public benefit status revisited

Public Benefit Status Revisited

Daniel CsanádyDepartment of Social Studies

Budapest College of Management

About the Author• Public policy advisor in the Hungarian Parliament• Counsellor in the Hungarian Ministry for Culture and

Education• Drafter of laws on public benefit status, 1 % non-profit

tax benefit and National Cultural Fund• Counsellor of Hungarian NGOs on EU forums• Assessor of US, UK, NL, EU and EEA/NM donor projects

on local government and NGO development• Consultant on civil society development in Croatia,

Bosnia, Serbia, Romania and Ukraine• Editor of Budapest Review of Law and Politics• Lecturer at various universities on NGO issues

7/6/2009 2Public Benefit Status

Overview of Presentation• Milestones of Hungarian CSO

Development• Phases of Hungarian CSO Development• Legislative Initiatives of 1996-97• Ten Years After of 1996-97• Recent Initiatives of Restructuring

Contract Law in Hungary• Recent Developments of Consultation

Standards in Hungary


Terms and Abbreviations• Civil Society Organisation = CSO = NGO = VCO• State Controlled Organisation = SCO = GONGO = CIC• Public Benefit Organisation = PBO• Mutual Benefit Organisation = MBO• specific political categories: political parties, religious

societies, self governments of national and ethnic minorities, and social partners

• social partners: trade unions and employer organisations

• specific economic categories: cooperatives and mutual societies

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Programme and TaskSame programme as in the UK:• Private Action, Public Benefit• Prime Minister’s Strategy Unit, UK Cabinet Office• PM’s Strategy Unit proposes major shake-up of

UK Charity Law on 25 September 2002• modernising Charity Law• improving legal forms for charities and social

enterprises• ensuring independent, open and proportionate

regulation• building the public’s trust in the sectorHowever, our task in the Continent is different.


Milestones for CSOs in Hungary

Oscillation between civil society development and state controlled corporatism

• 1987: Reintroduction foundations into the Civil Code• 1989-90: Freedom of association, including

political parties, and freedom of religions• 1993-94: Introduction of public law association,

public law foundation and public law company into the Civil Code, and cut of tax advantages of CSOs

• 1996-97: 1 % tax benefit, and public benefit status for CSOs


Milestones in Hungary (cont.)• 1999-2001: 1 % tax benefit for churches, and

tax advantage for churches and parishes• 2002: Government Strategy for CSOs• 2003: National Fund for CSOs, Law on

Volunteers, and Special Foundations for Political Parties

• 2004: Accession to the European Union• 2005: Consultation process with CSOs on 2nd

National Development Plan for the EU• 2006: Law on lobbying


Transitionary Roles of CSOs1st Phase: Transition to Market Economy and

Liberal Democracy: mediating social and political changes

• 1988-90: developing liberal democracy, e.g. political parties, trade unions, business federations

• 1990-95: developing civil society: providing missing services, e.g. new cultural, educational and social services


Transition in Hungary (cont.)2nd Phase: Improving Market Economy: balancing

between private and public services• 1995-97: developing new services: opening

new markets, e.g. environmental protection, science & technology

• 1997-99: developing new services: breaking old monopolies, e.g. economic development, education & research

• 2000-04: developing quality services: providing services for privileged and underprivileged, e.g. elderly homes for rich and for poor retired people


New Roles of CSOs in Hungary

3rd Phase: Improving Participatory Democracy: mediating social and economic changes

• EU accession generated new opportunities and threats for quality services,

• to monitor old markets,• to open new markets again,• to strengthen local economies,• to improve communities services,• To represent members, clients, and beneficiaries• to participate in local, regional and

national development & planning.


Missing Roles of CSOs in Hungary

State sponsored service providing function endanger representative and participative functions:

• petitioning• advocacy• lobbying• consultations• campaigning• legitimacy building


Legislations of 1996-97• Act. no. CXXVI. of 1996 on donation of one per

cent of the personal income tax by voluntary decision of the taxpayer

• Act no. CLVI of 1997 on public benefit organisations

• Model for legislation is not the Charity Commission of England and Wales

• but the Crown Office of Scotland, and New York City’s PBO registry


Act on PBOs• A so-called sectoral legislation,• linking together private and public law

regulations,• defines the scope of public benefit

organizations (PBOs) at the one hand, and• determines the fiscal preferences they are

entitled, on the other hand.• Acts on Personal Income Tax, Corporate Tax

and other revenues determine the extent and terms of priviledges entitled to PBOs.


Reasons of 1 % Legislation• Bridging temporary decrease of state subsidies

– fulfilled• Promoting CSO activities to the larger society

– fulfilled• Urging on competition for private donations

– fulfilled• All in all: creating a market of public and

private supports– basically fulfilled


Expectations by PBO Legislation

• Restructuring public funding– partially fulfilled

• Strengthening private funding– basically failed

• Opening public service market– fulfilled in quality but not in quantity

• All in all: creating a market of public services– basically failed


Optimistic Conference in Poland

• Conference in Krakow of 25-27 May 2000• on Local Government–NGO Co-operation• with special attention on the Czech and

Hungarian experiences• organised by the Krakowskie Forum

Organizacji Sojalnych (KraFos)• initiated by Ms. Iwona Panlak, President of

KraFOS


Ten Years AfterLegal categories of foundations:• instead of open and closed foundation• we need non-endowed and

endowed foundations.

Legal categories of donations:• donation by unilateral will• sponsorship by bilateral contract• different kinds of state subsidies

by public law contract.


Ten Years (cont.)Exchange of benefits:• instead of decreasing tax advantages• increasing of them in needed• both in terms of quality and quantity.

Strengthening supervision:• by clear transparency requirements:

centralised mandatory reporting• by accountability requirements: standardised

operational rules and regulations.


Improving of Legal Environment

Draft law on general rules of public law contracts

• which is not about public procurement• which is not about state concessions• but law of public services and developments

by contracts

Creating national consultation standards• based on EU regulations, and• Constitutional rights of consultations


Contractual Relationships

private law relations

e.g. renting or leasing by private

partners

public law relations

e.g. licensing bypublic authorities

mixed legal relations

e.g. providing public services by private

organisations


Public law contracts in Europe

• Contracts for public services

• Contracts for aid and development

• Contracts for share of responsibilities

• Contracts for supplementing public licences


Public law contracts in Hungary

• Although there are special rules for special types of contracts in laws for special service areas,

• there is no general regulation for contracts by private and public partners.

• Hence, these contracts are ruled by the courts on private law principles,

• but managed by public authorities as administrative matters.

• Hungarian Ministry of Justice prepared a draft in 2006, which was rejected by the Government so far


Areas of public services involved

• Public education• Adult education• Social services• Child care• Health care• Cemetery service• Chimney service• Waste management• Water management• Public railroads• Public roads and highways• Public shipping and sailing• Public channels of telecommunication


Public service contracts• Processed by public and private partners• Since responsibility for services rests on a public

authority or agency, it needs extra rights.• These rights are unilateral intervention and sanction in

certain cases (e.g. special supervision, quality control, termination of services, ceasing contract, etc.).

• Since responsibility for management and implementation rests on a private partner, it needs extra guarantees (in case of late or non-payment, requiring extra qualities or quantities of services, etc.)

• Extra guarantees are also needed against corruption and other forms of abuses by power

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Consultation Standards in the EU

• Protocol No 7 on the application of the principles of subsidiary and proportionality, annexed to the Amsterdam Treaty (1997):

• Az Erópai Bizottság COM(2002)704. számú közleménye „Előrelépés a konzultáció és a dialógus kultúrájának megerősítésében - Általános elvek és minimális követelmények” tárgyban

• A Tanács 1083/2006/EK (2006. július 11.) rendeleteAz Európai Regionális Fejlesztési Alapra, az Európai Szociális Alapra és a Kohéziós Alapra vonatkozó általános rendelkezések megállapításáról és az 1260/1999/EK rendelet hatályon kívül helyezéséről



Consultation Rights in Hungary

• Constitution § 4. - Trade unions and other interest groups are advocating for employers, employees and members of co-operatives

• Constitution § 36. - Government duty to consult CSOs concerning public responsibilities

• Constitution § 61. (1) - Freedom of expression and access to public information

• Constitution § 64. - Right to petition the Government either individually or collectively

Rights Under National Laws• Act no. IV of 1957 on general procedures of

public administration• Act no. XI of 1987 on legislation

§§ 19-20, 27• Act no. LXV. of 1990 on local governments• Act no XIX of 2005 on the amendment on no

LXIII of 1992 on freedom of information and data protection


National Laws (cont.)• Act No. XLIX of 2005 on lobby activity

§ 1 (3) a) and (4)• Act No. XXIX of 2004 on necessary legal

actions for EU accession §§ 141-43 [Requests, petitions and reports for public interest] § 148 (2) e) [Annulations of Act No. I of 1977 on requests, petitions and reports for public interest]

• Act No. XC of 2005 on freedom of electronic information


Correspondence• For questions, please contact

Daniel Csanády• [email protected] • or +36-20-9570-470 cell• or +36-1-356-4695 tel./fax• ÁVF Társadalomismereti Tanszék

Villányi út 11-13,H-1114 Budapest


public benefit status revisited

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