Tax-Exempt Status and Associated Factors among Charitable Foundations in China

Shuyang Wang,Xiaoyu Wu,Zhilin Li,Jing-Hua Zhang

doi:10.3390/su13084116

Abstract

Tax exemption plays an important role in the sustainability of charitable organizations (COs). The 2016 Charity Law of China provides stronger tax incentives for charity donations. Using 767 observations of Chinese charitable foundations (CFs) during 2010–2018 from the China Foundation Center database and manually collected tax-exempt status data, this study applies multivariate logistic regression analysis to examine the association between tax-exempt status and related key factors, such as transparency and donation dependency. This study found that a one-point increase in the transparency score of a CF is associated with a 3.9 percentage points higher likelihood of having at least one type of tax-exempt qualification (OR = 1.039, p < 0.01). There is in general a significantly positive association between tax-exempt status and donation dependency of CFs in China. After 2016, the CFs responded actively to the tax incentive provided by the Charity Law, which in return requires a higher level of transparency. These results suggest that taxation under the legal system may effectively function to promote the sustainability of charity foundations in China in the long run. Further studies are needed to explore in-depth why CFs with advanced tax-exempt qualifications concentrate in Beijing and Shanghai.

Highlights

A charitable organization (CO) refers to a social organization designed to benefit the general public or a specific group of the community with educational, humanitarian, or religious activities
With social goals as parts of their mission, the activities of a CO go beyond giving relief to the indigent, as their actions can extend to include the promotion of happiness and the support of Sustainable Development Goals (SDGs) for society
charitable foundations (CFs) with “tax-deductible and -exempt” account for about 24% of the sample, with a mean transparency of 67 points, which is much higher than the means of the full sample

Summary

Introduction

A charitable organization (CO) refers to a social organization designed to benefit the general public or a specific group of the community with educational, humanitarian, or religious activities. With social goals as parts of their mission, the activities of a CO go beyond giving relief to the indigent, as their actions can extend to include the promotion of happiness and the support of Sustainable Development Goals (SDGs) for society. These SDGs can be activities such as promoting health equity, employment opportunity, community security, responsible social practices, social equity, environmental protection, and natural resource conservation [2,3]. The contributions of COs, together with other nonprofit organizations, to sustainable social developments have been well recognized and acknowledged by both the academic community and international organizations [2,4,6]

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Results

Conclusion