Focus: Finance and Governance - Outlook - Give back the VAT - Brussels prepares for debate on tax

Next week in Brussels, the thorny subject of VAT is, naturally, going to be high on the agenda of the European conference International Philanthropy: Creating the Right Climate.

The problems that charities encounter with regard to VAT are widely recognised in the sector and across Europe. What this conference hopes to achieve is to provoke debate on the illogicality of having generous tax reliefs on donations to charities, only to tax that money when it is spent by charities in furtherance of their charitable objectives.

The European Commission recognises the problem and we are encouraged that the tax commissioner, Laszlo Kovacs, will be addressing the conference on this subject.

But will this just be a talking shop that achieves little, or will it be the start of a more co-ordinated look at the way in which the sector is regulated across Europe?

It is clear that a lot of important and useful work is being carried out by different agencies in the various EU member states, and our objective is simple: to make sure that a coherent and co-ordinated policy emerges that supports the sector rather than inhibiting its development and its effectiveness.

The idea of holding the conference first emerged last December, during discussions between the European Association for Planned Giving and the European Charities Committee on VAT. The Asian tsunami then brought the issue of cross-border giving to the fore more acutely than anything ever had.

First, the public response to the disaster was to donate very generously - and tax-efficiently. Second, there were many calls for donations to be made across borders to those agencies best placed to help in particular regions. Within these calls, the demand for equal tax treatment to apply to all donations was implicit.

Notwithstanding this demand, it quickly became clear that governments across Europe were nervous about any pressure to extend tax reliefs on donations to charities to residents of other EU member states. There appear to be two major concerns - cost and the potential for abuse.

The attitude of the European Commission seems contradictory, to say the least. Not long after referring Belgium to the European Court of Justice because, in its view, the inheritance and gift tax laws in the country's Walloon region discriminated against foreign charities, the European Commission launched a short consultation on the potential for charities to be used as vehicles for fraud and the financing of terrorism.

Over the summer, the commission's consultation sought views on its proposals to address the vulnerability of charities to terrorist financing and other criminal abuse, as well as a code of conduct to promote best practice on transparency and accountability within the charity sector.

The conference programme is available online at http://conference.eccvat.org.

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