“Political Approach to Philanthropy” – Letter of the Dutch Minister of Legal Protection to the House of Representatives of the Netherlands
Please find herwith a letter of the Dutch Minister of Legal Protection, Sander Dekker, from 18 October 2019 addressing the House of Representatives of the Netherlands, titled “Political approach to philanthropy”.
This letter is based on the following study: “Filantropie op de grens van overheid en markt” [in English: “Philanthropy at the border of the government and the market”], conducted by the Scientific Council for Government Policy (Wetenschappelijke Raad voor het Regeringsbeleid, WRR).
To the President of the House of Representatives
Date: 18th of October 2019
Subject: Political approach to philanthropy
I would like to inform your House about the government policy and the coordinating role of my ministry regarding philanthropy. I am also writing this letter in response to the exploratory study “Philanthropy on the border of the government and the market” of the Scientific Council for Government Policy (Wetenschappelijke Raad voor het Regeringsbeleid, WRR), carried out by a project group led by prof. Dr. M. de Visser. The authors note that recent developments in our society give cause for formulating explicit government policy regarding philanthropy.
I endorse this observation. Government and philanthropy have a long-term relationship. This relationship is reflected in, for example, the tax facilities for public benefit organizations (algemeen nut beogende instellingen, ANBIs) and the agreements that my ministry has made with the inter-branch organisations regarding the validation system in the past. The WRR study has given this relationship a new impulse. The sector also endorses the need for a comprehensive government policy and clarification of my coordinating role regarding philanthropy.
In this letter I therefore make the government policy explicit. I do this based on three government-wide spearheads: stimulating giving behaviour, promoting transparency and reliability of the sector and promoting cooperation between government and philanthropy. With this policy, the government aims to safeguard and strengthen the social importance of philanthropy.
Below follows firstly a summary of the WRR study. I will then set out government policy and, where appropriate, respond to the recommendations in the WRR study. Finally, I clarify the next steps related to my coordinating role regarding philanthropy.
Summary WRR study
Philanthropy in the Netherlands
The Netherlands traditionally knows a great wealth of philanthropic initiative and is internationally known as a generous country. The WRR project group uses a broad definition of philanthropy as "voluntary private initiative that is primarily aimed at the general social interest". This includes contributions in the form of money (donations, investments) and time (attention, expertise), made available voluntarily by individuals (individuals, households) and organizations (funds, churches, companies and charity lotteries).
The WRR study offers an overview of the different forms of philanthropy based on the above definition, with emphasis on the financial dimension. The Netherlands has a diverse philanthropic landscape consisting of volunteer organizations, money-raising funds (charitable organizations), capital funds, hybrid funds (consisting in revenues from both fundraising and returns on investment), community funds (which operate at local level) and crowdfunding initiatives aimed at the general public interest. Institutions that are designated by the tax authorities as ANBIs are also considered to be philanthropy, because they serve almost entirely the public interest and are not engaged in profitmaking activities.
In 2015, the Netherlands donated more than 5.7 billion euros to charities and 36% (Research Giving in the Netherlands (“Geven in Nederland”)) to 49% (Central Bureau of Statistics (“Centraal Bureau voor de Statistiek”)) of the residents of the Netherlands volunteered. The 'traditional' generosity in the Netherlands is however decreasing. According to the study “Giving in the Netherlands”, the number of volunteers is decreasing, fewer residents of the Netherlands spend time on their voluntary work and the total donation amount as a percentage of gross domestic product and disposable income has decreased. Conversely, the study observes a growth in social enterprises as a new hybrid forms of entrepreneurship and philanthropy.
Functions of philanthropy
The value of philanthropy does not lie solely within the social impact of charities. Philanthropy gives citizens room to contribute to the society based on altruistic motives. This strengthens the ties between people and communities and promotes social cohesion. The sector also has a signal function: giving behaviour expresses opinions about needs and needs in society and thus fulfils an important function in the system of checks and balances in our democracy. In addition, philanthropy has an innovation function: funds can try out new methods without being averse to risks.
Developments at the interface of philanthropy, government and business
The WRR study finds that the boundaries between philanthropy, government and the market are shifting and blurring. Due to the reform of the welfare state, decentralisations in the social sphere and the discourse on civil society, (local) government and philanthropy meet each other more often in the public domain. The authors cite among others the emergence of local community funds that ask for coordination with the local government and the covenant between the municipality of Amsterdam and charitable capital funds of 2014. The study also refers to the blurring of roles between government and philanthropy in tackling social problems which, according to the authors, is undesirable because the government and philanthropy are of a different nature: philanthropy has an arbitrary, exclusive and voluntary character, in contrast to the government that guarantees a system of fundamental rights.
In addition to these developments, the WRR project group signals a blurring of boundaries between philanthropy and the market: more and more Dutch companies have a business fund, philanthropic institutions are becoming business-oriented and the impact-oriented and entrepreneurial philanthropy is growing. Entrepreneurial philanthropy blurs the distinction between philanthropy and the market because, in addition to social impact, they also strive for financial returns. Finally, the government can also benefit from the commercialization of philanthropy in the context of social impact bonds, whereby social investors conclude a attainment contract with the government to combat a social problem.
Building blocks for government policy on philanthropy
According to the authors of the WRR study, the above developments give rise to explicit government policy. They propose several fundamental principles for this:
• Recognize free choice as an essential characteristic of philanthropy;
• Take account of the complementary functions of philanthropy with public interests;
• Do not consider philanthropy as a substitute for government services;
• Recognize the added value for social cohesion and a plural democracy;
• Be alert to the developments which affect the functions of philanthropy.
In addition, the authors make recommendations for facilitating and limiting philanthropy:
• Consider fiscal facilities as a generic incentive and broaden the reach of the target audience;
• Maintain dual supervision of public benefit organizations;
• Facilitate recognition of social entrepreneurship;
• Democratize control of remittances from the lottery system.
Below I outline the overarching government policy on the basis of the aforementioned government-wide spearheads and, where appropriate, refer to the building blocks of the WRR exploration.
1. Stimulating giving behaviour
The first policy objective of the government regarding philanthropy is to stimulate giving behaviour. The Cabinet defines giving behaviour as the voluntary commitment in time and money for the general social interest of citizens, charity organizations, endowment funds, churches and companies. Giving time and money voluntarily remains a private matter. The responsibility to stimulate giving behaviour and to spend donations efficiently and effectively lies with the philanthropy sector. Nevertheless, the government attaches great importance to encouraging voluntary commitment as an expression of appreciation for the fundamental contribution of philanthropy to our society. The government appreciates the functions of philanthropy, as described by the WRR authors, as well as the added value of philanthropy for social cohesion and the pluralistic democracy of the Netherlands.
The government also believes that encouraging giving behaviour is necessary given the decline in traditional generosity. The contrasting growth in hybrid forms of entrepreneurship and philanthropy has led to the plea of the WRR exploration to safeguard the social aspect of social enterprises. The State Secretary for Economic Affairs and Climate is investigating the possibilities for better recognition of social enterprises, as well as the need for this, and the support among entrepreneurs. In addition, the cabinet continues to facilitate giving behaviour in the Netherlands in various ways.
The social importance of the contributions to a vital society in the form of volunteering for care, sports and other organisations cannot be underlined enough. Regarding the facilitation of voluntary use of time, the government has taken a number of important measures. For example, the possibilities to do volunteer work while maintaining unemployment benefits have been expanded, volunteers working with people in a dependency situation can apply for a free letter of good conduct (Verklaring Omtrent het Gedrag, VOG) and the maximum tax-free volunteer allowance has been increased as of January 1, 2019. The responsibility for local volunteering policy lies with the municipalities.
Pursuant to the Wet Maatschappelijke Ondersteuning 2015 (“Social Support Act 2015”), municipalities must maximise the potential for volunteers to carry out their work. Among other things, the Cabinet is committed to removing legal bottlenecks and obstacles, (targeted) stimulating voluntary efforts and collecting and disseminating relevant knowledge and information about volunteering in the Netherlands. My fellow Minister of Health, Welfare and Sport is responsible for the government-wide coordination of the national volunteering policy.
Giving money is encouraged by a system of tax facilities, including the gift deduction and the ANBI scheme. The government attaches great importance to these tax facilities and has therefore laid down in the Coalition Agreement that the Geefwet (“Giving Act”) will remain, whereby it has also been decided to align for all donors the tax benefits of the donation deduction. The cabinet has entered discussions with the philanthropy sector to see if the gift deduction and the ANBI scheme could be made less complex and more practicable. This has led to a report from a working group of the Ministry of Finance and the Samenwerkende Brancheorganisaties Filantropie (“Cooperating Inter-Branch Organizations Philanthropy” (SBF)) which also considers suggestions for possible improvements coming from your House. This formed the basis for the government's proposals to improve the implementation of the gift deduction and the ANBI scheme as stated in the letter of 28 March 2019 to your House. The SBF will be involved in the further elaboration.
In addition, the Cabinet agrees with the WRR project group that fiscal facilities serve as a generic incentive and should not be linked to different goals to guide giving behaviour in terms of content. The government does not consider this to conflict with the multiplier, a specific tax incentive for donations to cultural institutions in the Netherlands. This arose as a result of the decline in government subsidies to the cultural sector and not so much because of a desire to steer giving behaviour. Researchers see a positive effect of the multiplier for donations to culture. The cabinet has therefore decided, in consultation with the philanthropy sector, that the multiplier should remain. My fellow Minister of Education, Culture and Science will also investigate which instrument can be used alongside or together with the multiplier to stimulate the giving of private money.
In the context of stimulating giving behaviour, I also attach importance to the remittances from lotteries to charities. In my letter to your House of 5 July 2019, I outlined the contours for the future development of the lottery system. The government considers it important that the destination of the remittance can count on consumer support, that (potential) beneficiaries have sufficient access to the lottery system and that beneficiaries receive remittances free of charge. These principles are therefore preeminent in future policymaking. In this way, attention is paid to the WRR's recommendation to democratize control over remittances.
Finally, I will make two further comments regarding the policy objective of stimulating giving behaviour. First, I want to emphasize that regarding policy initiatives affecting the sector, the government carefully weighs the importance of philanthropy against other social interests. Secondly, I think it is important that the size and nature of contributions from private individuals, companies, wealth funds, legacies and games of chance to social goals is periodically charted. This is why I contribute to the financing of biennial research by VU University Amsterdam.17 This research provides more insight into developments in giving behaviour and is used by both the government and the philanthropy sector in policymaking.
2. Increasing the transparency and reliability of the sector
The second policy objective is to increase the transparency and reliability of the philanthropy sector. Philanthropy in the Netherlands has a combination of formal legislation and a system of voluntary self-regulation. With a view to the fiscal facilities, the government naturally supervises ANBIs. In addition, the legal form of philanthropic organizations is laid down in association and foundation law. I agree with the WRR project group that the combination of voluntary sector self-regulation and government supervision of ANBIs is a desirable form of dual supervision. The government maintains this form of dual supervision.
In recent years, the philanthropy sector has taken important and good steps to promote transparency and reliability.18 In 2019, the Centraal Bureau Fondsenwerving (“Central Fundraising Office” (CBF)) supervises 567 recognized charities and plays a key role in promoting transparency and reliability. Therefore, I support the CBF. Additionally, the CBF and the inter-branch organizations Goede Doelen Nederland (“Charities the Netherlands”), Nederland Filantropieland (“the Netherlands Philanthropy Country”) and the Interkerkelijk Contact in Overheidszaken (“Interchurch Contact in Government Affairs” (CIO)) have cooperation agreements with the Tax Authorities dealing with supervision. Furthermore, I appreciate the steps that charity organizations have taken together with the CBF over the past year in response to media coverage of cross-border behaviour in international assistance. I committed towards the CBF to financially support the implementation of the new integrity standards and the duty to report integrity violations and cross-border behaviour on a one-off basis.
Nevertheless, the WRR explorative study warns of developments that undermine the functions of philanthropy and that put pressure on the system of self-regulation. The government is concerned about anti-integrative and anti-democratic aspects of philanthropy in the event of undesirable flows of money from "non-free countries" to Dutch (religious) institutions. I am therefore working on a scheme to make (foreign) donations to social organizations in the Netherlands more transparent. A better understanding of these money flows is of great importance for strengthening the action perspective of central government and municipalities and those involved in the relevant social organization itself. Here too a careful consideration of interests is made and the privacy, security and willingness to give of donors are taken into account.
3. Cooperation between government and philanthropy in the approach to social issues
The third policy objective is to promote cooperation between government and philanthropy. Both government and philanthropy focus on the public domain and seek solutions for complex social issues. I acknowledge that the government and philanthropy are of a different nature. The government bears responsibility for public interests based on principles of the rule of law and philanthropy, as described in the WRR study, therefore cannot be regarded as a substitute for government provisions. However, the government and philanthropy can work together in tackling social challenges that demand the commitment of society as a whole. This applies to both the national government and the local authorities. I agree with the WRR authors that, in cooperation with the sector, account should be taken of the autonomy and selectivity of philanthropy, and that role blurring should be guarded against.
Considering these founding principles of the WRR study, I started a renewed dialogue with the philanthropy sector to explore the possibilities for thematic collaboration. For instance, a meeting recently took place where top officials, scientists and representatives of the sector organizations, funds, foundations and charity lotteries discussed three social issues: the transition to a circular economy, inclusion of people with a mild intellectual disability, as well as radicalization and crime prevention.
Next steps coordinating role
My ministry has a government-wide coordinating role with regard to philanthropy and this role is first and foremost fulfilled by acting as a source of information and point of contact, both for the sector and within the government, for issues that affect the relationship between government and philanthropy. I also organize an interdepartmental consultation when necessary to discuss such topics. In addition, I am exploring with the SBF the possibilities for structural consultation at management and policy level to identify relevant developments in a timely manner.
Regarding cooperation between government and philanthropy, I will also initiate several small meetings in the remainder of this year to explore ways in which government and philanthropy can work complementarily in tackling the aforementioned and possibly other social tasks. In addition, I discuss with the sector whether a wider infrastructure for dialogue can be set up that offers space for the innovation and signal function of philanthropy in public interests. In this way I respond to the advice in the WRR exploration of funds and governments to get to know each other better, to meet each other and ultimately - if desired - to strengthen each other.
Where cooperation is already taking place, whether or not at local level, I want to collect important lessons with the partners involved regarding cooperation between the government and philanthropy.
Finally, I will consider in the coming year how I can contribute to the dissemination of knowledge and information about philanthropy in the Netherlands.
The Minister for Legal Protection, (rule of law? Justice security?)