On November 19, the Lithuanian Free Market Institute, in co-operation with the Baltic-American Partnership Fund, co-sponsored a conference "Philanthropy: From Exemption to Tradition." The aim of the conference was to identify barriers to the development of philanthropy which stem from the current tax system and to propose guidelines for needed changes. The event gathered NGO experts and representatives, state officials, politicians, lawyers, entrepreneurs, and journalists.

The results of a survey conducted by LFMI in 1996 showed that the tradition of philanthropy was still evolving in Lithuania but the general climate for the rise of private giving was favourable. As the survey indicated, the main obstacles to philanthropy are posed by the weaknesses in the laws regulating charity and giving, a heavy tax burden, and complex, and frequently ambiguous, procedures for registration of charity and giving. These hurdles discriminate against donors and beneficiaries alike.

"Now that the government lacks money to finance many of its programmes, it should withdraw from these sectors because frequently its being a helper and an almoner of gifts discourages people from thinking what they themselves care about," Elena Leontjeva said in her welcome address. She noted that the state's withdrawal or non-interference would be a clear signal for us all that the environment in which we live depends on ourselves - our values, responsibility, and self-knowledge.

Remigijus Šimašius, LFMI's Policy Analyst, presented on the weaknesses and defects of the regulatory framework governing charity and giving. The functioning law does not provide a clear distinction between charity and giving, and the regulations are riddled with a great amount of bureaucracy. For example, the law states that donations can be provided not for an organisation per se but for its programmes, which, in turn, must be approved by "the highest managing body of a non-governmental organisation." The law requires that both parties - the giver and the recipient - inform, in an established format, the Statistics Department and the territorial tax inspection about provided or received charity or giving. There are no clear provisions on anonymous donations, and it is difficult to distinguish between giving and commercial activities. According to Remigijus Šimašius, if private giving is to become a tradition, it is important to solve these problems. Equally, if not more important, is not to pin all hopes on law but to remove general barriers to private initiative.

LFMI's Vice President Rūta Vainienė focused on tax regulations applicable to charity and giving. She elucidated the principle of declining taxes, which is instrumental for a free market and philanthropy. All other principles of a tax system are built on the assumption that taxes exist, while the principle of declining taxation rests on the premise that taxes should not exist. Rūta pointed out that the phasing out of taxes makes it possible to privatise government functions and to return them to market participants, those to whom they should and used to belong. Under such conditions, philanthropy would be depoliticised and removed from the government's domain and influence. It would be that which it is supposed to be - a manifestation of a man's, and not government's, will.

To achieve this, LFMI's vicepresident noted, it is necessary to abolish the corporate income tax rate applicable to NGOs and taxation of donations received by private individuals. In fact, this approach means that philanthropy falls out of the sphere of the corporate income tax. According to Rūta Vainienė, this taxation scheme does not have all those advantages that could be achieved if the corporate income tax was eliminated de jure. This would eliminate complex accounting procedures and reduce the tax burden, leaving more money in private hands. Philanthropy becomes a tradition only when people, not the government, have more money, Rūta Vainienė concluded.

Director of the NGO Information and Support Centre Vaidotas Ilgius spoke about the role of non-governmental organisations and their private funding. Stephan E. Klingelhofer, Vice President of the International Center for Not-for-Profit Law, looked at international practices for regulating charity and giving.

After the conference LFMI's experts formulated conclusions and policy recommendations which will be presented in a special issue of LFMI's Lithuanian-language newsletter Laisvoji Rinka.