China Daily reports that no more than 100,000 Chinese companies, only 1% of the country's total ten million registered firms, have had a history of making donations to charity.
But the rest 99 percent enterprises that never engage in charity work feel unfair to be called "parsimonious". They complain of the current tax law under which corporations' donations are exempted from income tax if the amount is within 3 percent. The ratio is 30 percent for individuals.
At the two-day China Charity Conference, began Sunday, Chinese government promised to provide a convenient and standardized service in donation-related tax reduction and exemption.
"It's not we don't have goodwill, but charitable work does not deserve corresponding result under present tax law," said Wang Jianlin, chairman of the board of Dalian Wanda Group, a famous company in northeast China's Liaoning province. "The more you donate, the more tax you have to pay."
"Given the low ratio of tax exemption, enterprises in China lack the economic incentive to donate," said Xu Yongguang, vice-chairman of China Charity Federation.
It is estimated that by the end of 2004, about 5 billion yuan (US$617 million) had been donated to China's charitable organization, accounting for 0.05 percent of the gross domestic product. In comparison, it was 2.17 percent in the United States.
"Despite differences of national conditions, such a large gap should set us thinking," said Xu.
Wang Zhenyao with Ministry of Civil Affairs's Disaster Relief Department attributed this to an under-developed tax policy.
"People in our country have not realized they can enjoy tax exemption if they make donations, which is one of the reasons why the tax policy is lagging behind." said Wang.
"Even if one knows that making donation can get tax exemption, he may give it up because of too much red tape to go." added Wang.
Speaking on his own experience, he said he once went through 10 official procedures in two months in order to get 50 yuan (US$6.16) tax exemption for his 500 yuan's personal donation (US$61.6).
"The procedure could frustrate anyone who try to regain tax exemptions from donation," Wang said.
However, any donations made by foreign-funded companies in China are totally exempted from tax. In 2003, the State tax watchdog allowed full tax exemption on donations to only seven designated charity organizations.
"We are negotiating with taxation and financial departments to work out the new tax reduction system for donations," Wang said,
