A better way of doing good

  • Author : Dr Thomas A Wach
  • Date : April 2009
ABOUT THE AUTHORDr Thomas A Wach TEP is a board member and consultant of VALUEworks AG Zürich

T he symposium: ’Philanthropy – a better way of doing good‘, was held on a wintry December morning in Zürich. Patrizia Rezzoli, Head of Wealth Advisory at Clariden Leu, welcomed speakers and participants.

Following an introduction to the day’s programme by Jacob Rigg, Head of Philanthropy at STEP, Dr Andreas Müller, an expert on the formation and management of foundations under Swiss law, started the day’s proceedings. He sketched the Swiss foundation from its early medieval origins, managed by monasteries and churches, to the foundations of today with educational, artistic, cultural, scientific, environmental and other purposes.

Official statistics show that there are more than 13,000 institutions with a charitable or welfare purpose and total assets registered by foundations in Switzerland amount to more than CHF4 billion, roughly 2 per cent of the Federal Budget.

The Swiss foundation as a corporate entity is exempt from taxation if registered and recognised as an institution of charitable character. Contributions to charitable foundations are also increasingly taxed preferentially by the cantons. Funds donated to a charitable foundation may never revert to the donor and any distribution of funds to members of the donor’s family is expressly excluded.

The second presentation, on legal and tax issues in relation to charities in the UK, was given by Tim Thornton Jones of LG LLP. Key reforms brought about by the Charities Act 2006 were discussed, including the definition of what is considered charitable.

Any entity registered in England or Wales as a charity is regulated by the Charity Commission, an independent government department, answerable directly to Parliament. The Commission requires high standards of compliance and public accountability.

Charities in England and Wales are exempt from tax on income as well as gain from investments in estates, land and property, as long as such gain is used exclusively for charitable purposes. Gifts of shares and property are eligible for full capital gains tax relief and are also exempt from inheritance tax. In order to benefit from the tax advantages it is essential that it is a stand-alone UK charity, registered in Britain. No tax advantages are accorded to a UK branch of a foreign (non UK registered) charity.

That cross-border giving and overseas donations can face problems was clearly shown by reference to two cases in the next presentation by Pervinder Kaur, Head of the charities team at Addleshaw Goddard.

In Stauffer, a foundation established in Italy owned commercial premises in Germany for which it received rental income. It could not get tax exemption on this income, which it would have been entitled to as a charitable organisation under German law.

In Hein Persche, a person residing in Germany donated items to a nursing home in Portugal and deducted a corresponding value amount in his tax return. Even though the recipient organisation in Portugal was legally approved as a so-called institution of social solidarity, the tax deduction was denied in Germany.

Both cases demonstrate tax discrimination between charitable entities in different member states within the EU.

The next two speakers, Beate Eckhardt, CEO of the Association of Swiss Charitable Foundations and Etienne Eichenberger, founder and Executive Director of wise – philanthropy advisors, broached the subject of good foundation governance and good giving principles.

The principles of good governance in a foundation or charity may differ from those that apply in the corporate business world. Thus, grant-making foundations are completely independent from the outside world. They have no proprietary interest in that they know neither owner nor member. Being mostly tax exempt, they have no obligation to ensure transparency. The key problems of governance are differentiated organisational and management structures, a proper system of checks and balances, in- and outward transparency and the avoidance of conflicts of interest.

A number of countries have issued codes of conduct for the administration of foundations, among them Australia, Canada, the US, Germany and the Netherlands. In 2005, there appeared the first Swiss Foundation Code of which a second edition was published recently. The Code has a recommendatory character and does not pursue the objective of becoming binding.

After lunch, Jacob Rigg gave a review of the morning’s presentations, which was followed by a presentation from Carlos von Oxenford of Foundation AVINA and AVINA Stiftung, two sister organisations, founded by the Swiss entrepreneur Stephan Schmidheiny with the aim of promoting sustainable development by supporting initiatives with an entrepreneurial spirit in partnership with leaders from business and civil society.

Gilles Concordel, founder of the Tutator Foundation, a Swiss foundation working on restorative juvenile justice, concluded the day’s presentations with an interesting case study relating his personal experiences on a tour around the world in 2080 days with his family, exploring 42 countries, living with people and seeing the day-to-day operation of development work at grass root level.

The day was concluded by an animated discussion among the panel of speakers, chaired by Jacob Rigg with questions and comments from the audience.


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