The Driving Force Behind Society

17. October, 2001


Gints Grube

Foto: A. Jansons

Donations from private individuals come from the heart - for the most part, people donate because of a desire to do good or because of a feeling of guilt.

Gints Grube talks to the director of the NGO Center, Kaija Gertnere

What is the new context in which new NGO laws have been drafted – a draft law on associations and foundations, as well as a new draft law on organizations which serve the public benefit? Is it only because the Commercial Law has been changed, or has the context in which non-profit organizations operate also changed?

One of the main reasons, which made us move in this direction was the fact that the existing law on Non-profit Organizations applies to foundations and NGOs which are established as limited liability companies will cease to exist because of a new Commercial Law. There will no longer be a law on non-profit organizations, and foundations will not be able to operate on the basis of that law. We want them to have an opportunity, and the main thing is that the existing laws on non-profit and public organizations are out-of-date. When they were implemented, the main thing was to allow people to come together and establish organizations. Now we have to see these organizations as something serious – a real partner in cooperation for the state, local governments and even businesses.

What has happened to these organizations over the course of time?

I would say that they have become more serious. The existing law on public organizations does not allow them to engage in systematic economic activities. How can a public organization find money if 10 years after the restoration of Latvia’s independence, most financial sources are disappearing from the country? We have no more foreign financing, and it is basically impossible to attract money in Latvia, because there is absolutely no motivation for a business to donate money. We want to ensure that organizations can engage in economic operations in pursuit of their own goals. Economic activities must not be the main area of operations, they must be secondary. We also want to provide a definition in the law of the term volunteer, which is not included in existing laws. That is very important, because many organizations have only one or two paid employees, everyone else is a volunteer. Existing laws do not allow organizations to cover the expenditures that have been incurred by people who are working in an organization. The best example is someone who lives in Riga and agrees to work at the cancer hospital – meet patients, spend time with them, help them to write letters, etc. The organization does not have the right to repay him for public transportation expenses. The State Revenue Service believes that any person whose expenditures are covered must be employed. If that person is employed, he has a job contract, and if he has a job contract, he has to be paid the minimum wage. That completely destroys the whole idea of volunteerism.

The draft law distinguishes two different kinds of organizations. That’s also something new.

This is a very important division. First of all, there are associations and foundations. The main characteristic of an association is that it has members, its strength lies in its members. A foundation, by contrast, has property or money as its main resource. That is the main difference.

In other words, we’re talking here about the way in which they manage to find money.

The goal of foundations is to attract money which is then spent on specific purposes. Associations, by contrast, may very possibly have no reason to find money, the main thing for them is the ability of members to come together. A choir, a dance group, a society of hunters or fishermen – they want to get together to talk and to exchange experiences. We want to create an opportunity to bring together resources into a single fund of the type that does not exist any more in the new Commercial Law.

Does this not open the system up to the danger that organizations might hide behind the sign of an NGO and engage in hidden business activities? That has happened in the past.

No, a company which is set up as a non-profit organization in the hope that it will be able to hide its business activities will no longer be interested in doing so. Now, if an organization wants to receive donations, providing tax relief in return, it must get the Ministry of Finance to issue a one year donation permit. There are no evaluation criteria in this area which are clearly defined and universally known and to think that the State provides the oportunity for any donor to receive as as much as 85% of the donation as tax relief without any clear guidelines. The new legislation will provide a different procedure – there will be one law on societies and foundations, and another on the status of public benefit. That is perhaps the most important thing that has not existed in Latvian law – there are organizations which serve the interests of their members, and there are organizations which serve the public interest. Organizations that are of public benefit can be associations or foundations, but they want to do things that serve the majority of society. They receive tax relief in return, as we have planned, but they are supervised in a much stricter way. Their work will be reviewed every year, and that is not just a formality in terms of whether they have paid their taxes. There will also be controls over whether the donations that they receive are used for the public benefit.

How would you define the public benefit? If we finance travel for members of parliament to cosmic research conferences, that might be defined as serving the public benefit.

That’s why we looked at the experience of other countries in this area. Our main consultant from abroad is the International Center for Non-Profit Organization Laws, which focuses on ensuring that the laws of various countries allow public benefit organizations to operate and that there is sufficient supervision of such organizations. Activities that serve the public benefit are activities which are aimed at improving the welfare of society or its individuals and which operate in one of the 14 main areas of activity that have been defined. I might say that these definitions are so all-encompassing that any activity can be put into one of the categories.

Given that tax relief is part of the system, anyone will be able to say that his organization is a public benefit organization.

To be honest, there are considerably greater opportunities to do so now, because the Ministry of Finance does not ask anything about the real work of the organization or about the way in which it spends its money. That is one of the greatest shortcomings in the existing procedure, and the ministry has admitted this – much of the money is not spent for the public good. We have proposed much clearer and more precise criteria, and the status will be granted by a commission, not one civil servant. The commission will have representatives from ministries, as well as seven people from public organizations which have already been assigned the status of public benefit. Our working group believes that the most important thing is that organizations themselves must ensure transparency. If you talk to the large organizations which seek to find money, you will find that they are most angry at those organizations which use the status falsely. If this sector is to develop successfully, we must work in a way which ensures that we are trusted by government institutions and private donors.

To what extent has Latvia’s society become ready over the last 10 years to engage in activities, to establish civic initiative that serves the public interest?

More and more each day.

On what is that dependent?

On the ability of someone to think about more than just the present day – can I think about tomorrow, can I think about next month? I’m not thinking only about what my family and I will eat today, or whether I will be able to cover my minimal everyday expenses. The second thing is that we are increasingly hearing claims that the state and those who are in power are distanced from the people, but the fact is that people are no longer ready to accept this as something which goes without saying.

They don’t want to accept that it’s true?

Yes, they want to do something in response to this, they are no longer prepared to stay on the sidelines. I’m glad that this no longer has anything to do with parliamentary elections. Politics are not the only way to influence processes which affect you. We see that organizations are being established outside of Rīga, because there they can cooperate with local governments. People are sensing that they are undertaking responsibility for their own destiny instead of leaving it up to others.

Why has this trend changed? Research that was done three or four years ago showed that approximately 60% of residents felt that they could not influence the decision making process in any way.

I think that people consider the decision making process to be something that happens in Parliament or the Cabinet of Ministers, someplace far away from their own lives. If people live in the village of Dārte in Kurzeme and have problems with road building, then they will not see any opportunity to influence the way in which Parliament deals with the budget. That doesn’t mean, however, that people have no opportunity to improve the situation in their own village. People are becoming active, they’re working with businesses and local governments.

Coming together is one thing, but finding money is something else. What changes have there been in attitudes toward donations to NGOs which serve the public benefit if the donor doesn’t get anything in return?

Over the last 10 years organizations tried to find foreign financing, from the United Nations, the Soros Foundation and others. Support of this kind is declining, and we have to look at other sources – the state, local governments, private individuals, and companies. Over the last two years I have seen increasing numbers of companies which want to do something on their own.

Why would that be true? Businessmen never think about things like that, they’re only interested in profits.

Yes, they’re interested in profits, but they’re also interested in the environment around them. If we go into stairwells in Purvciems or Pļavnieki, we see that they’re terrible – people have urinated there, there is graffiti on the walls, and perhaps there are used needles on the floor. As soon as you open an apartment door, however, you’re in a nice and orderly environment. If you are a businessman and live in such a building, you cannot treat it as a private house and build a fence. How long will it take before you start to think about improving the stairwell and installing a lock on the door? You won’t do it alone, you’re going to try to get other residents to work with you. The children have to go to school in the morning, the stairwell is dark, and the lamps have all been broken. How long will the businessman wait for the local government to do something? Instead, there is an organization of residents in a single building, their aim being to improve the environment and to install a playground for children. Those are things that are of interest to one businessman. Other businessmen – those who represent a pharmaceutical company, for example – will be interested in educated specialists and they’ll offer scholarships to young people who are ready to study that profession. Those are areas in which businessmen display an interest. People, however, make donations that really come form the heart – either they have a conscience, or they want to feel good about themselves. That’s the main reason why a private individual donates money.

Do people willingly make donations?

That’s hard to say. Along with religious organizations, there are nearly 900 organizations which have donation permits, but political parties are included on that list, too. The numbers show, sadly, that the sums of money that are donated are astronomic in election years – between Ls 7 and 9 million. In other years the sum is around Ls 1 million. The NGO Center has spent a lot of time talking to businessmen in the last few years to find out whether they make donations, to what they make donations, what motivates them, and what has created good or bad experience for them.

Couldn’t it be that political parties will establish foundations for public benefit goals that are not far from the party’s own political goals, and in fact the organizations will be election campaign structures? The aim of political parties is to win power, not to work for the public interest. They hide that fact by making promises about engaging in charity and caring for the poor.

The law says that public organizations are not allowed to work in politics or with parties. It is a matter of international principle that these things must be kept apart. That’s a major problem with existing laws – organizations which serve the public benefit are under the same umbrella as political parties.

The issue about the right of NGOs to engage in economic activities has led to bitter disputes in all countries. Apparently there will also be a debate about this in Parliament when the draft laws are considered.

The main thing is that organizations with tax relief must not cripple the market, and they must not compete with business, which are not excluded from paying taxes. The goal of a public organization must not be to earn a profit, but rather to reach its public benefit goals. If the goal of an organization is to promote the observance of children’s rights in Latvia, and it opens up a barber shop in which lots of money is earned for salaries for the organization’s employees, that is not permissible. They must reach their goal – protecting the rights of children. Money must be spent on that goal, but the organization must not compete with the private sector which does not operate on the basis of the same principles.

What is keeping public benefit organizations from being active right now? What will change if the new law is adopted?

In addition toeconomic activity, we are providing for tax relief for those organizations which offer humanitarian assistance or which pay scholarships. We want Latvia to adopt the so-called one percent law, which is already in effect in Hungary and the Czech Republic – someone can donate 1% of his 25% residential income tax payment to any public benefit organization that he supports. That would provide motivation for individuals to make donations. Right now the process is too complicated. It is also fundamentally important to define volunteer work. State institutions and ministries have had the right to delegate functions to NGOs, but nowhere does it say that the state or local government institution also has the right to delegate financing. Any ministry will be perfectly happy to get rid of some of its functions.

By turning them over to NGOs?

Right, but at this time ministries cannot do that.

Won’t that degrade the whole idea of a non-governmental organization?

Being non-governmental does not mean being anti-governmental. An organization which operates in the area of adult education tries to ensure that adults get new knowledge and training so that they can compete in the labor market. The government’s political declarationidentifies this as a priority, but the Ministry of Education has not dealt with this issue. The ministry would happily delegate this function to an organization which has demonstrated its abilities. As soon as talk turns to the delegation of financing, however, it becomes too complicated. The new draft law says that ministries can do this.

Aren’t there certain fears about corruption in this area?

In what sense?

There is government money in an area, and ministry employees will begin to offer that money to their own people, getting them to set up public organizations for this purpose.

The most tiresome thing for me in working on the new draft law has been the need to answer questions about whether organizations will take advantage of the situation for malicious purposes and whether there will be corruption. If we are a democratic country, we cannot set up laws which provide full limitations. The law must include sufficiently clear parameters, but there must also be an opportunity for interpretation. The main thing is to ensure that the way in which a non-profit organization gets government money is completely transparent and open. We all know how bids for tender are organized by the state, but if we do not want to change the situation, we will not achieve anything.

The new draft law provides for the annulling of an organization’s license if it does not engage in activities which are in line with its goals.

Organizations at this time receive donation permits for one calendar year. Each organization must submit a financial declaration by 31 March, which is then reviewed by the Finance Ministry and then the State Revenue Service. At best, the organization receives a donation permit in June or July which is valid only until December. There are just a few months to do the work, and then they have to start the process over again for the next year. Our proposal is that the permit is issued for a unlimited period of time, and organizations must submit annual reports not only on finances, but also on the content of their work – for what goal was each donation awarded? The commission will have the right to withdraw a permit, but the organization will also have the right to appeal such a decision.

Have there been times when ideas that are aimed at the public benefit have been impossible to implement because the new law has not been adopted?

There are lots of organizations which feel that this law will help them. I just visited the organization Rūpju bērns in the Latgale district of Rīga. It cares for mentally ill people. They produce pretty greeting cards, they weave things, but they are not allowed to sell them. The organization might earn money to buy materials for the weaving and the greeting cards. It basically has to engage in economic activities in a way which circumvents the law. We do not want them to circumvent the law.

Care for others is a concept which is often cited when people talk about a developed society. To what extent is Latvia ready to implement this idea? The things that we discussed at the beginning are more aimed at care for oneself.

If we look at the organizations in Latvia which are active in this sphere, then we see that they are organizations which seek to protect the rights of children and of mentally and physically disabled people, they are organizations of pensioners and they are women’s clubs. These are people who have come together because they know what it means to be disabled or to face violence, and they understand that the problems will be handled more easily if they work together. Recently there was a story in the newspapers about a family in which the children were physically disabled, but otherwise they were able to study in a regular school. The parents want their children to attend such a school, and if they join together with other parents, they can surely achieve this more easily. They can influence the ministry, not just a single school. That is what care about others is. I was recently in the Netherlands, where people engage in activities that have nothing to do with their own interests, that is their sense of obligation as residents of the state. There is a sufficient level of welfare there that people want to give to others the things that they already have for themselves. I think that Latvia has a long way to go before we get to that situation.

When new draft laws are passed, it is usually said that they have to be in line with certain public values, or else they will not be operational. To which values do these new draft laws correspond?

We are thinking about the adoption of laws which will allow society to develop instead of hindering its development. I think that this is the main value in any country – development. We keep talking about the civic society in Latvia, but we cannot wait for someone to deal with these problems in our place. We are using the draft laws to improve the environment for activities in areas where existing laws are out-of-date. We are being asked whether we should really look at taxes, and I say that we cannot avoid this, because the state is not rich enough to provide subsidies for NGOs. We see the same thing elsewhere in Central Europe. In the Czech Republic, 36% of the overall NGO budget comes from the state. In Scandinavia, nearly all of the financing for organizations comes from the state, there they believe that the welfare of the state is at so high a level that the state can afford to finance civic initiatives. The main problem that has emerged in elaborating these draft laws is that we are trying to get rid of the list of organizations which has existed since the early 1990s. The law on the real estate tax speaks to organizations which are exempted from the tax. Why should there be any organizations which cannot apply for that tax relief? That will create equality. raksts

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