3rd Ld-Writethru-Xinhua Insight: NPC hopes charity law can help poverty fight

A draft of China's first bill regulating charities was submitted to the national legislature on Wednesday, with lawmakers hoping it can give donors confidence to help the country meet its poverty alleviation targets.

"Charitable programs are indispensable for the fight against poverty. Formulating a charity law helps nongovernmental sources work together in taking targeted measures to eliminate poverty and contribute to achieving the goal of building a moderately prosperous society," said Li Jianguo, vice chairman of the National People's Congress (NPC) Standing Committee, when introducing the bill to NPC deputies at the NPC annual session.

The law provides stipulations on how charities should be registered, giving approved charities more freedom in their operations than is currently the case. It also promises tax benefits for charitable activities.

China is aiming to ensure that all its rural residents are living above the poverty line by 2020. As of the end of 2015, 55.75 million rural Chinese were living below the line, meaning they had a per capita net income of less than 2,800 yuan (430 U.S. dollars) a year.

Annual donations to registered charities in China soared from 10 billion yuan to 100 billion yuan in the past decade. But both the public and authorities are wary of corruption and mismanagement in the charity sector. A number of scandals have suggested they have good reason to be wary of.

Many charities have weak internal management and are not operating under established protocols, while the sector as a whole "has not developed a self-discipline mechanism," according to Li.

Although several existing laws and government regulations regulate charitable activities to some degree, they are out of date and inadequate given the growth of the sector, he said.

Since 2008, national lawmakers have tabled dozens of motions and proposals for enacting a charity law. The draft was submitted for the first reading at the bi-monthly session of the NPC Standing Committee in October and for a second reading two months later.

MORE QUALIFIED FOR PUBLIC FUNDRAISING

Currently, only a handful of charities are allowed to raise money from whoever they like, while the others are restricted to drawing on specific groups of donors.

The bill says legally-registered charities that have been operating for at least two years will be able to apply to the civil affairs department to be allowed to raise funds from the general public.

Recognizing that Internet fundraising has been widely used but also widely subject to fraud, the bill requires charities to post clear information either on government-designated websites or on their own.

Groups or individuals raising funds from the public without a license will have to return the donation and may face a fine of up to 100,000 yuan, according to the bill.

HIGHER TRANSPARENCY, FEWER SCANDALS

The reputation of Chinese charities took a hit in 2011 when a woman claiming to manage an organization under the Red Cross Society of China used social media to flaunt her wealth and extravagant lifestyle.

The public has been calling for more transparency and tighter internal management of charities ever since.

In response, the bill says charities must publish their articles of association and information on their executives and supervisory bodies. They should also give annual reports complete with financial statements, details of projects launched as well as staff pay and benefits.

It also stipulates that charities should minimize operational costs, keeping them below 15 percent of the amount they raise if they are certificated to get donations from the public.

Charities may have their registrations revoked if they engage in or sponsor activity deemed to undermine state security or public interests.

INDIVIDUAL RESPONSIBILITY FOR FUNDRAISING

A notable absence from the bill is the regulation of individuals appealing for aid.

In September, a man in east China's Anhui Province spread a story online claiming his girlfriend had been injured trying to save a girl from dogs and raised about 800,000 yuan. The story turned out to be a fraud and police later detained its author.

"The bill does not forbid citizens from asking for help online nor does it encourage it," said Kan Ke, former deputy director of the NPC Standing Committee's Commission of Legislative Affairs.

It will be up to individuals whether to make such appeals or donate to people who make such appeals, said Kan, who was involved in drafting the charity law.

"The legislature would prefer to see people turn to charities to do kind deeds, rather than going directly to a certain beneficiary, for it will be easier to supervise a small number of organizations than watch a huge number of individuals," he said. "We should let the professionals do the job."

TAX CUT FOR GOOD DEEDS

Addressing the common complaint that businesses making large donations don't get enough tax concessions, the bill stipulates that if a company's donation exceeds the legal limit of deductions from its taxable income in one year, the balance can be deducted from taxable income in the following two years.

Currently, the government waives corporate income tax on donations companies make from their profits, but the waivers only apply to the companies that donate 12 percent of their profits or less. The new bill eases this restriction, promising a rebate in the following two years. Endi