2nd Ld-Writethru-Xinhua Insight: Charity Law to smooth China's last-mile drive to 2020 targets

China's national lawmakers on Wednesday passed the Charity Law with 2,636 votes in favor, 92.49 percent of the total.

The new law, which was adopted at the annual legislative session and will take effect in September, eases restrictions on the fundraising and operational activities of charity groups, promises tax benefits for the sector, and will tighten supervision on their internal management.

Charity groups and law experts praised the law for responding to public concerns.

Annual donations to registered charities in China soared from 10 billion yuan (1.5 billion U.S. dollars) to 100 billion yuan over the past decade.

The charity sector will support the ongoing poverty alleviation campaign, which has the pressing goal of lifting all rural residents above the poverty line by 2020.

As of the end of 2015, 55.75 million rural Chinese had been classed as impoverished, meaning they had a per capita net income of less than 2,800 yuan a year.

Both the public and authorities are wary of corruption and mismanagement in the charity sector, the reputation of which took a hit after several scandals in the past few years.

As one way of redistributing wealth, charities can support areas overlooked by market and government investment, said Cao Yisun, with the China University of Political Science and Law and a national political advisor.

Take for instance, the Charity Law outlines rules clarifying the responsibilities and liabilities of different parties involved in charitable activities, a good boost for the cause, he said.

"RESERVOIR OF CHARITY FUND"

The law defines how charities should be registered, giving approved charities more freedom in their operations than the current time.

Only a handful of charities are currently allowed to raise money from anyone, while others are restricted to specific groups of donors.

Moreover, the new law stipulates that registered charities that have been operating for at least two years can apply to the civil affairs department for permission to raise funds from the general public.

It also responded to the common complaint that businesses making large donations do not get enough tax concessions.

The government waived corporate income tax on donations made by companies from their profits, but this only applies to companies that donate 12 percent of their profits or less.

The new law stipulates that if a company's donation exceeds the 12 percent in one year, the balance can be deducted from the taxable income over the following two years.

This provision is a major step and will encourage more enterprises and wealthy people to donate to charity projects, said Xu Yongguang, chair of the Narada Foundation, a private foundation that helps the children of migrant workers access education, and disaster relief.

"The new law is like building a large reservoir of charity money," Xu said.

TIGHTER SCRUTINY

The new law adopts strict regulations to prevent fraud and imposes tighter supervision on the management of charity groups.

Recognizing that Internet fundraising is popular but also an easy platform for fraud, the law requires that charities post clear information either on their own websites or on gateways designated by the Ministry of Civil Affairs.

Groups or individuals raising funds from the public without a license will have to return the donations and may face a fine of up to 200,000 yuan.

Charities may have their registrations revoked if they engage in or sponsor activity deemed to undermine state security or public interests. They may face punishment from other law enforce agencies.

The law asks charities to 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.

A charity with permission to gather donations from the public should have its financial report audited. It should also minimize operational costs, keeping them below 10 percent of the amount it raises.

The bill was submitted for its third reading at the annual session of the National People's Congress (NPC) that just concluded Wednesday, after two readings at the bi-monthly sessions of the NPC Standing Committee.

NPC deputies pushed about 90 amendments to the bill during the deliberation, including doubling the maximum fine imposed on charity groups that embezzle or misuse donations. Endi