3 | Eect spring 2008

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European Foundation Centre | www.efc.be
Assessing the impact of percentage philanthropy
By Nyegosh Dube, EFC
Over the past decade, an innovative form of philanthropy has
been adopted in several central European countries: taxpayers can
direct one or two per cent of their previous years income tax to
eligible NC0s of their choice. Hungary's Nonprot nformation and
Training Centre (N0K) has just completed a project to study this
phenomenon and share its lessons. The project was funded by the
Sasakawa Peace Foundation, an EFC member, through its Central
Europe Fund.
Hungary was the rst central European
country to adopt a percentage system
in 1996, and civil society leaders in other
countries in the region were eager to learn
about the system. They turned to NIOK for
advice. By spring 2003, Lithuania, Poland
and Slovakia had also adopted percentage
legislation. At this point NIOK launched its
Percentage Philanthropy Project. In its rst
phase it ran a comparative study of the
issue in Hungary, Lithuania, Poland, Slova-
kia and Romania. This last country joined
the percentage club in late 2003. The
study looked at the development, func-
tioning and promotion of the system.
As a follow-up to the study, NIOK provided
expert assistance, training and know-how
to current and potential percentage club
countries (eg regarding ne-tuning of ex-
isting laws and lobbying for new legisla-
tion) and generated an exchange of ideas
between older and newer club members.
In the projects nal phase (2006-8), the
Centre launched a new study to analyse the
impact of the percentage system on phi-
lanthropy and the NGO sector, focusing on
Hungary and Slovakia. We did this analysis
because in order to make any changes in
legislationor to assist decision-makers
[in] new countries which aim to introduce
the lawthere should be some kind of evi-
dence [regarding the pros and cons of the
system and what can be improved], says
Anik Porkolb, NIOKs Deputy Director.
Thus, anyone thinking of legislative changes
or new legislation can have something in
hand that they can base themselves on in
their debates.
The outcome
What has the latest research discovered?
The most important nding is that, con-
trary to many experts predictions, per-
centage philanthropy has not crowded out
other forms of giving, which still remain a
much bigger source of NGO funding. In-
deed, percentage designations (along with
the number of percentage donors and ben-
eciaries) and other forms of giving have
increased. This is despite lawmakers having
cut back or abolished tax benets for do-
nations in the mistaken belief that the per-
centage system provides adequate state
support for civil society. For most NGOs,
percentage designations only supplement
their income, while many NGOs which work
in elds unpopular with taxpayers dont get
any designations. In Hungary the top 100
beneciaries get 33% of percentage funds.
The benets
If revenues from percentage designations
form quite a small part of NGO sector funding
(although for certain organisations they are
indeed signicant), what are the systems
main benets? According to Porkolb, the
system generates new skills among NGOs
(especially communications and fund-raising),
encourages them to be more transparent,
and builds up networks around NGOs. It
ties citizens more closely to the NGO sector.
Because it is linked to taxation and the tax
season, it reaches many more people than
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Anik Porkolb, Deputy Director, NIOK
European Foundation Centre | www.efc.be
Casting the philanthropic net to convert
Irelands nouveax riches
By Risn Hughes, EFC
This phenomenon, combined with the
prospect of one of Irelands largest foun-
dations, The Atlantic Philanthropies,
shutting up shop in less than a decade, is
causing appreciable anxiety among the
countrys non-prot leaders. Consequent-
ly, several of them are embarking on new
projects aimed at ensuring that capacity
is created for more philanthropy to our-
ish in Ireland. The Ray Murphy Lecture Se-
ries launched on 25 January at University
College Cork is central to this movement.
Over 100 people gathered to take part in
the rst of the ten an-
nual lectures that
honour the late Ray Murphy (1953-2007)
for his commitment to philanthropy in
Ireland and abroad. The series is designed
to encourage further development of phi-
lanthropy in Ireland through exposure to
current trends in the international arena
and to help position Ireland as a centre of
philanthropic excellence. EFC members,
the Charles Stewart Mott Foundation and
The Atlantic Philanthropies, organisations
for which Ray worked, are funding the ini-
tiative.
A philanthropic tradition
Ireland is a nation which has long prided
itself on values characterised by sponta-
neous and generous giving, even before
the Celtic tiger roared its way in. The
new Lecture Series presents Irelands
philanthropically-inclined with an
opportunity to convert these chari-
table impulses into organised giv-
ing. Irelands President, Mary McA-
leese, who delivered the inaugural
lecture, remarked: With this new
conuence of peace and prosperity
in Ireland, now is exactly the right
time to examine how we can meta-
morphose that generations-old culture of
generosity, so that it incorporates the kind
of planned philanthropic giving which can
be a power-house of lasting change.
Speaking on behalf of The Atlantic Philan-
thropies, which was founded by the Irish-
American billionaire, Chuck Feeney (See p.
44), the foundations Vice-President, Colin
McCrea, pointed to three considerations
in getting Irelands tycoons to dig deep.
First, the challenge of actually getting
them to give a signicant share of their re-
sources to philanthropy; second, persuad-
ing them to give in a carefully structured
way; and third, convincing them to publi-
cise their generosity.
Redressing the balance
In his remarks, McCrea advocated a level
playing eld as an essential condition be-
fore the rst of these could be addressed.
He pointed to a aw in Irelands current tax
system, which is structured to encourage
investment in areas such as property, but
discourages investment in philanthropic
giving on the same scale. McCrea urged
the state to remain neutral over how the
wealthy chose to dispose of their resources.
He added, the state needs philanthropy
as part of the way it achieves its own
endsin this way philanthropists, acting
in partnership with the state, can act as
path-nders in areas of common interest.
To guarantee professional practice in the
eld, and most of all, impact, McCrea pro-
other forms of philanthropy. So, many
more people designate 1% than donate
from their own pocket, she explains. In
spite of vigorous competition between
NGOs for 1% funds, their campaigns re-
inforce each other and draw public at-
tention to the sector as a whole.
One rather surprising fact is that two-
thirds of Hungarys beneciaries of per-
centage designations are foundations,
a sector usually thought of as NGO-
funders. This is probably because most
of them were set up to raise funds for
charitable purposes and tend to operate
in areas favoured by percentage desig-
nations. In Hungary very few found-
ations provide support to other NGOs,
says Porkolb. We do not really have
foundations in the European sense.
Interestingly, the Hungarian percentage
system was originally conceived as a
solution to the problem of church nan-
cing, not as a means to support NGOs.
Despite the separation of church and
state, churches insisted on state subsi-
dies, so the 1% system was accepted as
a compromise. When it was expanded to
include NGOs, churches won a separate
1% allocation in order to avoid competi-
tion. At any rate, in both Hungary and Slo-
vakia, the percentage system has been
well-received and is now an integral part
of civil societys support system.
For more information,
visit www.onepercent.hu. To see
the Hungary-Slovakia comparative
study online, visit www.onepercent.
hu/Dokumentumok/role_of_
percentage_designation.pdf.
To request a printed version of the
study, write to a.porkolab@niok.hu
ries launched on 25 January at University
College Cork is central to this movement.
Over 100 people gathered to take part in
the rst of the ten an-
nual lectures that
for which Ray wo
tiative.
A philanthro
Ireland is a nat
itself on values
neous and ge
the Celtic
new Lectur
philanthro
opportun
table impu
ing. Ireland
leese, who
lecture, r
conuenc
in Ireland
time to ex
Despite having ridden the wave of an economy which has
soared over the past 15 years, the vast majority of reland's
estimated 30,000 rich entrepreneurs are failing to turn
their assets into tools for social change. This is according
to a guide released in 2007 by the countrys grant-maker
association, Philanthropy reland.
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4 | Eect spring 2008
Left to right: Liam ODwyer, Executive Director, Irish Youth
Foundation / Colin McCrea, Irish Vice-President, The Atlantic
Philanthropies / Jackie Harrison, Chief Executive, Philanthropy
Ireland / Michael Murphy, President, University College Cork
/ Caitriona ODriscoll, wife of the late Ray Murphy (2008
Philanthropy Ireland/Gerard McCarthy Photography)