The Riigikogu took a close look on charity and donations

NordenBladet —

Today, the Riigikogu discussed the implementation of the Estonian civil society development concept as a matter of significant national importance at the initiative of the Constitutional Committee. Everyone agreed that the Estonian residents are more involved in charity and that new donors are constantly emerging, which is why the government should find ways to promote charity work.

Minister of the Interior Kristian Jaani focused his presentation on the current situation in the development of the civil society and emphasised the importance of continuing with the implementation of the Estonian civil society development concept.

Jaani described the civil society in Estonia as strong and free. The civil society has increasingly contributed to our economy. In 2019, non-governmental organisations initiated by citizens made EUR 207 million in business revenue, with EUR 164 million of this coming from non-profit organisations; this forms about 2% of Estonia’s GDP. NGOs employ nearly 12,000 people.

At the end of 2019, social enterprises employed nearly 1,800 people and their business revenue reached almost EUR 45 million.

Jaani said that one in two Estonians have volunteered at some point. He referred to the studies on volunteering, commissioned by the Ministry of the Interior, which show that nearly 49% of the Estonian residents volunteered during the year leading up to the study. In 2013, only one in three had done the same. While in 2015 EUR 30 million was donated to NGOs, in 2020 the donations totalled at EUR 48 million.

In the international donations ranking World Giving Index, Estonia ranks 53^rd among 114 countries. Although Estonia is the highest ranking Baltic state, we still have a lot of room for growth compared to many welfare states such as the Netherlands, Denmark, or Sweden.

Minister of the Interior touched on the main challenges of the civil society, including the need to create the conditions for the civil society to act quickly and flexibly, and outlined the possible ways for the state to give a hand in promoting charity work.

He suggested reviewing the conditions and limits for donations by businesses, seeking out the appropriate solutions in cooperation with businesses and partners, and increasing the flexibility of the current terms and limits. Today, legal persons can donate to NGOs without paying the income tax only up to a certain limit. A private person may deduct up to EUR 1,200 a year.

Minister Jaani concluded by saying that a strong civil society is the corner stone of democracy that needs to be built together.

The Executive Director of the Network of Estonian Nonprofit Organizations Kai Klandorf explained that donations allow us to help those who need our help to overcome an accident, difficult circumstances, or wrong choices. Those who find themselves in a situation that none of us are really safe from, and that we would also need the goodness of others to overcome if these should ever happen to us.

There are over 2,500 organisations in Estonia who collect donations; the donors thus contribute to saving lives, organising cultural and sports events, leading study and hobby groups, and defending democracy. Klandorf defines all these organisations and their donors as part of the civil society.

The civil society is viable when there are active and aware people who use different means and channels for participating in social life, volunteering, joining an organisation at their own initiative, participating in making the decisions that shape their lives, serving their community in a local government or at the national level by getting involved with initiatives they care about, and of course, donating.

Statistically, female donors outnumber men two to one; however, regardless of the age or gender, donating is on the up. In 2020, almost EUR 49 million worth of donations were declared in Estonia. A mere five years ago, this was EUR 18 million less. “This is a rapid increase. We are donating larger and larger amounts and with increasing frequency,” said Klandorf. “Actually, we have a lot to be grateful for. One could even say that charity is doing well.”

Nevertheless, for every regular donor in Estonia, there are still three who do not donate. “A closer look at the amounts tells us that an average donor gives as much a month as a good cup of coffee costs,” she explained. “We could definitely give to charity more than the price of one cup of coffee a month.”

Klandorf feels that Estonia has reached the economic wellbeing where most of us could feasibly comfortably donate one or two percentages of their income to charity.

Klandorf suggested that the government could promote donations by setting a separate limit that is not dependent on other deductions. Today, all tax-paying natural persons who donate may use deductions of up to EUR 1,200 a year; however, she feels that donations in public interest could be subject to a separate limit, and instead of a specific amount we should follow the principle that every citizen with a conscience donates 10 percent of their income.

“Promoting donation culture does not only help to support the capabilities of NGOs and mitigate different challenges in the society, but also enhances the solidarity and wellbeing in the whole society,” Klandorf concluded. “By personally contributing, we form a connection to that field; it is an important component of social activism and the functioning of the civil society, and thus democracy.”

Entrepreneur and co-founder of the technology company Bolt Martin Villig explained charity from an entrepreneur’s point of view. He spoke about his community, which has already given birth to the Education Fund and Jõhvi School, and which has received around EUR four to five million in donations from the founders over the last three years.

Villig referred to Jõhvi School as an excellent example of cooperation between the public and private sectors as well, only with an added contribution from 50 entrepreneurs and businesses. “Every time I see an opportunity to contribute and serve my private interests, or an opportunity to resolve social challenges, I lend a hand,” Villig said.

Speaking more broadly about how entrepreneurs view charity, Villig described most IT industry entrepreneurs as huge patriots of Estonia. “This is why we want the head office to be located in Estonia, although the businesses are built up globally. This means that although Estonian market is fairly small and we cannot build very large companies here, if we create jobs here that are knowledge intensive, and build products that are used across the globe, a big chunk of the export turnover and the taxes end up back in Estonia,” he explained.

Another key is also to think about charity on the global scale while building companies on global scale. “We are of course contributing in Estonia, but not only; our communication is actually global in scope,” Villig said and gave the example of the Founders Pledge, a charity organisation that has 1,700 members across the world by now. “An entrepreneur makes a pledge that if at one point in the future they would be doing well and their company has grown, they would make an agreement with the organisation and donate a certain percentage of their new assets to charity,” Villig explained. The average percentage has reached about 13 by now.

Villig sees a need for businesses and organisations to think about donations just like they do about investments. He also feels that in addition to monetary donations it is also important to think along and transfer the business mindset to the charity sector. This was the idea behind the Good Deed Foundation which is coordinating the Education Fund; the Foundation unites a community of volunteers, whether financial analysts, HR experts, lawyers, etc., who are ready to contribute their time or money if an initiative needs a helping hand.

Villig stressed the need for transparency. “When we are doing something, it needs to be clear to a wider circle why we are doing this,” he said. “In education we see that the better the people who join us and the better the values and foundations people grow up with, the less the state needs to worry about them later: there is less crime, better awareness of healthy eating and exercise, and all this dramatically reduces our social expenses in the future.”

The second key concept is cooperation with the state. He suggested testing out fresh ideas with private money and see if these bring a positive effect that coincides with national priorities, and from that point forward the state could start to offer co-financing. “We are able to import changes and mindsets quicker,” Villig said.

The technology industry has grown over the past five to six years by 25% a year, currently offering 8,000 jobs and about two billion in turnover, large part of which is formed by export, and about EUR one billion in foreign investments came in last year. The industry pays around EUR 500 million in taxes a year.

In comparison, Estonia’s state budget was around EUR 13 million last year, and the value of our technology companies was around six billion, i.e. nearly one half of the current state budget.

Villig predicted that the state budget could be around 30 million in ten years’ time, and the net worth of the Estonian founders of technology companies could be around 40 billion. He suggested that a one percent investment from one’s assets to charity every year would be quite reasonable. “In ten years, this could potentially be around 300 or 400 million,” Villig predicted. “This would help us solve some pretty dire social challenges in Estonia as well as in the global context.”

If a business can currently donate 10% of the profit they made the previous year or 3% of the salary fund this year tax-free, we could consider raising this to 10–15% of the total retained profit, which the businesses could contribute towards charity. He concluded by calling on all entrepreneurs to consider donating.

Chairman of the Constitutional Committee Toomas Kivimägi said that the number of people who are willing to donate exceeds the number of people who are actually doing it by two to three times. For example, the percentage of regular donors in Estonia is 12 percent, and nearly one in two have made single donations. While 27% of Estonians donate in a single month, in Finland this number is 39% and in Sweden 57%. “This is a sign that we still have a long way to go,” Kivimägi remarked.

Kivimägi is not in favour of doubling the deductible amount from EUR 1,200 to 2,400. He suggested introducing the deduction of an additional EUR 500 or 600 only if these are donations.

He emphasised personal approach in collecting donations and highlighted the importance of regular donations. Although financial donations form quite a large amount, a lion’s share of these go to a very small number of organisations, which he sees as a problem. People can also contribute their time, which can be measured in financial terms. In conclusion, Kivimägi sees helping others as a privilege.

The reports were followed by questions to the speakers and comments by the representatives of factions and members of the Riigikogu. During the debate, Andres Metsoja (Isamaa), Peeter Ernits (Estonian Conservative People’s Party), Lauri Läänemets (Social Democratic Party), Heiki Hepner (Isamaa), Marko Šorin (Centre Party), and Margit Sutrop (Reform Party)took the floor.

Verbatim record of the sitting (in Estonian)

The video recording of the sitting will be available on the Riigikogu YouTube channel.

(Please note that the recording will be uploaded with a delay.)

Source: Parliament of Estonia