Editor’s Note
This is an abbreviated and adapted translation of an article published by the Charity Times on the 16th of October 2020, under the title 全国人大常委会执法检查组提出要适时修改慈善法，改什么，为什么? The article reviews some of the main points from a recent government report on the implementation of the PRC’s Charity Law, passed in 2016, which regulates the activities of Chinese charitable organisations.
On the 15th of October 2020, at the 22nd meeting of the 13th National People’s Congress, the Law Enforcement Inspection Team of the Standing Committee of the National People’s Congress submitted a report on inspecting the implementation of the Charity Law.
The report reveals some outstanding problems in the contemporary philanthropy sector in China, problems which are not compatible with society’s level of wealth and with the concept of “third redistribution“, showing that within the multi-layered social security system, the philanthropy sector needs to be further stimulated in order to become more effective.
In response to these problems, the report proposes to make improvements to the current laws and regulations. Specifically, it states that the Charity Law has to be revised in a timely manner. So how and why does the report suggest to amend the existing Charity Law?
I. Clarify the coordination mechanisms for the departments that work closely with charities
The Charity Law determines that the Civil Affair Department of the State Council shall be in charge of charity work throughout the country, and the Civil Affairs Departments of local governments at or above the country level shall be in charge of charity work in their respective administrative regions.
As the competent authority, the civil affairs departments at all levels currently have ineffective supervision systems, which has led to insufficient supervision of charity work. In 2019 the Ministry of Civil Affairs set up a Department of Charity Promotion and Social Work, and the civil affairs departments at all levels consequently established internal institutions in charge of charity work. However, these institutions are generally short of staff. The report shows that on average there are less than four people in each charity supervision and law enforcement agency of the civil affairs departments at the provincial level. Some prefectures, cities, and counties do not even have a dedicated person in charge, failing to meet the legal responsibilities set out by the Charity Law.
The report also points out that the philanthropy sector is closely related to nearly every sector of society, and indeed the Charity Law contains mentions of sectors including finance, taxes, the internet, emergency management, the media, education, science, culture, healthcare, sports and auditing. Therefore, the civil affair departments alone are not sufficient to deal with all the issues. For example, getting approval for pre-tax deductions for public welfare donations requires going through the departments of civil affairs, finances and taxation. As each department has its own rules and schedules, if coordination is lacking problems will inevitably emerge.
Even though the Charity Law states that “the relevant departments of the people’s government at or above the county level shall, in accordance with this law and other relevant laws and regulations, work effectively within the scope of their respective duties”, the law does not make clear the specific duties when multi-departmental cooperation in involved. Hence, the report appeals for clarity regarding the coordination mechanism for the departments that work closely with charitable organisations.
II. Set regulations for online charity work and individual requests for aid
Although the Charity Law has set rules for fundraising, donations and promotions through the internet and social media accounts, the law only considers the internet, radio, television, newspapers and telecommunication as channels for information transmission, rather than platforms to make payments and a part of daily life.
This approach causes the following problems: first of all, the report shows that virtual fundraising platforms normally have stricter rules for programmes’ executory and management costs, which have restrained programmes that are not able to meet the rules from applying to raise funds through these platforms. Besides, the admission fees for some platforms are very high, greatly affecting the fundraising events.
Secondly, the Charity Law does not have regulations on individual requests or appeals for help through social media. However, in recent years, a rising number of individuals have appealed for help from the public on their own social media accounts, but not all appeals for funds are in good faith, and the revelation of a series of frauds has made the public more suspicious of charity in general. Some fundraising appeals contain fake information in order to get more money, and sometimes the donors’ personal information is not appropriately protected.
The Administrative Measures for Public Fundraising from Charitable Organisations, published by the Ministry of Civil Affairs, contains regulations on online fundraising only in Article 16. Another regulation, the Administrative Measures for Public Fundraising Platform Services, jointly issued by the Ministry of Civil Affairs, the Ministry of Industry and Information Technology, the State Administration of Press, Publication, Radio, Film and Television and the State Internet Information Office only contains the provision that when individuals ask for help, platforms must notify individuals about the risks of posting fundraising information and their responsibilities regarding the authenticity of the information. Currently, the designation and supervision of online public fundraising information platforms are operating in accordance with two industry standards: the Basic Technical Specifications for Internet Public Fundraising Information Platforms for Charitable Organisations and the Basic Management Specifications for Internet Public Fundraising Information Platforms for Charitable Organisations issued by the Ministry of Civil Affairs. The legislative level of these two standards, and therefore their authoritativeness, is however rather low.
Based on the current situation, the report proposes the addition of a special chapter in the Charity Law, which should set clear rules for online charity events, methods for raising funds, legal responsibilities and the conditions and obligations for individual requests for aid so that online fundraising platforms will have a more authoritative law that they must comply with. Also, the report proposes amendments to the Administrative Measures for Public Fundraising of Charitable Organisations to add regulations for online fundraising events.
III. Improve the charity emergency response mechanisms
So far, there are six types of activities that are recognised by the Charity Law as “charitable activities”, including natural disaster relief, accident relief and aid for public health incidents. During the COVID-19 pandemic, however, various problems arose as charitable organisations lacked platforms for information sharing and management and mechanisms for material reserves and resources coordination.
One of the main factors that caused these problems is that the regulations contained in the current National Emergency Plan for Natural Disaster Relief on promoting the role of charitable organisations and cultivating and developing non-governmental organisations and volunteering teams look good on paper but give little practical guidance.
Therefore, the report proposes the amendment of the relevant laws and regulations in response to emergencies such as the COVID-19 pandemic. Mechanisms of charity emergency response need to be reinforced, and the law needs to support emergency response plans that incorporate various social forces, and confirm the legal status, responsibilities and protection of charitable organisations and individuals participating in emergency relief actions.
IV. Improve the registration and recognition systems
By the 30th of June 2020, there were 7,169 organisations across the country that were registered and recognised as charitable organisations. Meanwhile there were over 870,000 social organisations (the term social organisation is used in official policy for all kinds of non-governmental, non-profit organisations), which means that charitable organisations make up less than 1% of the total number of social organisations in China. What’s more, from 2017 to 2019 the number of newly registered charitable organisations was in annual decline. Some civil affairs departments at the county level never even received any applications for the registration of charitable organisations.
Even though, after the Charity Law was passed, the Ministry of Civil Affairs passed the Measures for the Recognition of Charity Organisations, the already existing social organisations have not applied in large numbers to be recognises as charitable organisations. The report claims that this is because there is no obvious difference between being a charitable organisations and another type of social organisations in terms of policy benefits. Another phenomenon is that, when an organisation is going to register as a social organisation, it may not apply to become a charitable organisation simultaneously. However, there are no detailed regulations which give guidance on how these organisations can become charitable organisations later. Namely, there is a risk faced by these organisations that they might never be able to become charitable organisations, if they do not apply to become one at the very beginning.
The problems mentioned above have undoubtedly set obstacles for cultivating charitable organisations in China, and the report proposes that the registration and recognition systems for charitable organisations have to be further developed and enhanced.
V. Clarify the conditions and procedures for removing the qualifications for public fundraising
The Charity Law prescribes that, before charitable organisations organise public fundraising events, they have to obtain the qualifications for public fundraising. The Administrative Measures for Public Fundraising for Charitable Organisations issued by the Ministry of Civil Affairs has a detailed description of the application process for public fundraising qualifications.
The Measures also stipulate that registered charitable organisations that have not carried out public fundraising activities for six consecutive months shall be included in the list of organisations whose fundraising activities are abnormal and announced to the public; charitable organisations that are legally revoked from holding public fundraising shall immediately cease any public fundraising activities and disclose the relevant information to the public.
However, at present, no actual rules on the revocation of public fundraising qualifications have been announced, which undermines the effectiveness of these measures. The report thus proposes that clear conditions and procedures for removing charitable organisations’ qualifications for public fundraising must be added to the Charity Law.
VI. Adjust the standards of expenditures and management costs for charitable organisations
The Charity Law clearly regulates the annual expenditures (above 70% of the previous year’s total income) and management costs (above 10%) of foundations that have public fundraising qualifications. The law also give the Ministries of Civil Affairs, the Ministry of Finance and the Ministry of Taxation authority to set up standards of annual expenditure and management costs for other social organisations that have the right to organise public fundraising events. Moreover, the Ministry of Civil Affairs, the Ministry of Finance and the State Taxation Administration have jointly formulated the Regulations on the Annual Expenditure and Management Expenses of Charitable Organisations Carrying out Charitable Activities, which set different standards for annual event expenditure and management costs for charitable organisations of different scales that are not eligible to organise public fundraising events.
Nevertheless, the report reveals that the regulations in the Charity Law do not fully match the reality of operating charitable organisations. For example, the Charity Law sets out that charitable organisations can make investments in order to maintain and increase the value of their properties, and the Ministry of Civil Affairs has published detailed rules for charitable organisations to make investments. But the existing standards for annual expenditures and management costs in the Charity Law and other regulations make it hard for charitable organisations to make investments, because if they comply with these standards little money will be left for any investment. The report therefore mentions that these standards have to be changed to fit the reality.
VII. Ensure compatibility and coordination with the relevant laws
Since the passing of the Charity Law, other relevant laws have also been adjusted accordingly. For example, regulations on tax incentives for charitable undertakings in the Corporate Income Tax Law and the Individual Income Tax Law have been amended in order to be compatible with the newly passed Charity Law. However, this type of adjustment has not been completed.
An example given are the issues that arose concerning the Red Cross Society in Wuhan during the pandemic this year. The Wuhan Red Cross Society is a public health public institution (a form of Chinese public institution that provides social services in public health), and according to the Notice of the Ministry of Civil Affairs and the Chinese Red Cross Society on Issues Concerning the Red Cross Public Fundraising, it obtained the qualification for public fundraising. Yet the general public believe that the Red Cross Society should apply for the qualification according to laws regulating charitable organisations, and therefore doubted the validity of its fundraising qualification.
This happened due to the public ignorance of the Red Cross Society as both a charitable organisation and a public institution. The report thus emphasises that the compatibility of different laws and regulations related to charitable organisations and other social organisations have to be fully achieved with the aim of providing valid legal guidance for the healthy development and reform of charitable work in the new era.
The Charity Law is relevant to every person’s life, and how the aforementioned seven aspects will be revised and amended depend on more people’s participation in providing insightful suggestions and proposal for the law’s amendment.
On the 24th of September, the Social Policy Research Centre of the Chinese Academy of Social Science and other institutions co-hosted a “Seminar for Social Participation in the First Charity Law Enforcement Inspection”. Based on opinions collected during the seminar, the Research Centre wrote up the Recommendations on the Initiation of Law Amendment Procedures After the Charity Law Enforcement Inspection, and sent it to the Charity Law Enforcement Inspection Team of the Standing Committee of the National People’s Congress. The Recommendations have already been submitted to the 22nd Standing Committee of the 13th National People’s Congress as a reference for their further inspection.
The amendment of the Charity Law demands more public participation, and the Charity Times welcome discussions and opinions of the aforementioned seven points from all sectors of the public. If you have any suggestions to contribute, please send them to wangyong@gongyishibao.com.
