Do we need recognition of European Foundations?

When charitable activities are bound by national borders

October 1st is the European day of Foundations and Donors

There are only a handful of internationally active charitable foundations in Austria; Red Noses Clowndoctors International (RNI) is one of them. It is a constant struggle for foundations like ours to make a social impact outside of our national borders.  Recent reforms in Austrian legislation are a welcomed change, but more progress is necessary at the European level.  

In 2015, a promising initiative in this direction by the European Commission failed because of a lack of consensus between EU Member States. If successful, the statute would have created a common legal designation of “European Foundation” (EF). The plan was to complement national laws while permitting transborder activities.

Instead, the status quo remains. What does this mean, not only for RNI, but also for the estimated 100,000 charitable foundations in Europe? It means increased costs for European and international social activities. It also places unnecessary administrative and legal burdens on these foundations. Each charitable foundation with international aspirations has to establish local entities that are legally recognized. This process can be expensive as it also requires establishing new statutes, new steering committees, and a whole construct of contracts for carrying out each individual transaction or project.

Ideally, a European foundation would avoid these pitfalls. Based on a common designation and recognition of “charitable status”, an EF would promote the virtues of the EU and further integration. It would also signficantly lower administrative costs. An EF should, based on a common understanding of charitable status, boost the European idea and integration, and ease tax requirements for donors.

At the moment, it is difficult to operate on an international scale as a charitable foundation within Europe. Whether having to navigate through the different national legal requirements of being a charity or facing significant barriers to receive international donations, these obstacles diminish the impact and efficacy of Europe’s civic society.  

In February 2012, the European Commission presented an elaborate proprosal for the establisment of the legal recognition of European-wide foundations. After three years of intense negotiations, the EC withdrew the proposal in March 2015. This was a crushing blow to the positive momentum gained.

This seems counter productive when considering how prominent foundations are within the EU. It is estimated that charitable foundations in Europe have monetary assets totalling 350 billion Euros, representing a signficant economic factor in any discussion. Any impediment to this sector for example, national legislation, is contrary to economic reasoning and to the values of the EU. 

An EF would have the right to register in one country and have the legal status to operate and take action in all European countries. Donations and tax deductions would be automatically treated according to the local legislation of the donor. 

What progress has not been achieved at the European level has, at least partially, been regained in Austria. The recent legislative reforms have placed Austria at the forefront in leading these discussions. Nevertheless, major foundations continue to migrate to Switzerland because of more favourable and straightforward legislation. It will continue to be an uphill battle for pioneering foundations, such as RNI, to overcome the legal hurdles to operate outside Austrian borders. 

Europe needs a broader recognition of charitable foundations. Europe must strengthen its active civil society through these reforms. The European Commission must take responsibility to lead in these endeavours. 

 

Monica Culen

 

About the author:
Monica Culen is the co-founder of ten RED NOSES organizations in Europe and the Middle East. She is also the President of the Austrian Fundraising Association.

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