Enabling Environment Initiative:   

 The Initiative   |    Recommendations   |    Fiscal Reforms    

The Pakistan Centre for Philanthropy formulated five clusters of recommendations as an outcome of the Enabling Environment Initiative:

A fundamental reform of laws regulating citizen organisation for public benefit to overcome fatal philosophical and technical flaws in current laws. Specifically, the Voluntary Social Welfare Agencies Ordinance 1961 and Societies Registration Act 1860 should be consolidated, rationalised, and modernised into one public benefit organisations law, the “Nonprofit Public Benefit Organisations (Governance and Support) Act 2003”.

Change in the structure and nature of the regulatory function of government. As contained in the proposed new NPO law, responsibility for regulation should be shifted from the diverse parts of government (across which it is now distributed) to autonomous statutory bodies; one federal and one for each province, governed by representatives from government, citizen organisations, business, professionals and eminent citizens.

     Tax benefits and fiscal support for NPOs. First and most important, the definition of organisations qualifying for various tax benefits should be broadened to include a wider set of purposes. Second, further additions to the menu of fiscal supports available to citizen organisations should be made. Third, access to existing benefits needs to be simplified and administered more effectively.

Purposeful dialogue between government and citizen organisations. It is the unequivocal conviction of the EEI that in the absence of such dialogue very little substantive improvements in the operations of nonprofit public benefit organisations will occur. Absent formal dialogue and vigorous efforts to popularise that dialogue, citizens at large will not renew their faith in government and in their own potential to organise for public benefit. 

Reform of other laws concerning citizens' organisations. A number of other laws touch on aspects of the domain of citizen organisation for public benefit. This final cluster of recommendations sets out a course for reform regarding the most important of these, including the Charitable Funds (Regulation of Collection) Act 1953, the Companies Ordinance 1984 (Section 42), the Trust Act 1882 and scattered enactments exclusively dealing with public trusts (Charitable and Religious Trusts Act 1920, Charitable Endowments Act 1890, Section 92 of the Civil Procedure Code 1902), the Religious Societies Act 1880, the Charitable and Religious Trusts Act 1920, the Cooperative Societies Act 1925 and the Wakf laws -- the Mussalman Wakf Validating Acts, 1913 and 1930, the Mussalman Wakf Act, 1923, and the provincial (Punjab, Sindh, NWFP, Balochistan) Wakf Properties Ordinance .
 

 
Instigated by the EEI, important liberalising reforms were instituted in 2002 through the Finance Ordinance (amending the Income Tax Ordinance 2001). These include:

Purposes broadened: “Development purposes” have been included in the definition of NPO in section 2(36). The definition of “charitable purposes” that was omitted has been re-inserted as section 2(11A). Through the Finance Ordinance 2002, the term “nonprofit organisation” has been included in Clause 58 and 59 to widen the purposes for which organisations are eligible for exemptions and other related benefits.

Utilisation of funds: The ceiling of maximum Rs 20,000 as unutilised funds for the year have been relaxed in the new tax rules. 

Rules made enabling: By promulgation of chapter XVII of the Income Tax Rules 2002 the whole fiscal regime has been made very enabling. The discretionary authority of tax officials has been greatly diluted by creating a provision of appeal and making it mandatory for tax officials to follow a mandatory timeframe and in case of rejection of tax exemption to give reasons in writing.

Mandatory condition of chartered accountant removed: The new tax rules have also provided for a graduated standard of financial reporting. Small NPOs are no longer compelled to provide accounts audited by chartered accountants. NPOs with annual receipts of less than Rs 0.5 million can file accounts audited by retired audit officer or a bank manager.

Principle of independent certification agency accepted. In Rule 211, the principle of having an independent evaluation and certification agency has been accepted and incorporated in the law.

Annual renewal changed to three-year renewal: Previously annual renewals were required. The new Rule 214, has provided for renewals up to three years subject to report of the certification agency and audit results.
                                                                                                                                 
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