Businesses Embrace Charity Despite Tax Hurdles

KIEV, Ukraine -- The philanthropic practices of Ukraine’s most generous donors are receiving more attention as NGOs and businesses work together to promote the practice of corporate philanthropy within the nation’s business community.


Novynar, the Ukrainian-language sister publication of the Kyiv Post, named the top-15 Ukrainian philanthropists of 2007 in its first ever Philanthropist ratings published on Dec. 17.

Ukrainian billionaire Viktor Pinchuk, son-in-law to former president Leonid Kuchma, was rated as the most generous philanthropist of the year, giving a total of Hr 103.5 million ($20.7 million) to culture and health services charities.

The list of the top 15 philanthropists included well-known business and entertainment figures, as well as politicians, who gave money for a range of charitable causes, including education, assistance to children, cultural preservation, health services and AIDS prevention.

Others ranked in the top five included Ukraine’s richest man, Rinat Akhmetov (2), who gave Hr 78.8 million ($15.76 million) in 2007, industrialist Serhiy Taruta (3) with Hr 30 million ($6 million), lawmaker and businessman Oleksandr Feldman (4), with Hr 11 million ($2.2 million) and Kuchma’s daughter Olena Franchuk (5), with Hr 7.9 million ($1.58 million). Franchuk is married to Pinchuk.

The rating is irrespective of political ratings, business conflicts, and moral aspects, or the source of the funds, according to authors Tetyana Kharchenko and Yaroslava Naumova.

“We only offer names and amounts – it is up to the reader to decide who the top philanthropists truly are,” both said in a statement.

On Dec. 13, a group of NGOs held Ukraine’s very first “Philanthropist of the Year” awards.

The selection committee recognized the top nationwide philanthropists in five categories: international company, Ukrainian company, financial institution, charitable foundation and institution. The awards were presented by Dytyachyi Svit, the Ukraine 3000 charitable foundation, the Ukrainian Forum of Grant Makers and the Center of Philanthropy.

More than 20 companies were nominated for awards. Avon Cosmetics Ukraine won the award in the category of International Company. Home appliance supermarket chain Foxtrot won in the category of Ukrainian company of the year, and for financial institution, the award was given to the Poltava Kredyt credit union.

A growing trend

Corporate philanthropy is becoming “widespread” in Ukraine, according to Barbara Felitti, country director of the Ukrainian Citizens Action Network (UCAN), a program funded by the US Agency for International Development (USAID) which supports advocacy initiatives by citizens that address issues important to Ukrainians.

UCAN works primarily with civil society organizations and one of its core activities is to make philanthropy more effective and transparent in Ukraine.

“When I first got here, people said ‘Oh, there’s not a lot of corporate philanthropy going on in Ukraine. Then as people started to do research … they found out that there is a lot of charitable giving, it was just done quietly,” Felitti said.

Felitti said it’s hard to know all of the reasons for this. It could partially be due to the Ukrainian cultural tradition of “Metsenat,” translated as philanthropist in English.

“It was always seen that companies had a responsibility to give back to the community,” said Felitti.

Ukrainians prefer more traditional ways and areas – work with orphans, cultural heritage, education, health, Felitti added.

Ukrainian companies can receive a tax credit in the following year if they donate between 2 to 5 percent of their profits from the previous year to charity. However, if their donations equal less than 2 percent of profit, they don’t receive that tax credit, creating a disincentive to companies to accurately report their giving practices, Felitti said.

“The minimum needs to be removed,” she added.

Last year, approximately Hr 2 billion ($400 million) was donated from reported corporate income of Hr 75 billion ($15 billion) for a combined average of 2.6%.

Additionally, businesses who establish their own corporate funds need to start giving more transparently, according to Felitti.

Businesses need to start approaching their giving in the same way as business – as “investments,” Felitti said.

Many of the large Ukraine corporate holdings give through their own charitable funds, such as System Capital Management’s (Akhmetov’s industrial holdings) Development of Ukraine Fund, or Viktor Pinchuk’s Foundation, which gives out arts, culture and education grants.

Source: Kyiv Post