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
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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
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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.
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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
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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
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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
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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
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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.
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Missing Roles of CSOs in Hungary
State sponsored service providing function endanger representative and participative functions:
• petitioning• advocacy• lobbying• consultations• campaigning• legitimacy building
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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
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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.
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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
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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
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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
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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.
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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.
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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
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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
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Public law contracts in Europe
• Contracts for public services
• Contracts for aid and development
• Contracts for share of responsibilities
• Contracts for supplementing public licences
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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
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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
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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
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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
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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
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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
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