Debate: The proposal to build a ‘single market for philanthropy’
Date: THURSDAY, 21 OCTOBER 2021
Speaker: Mairead McGuinness
Language: EN

The field of arts and culture is at the core of philanthropy, and it is amongst the most important areas of funding for philanthropic organisations in Europe. Data shows that nearly half of the European Foundation Centre’s members have a main focus on arts and culture, and this is welcome. The cultural and creative sectors and industries have been hard hit by the fallout from the COVID-19 pandemic. Even at a time when the sector is gradually reopening again all across Europe, many challenges remain as the financial impact on the sector has been huge.  On top of this, natural disasters and the extreme weather we’ve seen this summer has added strain on venues and cultural heritage sites. Artists have seen venues closed and not always re-opening. Even with steady public funding, the sector remains vulnerable. Eurostat data shows that in 2018, cultural services represented, on average, 1% of governments’ expenditure. The amount remains unchanged since 2013. But the story these figures do not tell is that amounts vary greatly from State to State. Some Member States increase their expenditure, often responding to challenges from the 2008 economic crisis, but others have reduced it, putting greater pressure on a sector that is so important to our economy, to people’s livelihoods and to our sense of community.  Most countries put in place extraordinary measures just to support their cultural and creative industries during the recent pandemic and confinement. Indeed, so did the European Union, with the unprecedented NextGenerationEU package and a new MFF, which allows a higher number of EU funding sources for the cultural and creative sectors than before. But we know that this support cannot meet all needs.  A few examples: a recent survey shows that during the second wave of the pandemic, almost 7 in 10 museums expected budget cuts in the coming years, and they expect that it will be a long time until visits will be back to pre-COVID levels. In addition, half of the surveyed museums stated that they had not considered looking into alternative funding sources. So, on the one hand, we have pressure on the horizon. On the other hand, we have no clear, widely implemented way of relieving this pressure, and this brings me directly to the topic of our debate of philanthropy.  This philanthropy can help us catalyse a more holistic response to the vast challenges that lie ahead, from climate change to vaccination and social innovation. There is a great disparity amongst legal frameworks relating to philanthropy with regard to arts and artists across Europe. Corporate giving or donations as tools for corporate philanthropy are considered to be one-sided business transactions where donors contribute with money, time, information, goods and services to another organisation. Reasons to donate are therefore largely moral, expected to contribute to social welfare and understood as a pre-social spending or pro-social spending. For instance, in Romania, some of the largest private companies have included cultural heritage in their corporate social responsibility support programmes. Donations in general are covered by the Treaty, and these rules on free movement of capital apply, which create rights both for the donor and the recipient of a donation. This means that donors can donate cross-border and beneficiaries can accept foreign funding. Any restrictions by Member States need to pursue a legitimate public interest. The Commission will ensure that national measures, which restrict capital movements are risk and evidence based and proportionate.  Two forms of donations can be distinguished. Pure donations in which donors stay anonymous and public donations where donors are publicly announced and receive indirect benefits from the promotion of their name in public. Donations are generally considered as a deductible expense for corporate income tax purposes. In some environments, the subcategory of patronage is employed as a mechanism to provide support to good causes with some degree of expected return. In public donations and patronage, there is an element of societal recognition and reputation. However, these forms of contribution display a deeper, altruistic dimension than sponsorship actions and do not imply the generation of an immediate and tangible output.  In these cases, the boundary amongst public corporate donations and sponsorships may be difficult to draw. The regulatory and strategic frameworks of corporate-giving and patronage are key factors to promote and encourage these practices. In many European countries, donations are encouraged through a variety of different income tax deductions. Special fiscal schemes and tax benefits vary widely from state to state. Considerations upon legal entities, eligibility and general interest of the activities are important aspects to achieve social and institutional convergence.  For instance, Spain established a set of deductions applicable to the donations supporting the historical Spanish heritage assets. In this framework, the potential impact of non-monetary donations of professional services should also be recognised and encouraged. An additional model to consider is the one based on connecting business with individuals and the arts. A typical scheme is a business to arts found in Ireland, where businesses are matched with arts organizations and artists to develop solutions in areas such as sponsorship, commissioning, brand development, training, leadership development, internal and external communications and events. In this setup, business works with artists and arts organisations, providing a range of training opportunities and coaching to help diversify income streams, to grow audiences and improve efficiencies. Their corporate membership base and network ranges across the business sectors from local family-run companies, SMEs, semi-state companies to corporate foundations.  Another good example can be found in Belgium, where the foundation  The idea to have a single market for philanthropy should embrace all topologies of sources of financing I’ve just mentioned. Learning from best practices without prejudice to the possible application of state aid rules. When it comes to supporting arts and culture specifically, DG EAC hosted in January a complementary funding workshop for cultural heritage with over 100 good practices from our Member States and this included donations and therefore philanthropy, but also many more schemes such as public and private partnerships, lotteries and so forth.  In addition, the Commission is currently preparing two studies to identify barriers for cross-border activities of social economy actors and map the legal regimes of associations in the European Union, including for philanthropy.  The upcoming Action Plan for the Social Economy will look at these issues with a view to facilitating the implementation of the principle of non-discrimination regarding cross-border donations to public benefit organisations.  In this context, the Commission follows closely the ongoing work related to the Parliament’s own-initiative legislative report on a statute for European cross-border associations and non-profit organisations. Thank you, and I look forward to the debate.