the sector. Things have not turned out as badly as feared. All the reporting requirements are there, but practice shows its not being used to exercise political control, its just another layer of bureaucracyBut still, if

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European Foundation Centre | www.efc.be

Focus on: central and eastern Europe