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Current Legal Situation

June 2010- Declaration of a New Public Commons
The government supports a "New Public Commons," under which not only the government but also citizens, NPOs, private businesses, and other parties, with the spirit of mutual assistance, play an active role in providing services for our everyday life, such as education, childcare, community development, nursing care and welfare services.

To this end, the "New Public Commons" Roundtable held by the Prime Minister put together the Declaration of "New Public Commons" on June 2010.

In response to the proposals by the roundtable, the government announced its actions toward their institutionalization. 

An editorial from the Asahi Newspaper on May, 5, 2010
New tax rule for NPOs -- Requires easy access by everyone
Prime Minister Yukio Hatoyama is pushing a "New Concept of Public Service*." In efforts to achieve this concept, the government plans to revisit the current taxation system and create a new rule for certified nonprofit organizations (NPOs). Let's explore what the new rule entails, and also hope that it will strengthen NPOs and become a resource for civil society.

The main goal of the new tax rule is to expand tax benefits as an appeal for individuals to donate more, and to relax the eligibility standards used to certify NPOs with a special status to benefit from this rule. The government plans to finalize the contents and include this new rule into the agenda for the end-of-the-year tax reforms.

The criticism has been that the current system benefits only the high-income donors because donated amounts can be deducted only from their pre-tax income. Prime Minister Hatoyama announced a new rule that includes an option to deduct a portion of donations directly from their income tax. Half of donated amounts will be deducted from donors' income tax, and up to 25% of the income will be the tax-deductable portion of the income. The government believes that the new rule will benefit more than the current plan for donations made to political parties and political groups, which allows only up to 30% of the donations to be taxdeductable. The new rule should be welcomed because it will strengthen a system in which the tax payers will directly support activities and initiatives among citizens and NPOs. However, one obstacle is that the current system requires most of the low- to middle- income donors to file an income tax return in order to receive tax deductions. This issue needs to be worked out by the end of the year.

Another issue is that the current system doesn't necessarily benefit all the nonprofits across the board. It only benefits NPOs that were certified special status by the National Tax Agency of Japan for their impact on the public interests. Of all the 40,000 nonprofit organizations currently existing throughout Japan, it's been reported that the National Tax Agency has certified the special status to only 127 so far. In efforts to raise the number of the qualified NPOs, the rule also includes a plan to relax the eligibility standards.

Under the current standards, more than one third of the total revenue of NPOs must come from donations. However, many of NPOs face challenges in satisfying these standards especially if they have business profits. Also, the current standards have such a complicated system to categorize expenses that NPOs have to hire accountants for their expertise.

A new standard included in the rule is to review how many donors give more than a certain amount to the NPOs. The Hatoyama administration, however, should be extra careful not to let the criteria and standard too loose. Otherwise, the new rule could be a venue for tax evasion.

What's most important here is for the NPOs to become credential nonprofit organizations that are worth giving to so that individual donors can be confident in donating more. There are a number of challenges for the nonprofits to overcome to become one of those trusted organizations. For instance, some organizations lack accountability in publicizing detailed information on their programs and services, finances, and human resources. The number of donors in Japan is almost the same as in the U.S. Each of those donors, however, gives less than their counterparts in the U.S. What is holding these Japanese donors back from giving more seems to be the lack of accountability and information sharing by the NPOs.

The government alone cannot achieve creating supporting systems needed for the NPOs. Some of the NPOs are voluntarily working together to standardize accounting systems and managerial principles. It is our hope that the NPOs continue to collaborate with each other and with the government for their independence and quality enhancement.


 

Center for Gender in Organizations - Simmons School of Management
300 The Fenway - Boston, MA 02115

Phone: 617.521.3824
Email: cgo@simmons.edu

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