Donations and tax policy of the Czech Republic

The non-profit sector has a unique place in the contemporary economy and is able to effectively provide activities that businesses are not interested in fulfilling, as these activities are unprofitable. Non-profit organizations fulfil a number of tasks in the social, cultural, environmental, educational, sports, and education sectors.

Funding of the non-profit sector is the current problem in the Czech Republic at the present time. The problem is not linked only to the economic recession, but also to the abolition of tax progression and introducing a uniform tax rate of 15 % (from January 2008). This step reduces the effect of deductible items used primarily by the middle class. Donations belong to those deductible items.

Tax preference for donation providers to non-profit sectors who operate in the public interest can be found in most countries. Basically, there are generally three types of such preferential schemes. A tax deduction is a donation deducted as a tax deductible item from the tax base. This form is used in the Czech tax law. A tax credit leads to a reduction in tax payments and the taxpayer, has to decide on the levy of the part of taxes in favour of the non-profit sector. The taxpayer has no option but directly determines the specific recipient of the donation. This fact is the main difference from a tax assignation. A tax rebate is the taxpayer’s part of the tax liability is remitted to a specific subject.

The paper discusses the taxpayer's willingness to support the non-profit sector in the context of tax incentives from the state. The paper presents the results of research activities focused on corporate philanthropy, i.e. monetary donations and non-monetary donations which were implemented in the Moravian-Silesian Region of the Czech Republic.