More taxation hikes, grantmaking in jeopardy
Dear friends,
This is the time of the year when organizations make their plans and prepare their budgets for the next year. We, too, at Fondazione Cariplo are engaged in this exercise, preparing the documents that set out our strategy and resources for 2015.
Recently we have come to know that Italy’s Budget proposal for 2015 contains certain provisions that will increase taxation for Foundations, adding to the tax rises already introduced last July and in prior years.
It is only fair that the people and the nonprofit organizations that work with us be made aware of the situation and of the projected impact of these new provisions.
FACTS AND FIGURES
Taxation on Banking Foundations has been rising steadily. The progression seen in the past five years has been conspicuous:
- Year 2011: € 100 million
- Year 2012: € 170 million
- Year 2013: € 170 million
- Year 2014: € 340 million (estimate)
- Year 2015: € 360 million (estimate)
With the measures passed in recent months and those contained in the 2015 Budget proposal, in 2015 taxation on foundations may rise further to € 360 million after skyrocketing from € 100 million in 2011 to € 340 million in 2014. This would be a result of the combined effect of increased tax rates on investment returns – from 12.5% to 20% in 2012, up to 26% in July 2014 – and the additional increase in tax rates on income from interest, dividends and capital gains that is contained in the 2015 Budget proposal.
COMMENT
Taxation has grown exponentially over a short timeframe. Most certainly this will impact voluntary and private organizations in the social sphere as well as local public administrations whose financial resources are being slashed. In fact, anytime taxation on foundations is increased by one cent Foundations have one cent less to give to those who work for the common good.
Italian banking foundations are private, independent nonprofit philanthropic organizations that provide funds to nonprofit players in the private and public sector, supporting welfare, social integration, cultural and civic life in the communities they serve. Increasing taxation on them means slashing the financial resources they use to support research, arts and culture, but most importantly, the most vulnerable such as the elderly, the disabled, the sick, underprivileged children, immigrants, and the many other people in need whom local public administrations alone are no longer able to provide for.
The various drafts of the 2015 Budget proposal that have been circulated so far contain provisions that, if passed, are going to affect the ability of Italian banking foundations to provide that support. Oddly, income from dividends received by these foundations would be taxed at a much higher rate than the one applied to corporations, that, unlike foundations, do not socialize their profits. If passed, these new tax hikes will widen the gap between Italian banking foundations and their peers in Europe that In view of their social function are granted a number of tax exemptions and reliefs by their respective governments.
Having a further increase in taxation would be an incomprehensible move by a Government that intends to foster the role of voluntary organizations and the third sector as a whole, of which foundations are a part and a driving force. Applying these new provisions retrospectively from financial years starting on or after January 1, 2014 would have an accretive adverse effect as this would undermine activities that are already underway. This would mean that, in addition to being unreasonable, these new provisions may also be unconstitutional.
Fondazione Cariplo
All started with a tweet, a spark ignited from the grassroots, by some nonprofit players in Salerno that launched a campaign on FB and twitter – signed up by Fondazione Cariplo too - to oppose the measure after the further tax increase proposal was announced. If passed, this would mean a heavy burden placed especially on those who use the philanthropic funds they receive to carry out projects in the social sphere, to promote arts and culture, environmental sustainability and research, and most importantly to support the people in need who are at the centre of everything they do.
Since 2011 there has been an exponential increase in taxation and if the recently proposed measures are passed, in 2015 taxes payable by Foundations will be up by another € 260 million.
(FOR MORE INFORMATION: www.fondazionecariplo.it)
Across Europe governments support philanthropic organizations. In our country it is quite the opposite. The European Foundation Center (EFC) that represents European philanthropic organizations has recently issued a clear statement about this.
When it comes to tax treatment, there is no reward for investing in philanthropy in Italy.