PUBLIC AFFAIRS: Big business, taxes and corporate giving

Peta-Anne Baker, Contributor

It is ironic to think that the people of Harbour View would not be looking forward to finally having a functioning sewerage disposal system if a non-Jamaican foundation had not been willing to support the work of the Jamaica Environment Trust (JET). Hiring an attorney to take the National Water Commission to court is one of the things that support from the McArthur Foundation in the United States has helped JET to accomplish over the last six years.

A Jamaica Employers' Federation study done in 2007 found that 90 per cent of the companies surveyed said they wanted to contribute to social initiatives and national development. Indeed, many companies reported contributions to programmes of various kinds, especially in the field of education. The same study identified some 16 or 17 foundations established by the major financial, manufacturing and mining entities, and most companies have some kind of outreach activity, usually coming within their public relations budgets.

Jamaica has long prided itself on its philanthropic traditions. Many public social services and voluntary organisations have emerged from the efforts not just of the churches, but also of the middle and upper classes to provide for those made vulnerable by an accident of birth. In more recent times, the United Way of Jamaica was an effective mobiliser of resources for the voluntary sector. Now 25 years old, it appears that it has lost some of its early energy. In any event, there has always been the challenge of securing long-term commitments to support ongoing work requiring the services of a paid staff. There is the always the challenge of balancing the need for the immediate 'photo op' against the need to dig in for a long-term engagement.

PRIVATE SECTOR CONTRIBUTIONS

Private sector companies like GraceKennedy and the ICD Group have proud records of not just giving, but of active and sustained engagement with the communities in which their businesses are located. How many people are aware of the fact that GraceKennedy has not one but two foundations? There is the private (family) GraceKennedy Foundation which provides extensive support to higher education, and the Grace and Staff Community Development Foun-dation, which, with a small staff, has been working in some of the most volatile environments of downtown Kingston for more than 35 years. The funds for the latter come from staff contributions which are matched two to one by the company.

While there are reports that a group of private sector leaders are planning a coordinated programme to support youth development in the downtown Kingston area, it is regrettable that it took a call from President Barak Obama at last year's Summit of the Americas and funds from the US State Department to provide the stimulus to this development. In any event, it is not entirely clear whether the non-governmental organisations that have long been at work in Kingston's inner city will get support for their programmes. Whether it is technical or remedial education, counselling, mentorship or small business development programmes, the leaders of this latest initiative must know that funds must be made available to pay for the professional services the agencies need to deploy. They must understand that they will need a 10 to 20-year horizon, and that as much attention must be paid to the social and cultural aspects of the process as to the business aspects.

TAXING GOOD BEHAVIOUR

The Jamaican private sector and the Government seem to be unaware of developments in the field of corporate philanthropy. How else does one explain the lack of attention to our income tax law and administration which do little to encourage individual and corporate giving? The income tax law does not permit a taxpayer to claim relief for donations exceeding five per cent of his or her taxable incomes. (It seems that despite our oft-repeated claims of being a Christian country, we conveniently forget the injunction to tithe!) This is not the kind of policy perspective that will encourage the emergence of the Jamaican equivalent of a Bill Gates, Warren Buffett or Jeff Skoll, three of the richest men in the United States who have committed to giving away as much as 90 per cent of their personal fortunes. (Admittedly, they are motivated by much more than tax considerations.)

In addition, organisations wishing to obtain tax-exempt status have to go through multiple hoops requiring the services of a lawyer, who most will not be able to afford. However an organisation's charitable status will not automatically result in its donors being able to claim relief for their contributions. That status is the "gift" of the minister of finance, whose recent declarations about increased scrutiny of voluntary organisations does not augur well for those wishing to obtain his blessing at this time.

Like many other jurisdictions, our income tax laws are not very specific about the kinds of activities and organisations that will qualify for exemption, except that they must be for "religious, charitable, scientific, or educational purposes". The organisation must be dedicated exclusively to these purposes and must not distribute its profits or income to individuals, except for services rendered. The interpretation of the meaning of terms like 'charitable' and 'educational' is the responsibility of the tax authorities, who I found pleasant and helpful during my enquiries, but who, as far as I know, have no special training or guidance on what these terms could mean.

So for example, a grass-roots agency that does not have the resources by way of connections or money could be denied tax-exempt status despite the fact that it is the sole source of hope for youth in a particular inner-city community. In the meantime, an organisation with the resources to hire a sharp lawyer could be exempted from paying tax on the money it collects for running youth-training programmes from the same community. The certificates handed out at "graduation" will not be worth the paper they are printed on, but the founder, principal and president of the 'college' will have bought a house in Norbrook from his 'salary'.

MODERNISING PHILANTHROPY

Unlike many other jurisdictions, the Jamaican authorities have not seen fit to introduce, much less update, its legislation relating to charitable organisations. Nor have any steps been taken to establish an independent body to regulate the philanthropic sector. England and Wales introduced new legislation only four years ago after an extensive period of research and consultation. In June, a bill was introduced in the US House of Representatives not so much to regulate as to create a forum for a more effective partnership between non-profit organisations and the Federal government. This move was the result of active lobbying by the non-profit groups themselves.

Neither the Jamaican non-governmental organisations nor the private sector companies and foundations seem to appreciate the importance of systematic and sustained research and representation even to advance their own interests. While most current legislation restricts charitable organisations' involvement in partisan political campaigns, there has always been an understanding that NGOs contribute to governance in important ways. This is how NGOs in the United States come to be involved in voter registration, animal rights and anti-human trafficking campaigns. This is why the McArthur Foundation supports the work of JET.

If there is no modernising impetus in the philanthropic sector in Jamaica, it will be a long time before environmental groups like JET, child-rights groups like Children First, can hope to win substantial financial support from indigenous individual or corporate philanthropists. It will be a long time before the sector catches up with innovative trends such as the emergence of social entrepreneurship - the creation of economic enterprises to serve social ends. Social enterprises are seen as an important avenue for addressing the intractable problems of structural disadvantage, and have become a mechanism for public-private-community partnerships at municipal and provincial levels in Canada.

Social entrepreneurship also informs NGO fair-trading initiatives to provide secure markets and fair prices for farmers and craftspeople in Africa and Asia. Indeed, some individual and corporate philanthropists now provide venture capital rather than loans to community-based enterprises, relieving them having to depend on the high-priced loans provided by the established banks and micro-enterprise lending agencies.

It has become popular to talk about Jamaica achieving developed country status in 10 or 20 years. Even if we are not all agreed on what kind of contribution the private sector should make towards achieving this goal, we accept that it has a role to play in the economic sphere. It is time we took a look at the sector's philanthropic role. Note, however, that quality performance in this area will require the same innovative and entrepreneurial spirit which helped the best of our business leaders to make their fortunes.

Dr Peta-Anne Baker is the coordinator of the Social Work Programme at the University of the West Indies, Mona. She may be contacted at pab.ja2009@gmail.com, or send feedback to columns@gleanerjm.com.