AN EGG VS. AN ORANGE: A COMPARATIVE STUDY OF TAX TREATMENTS OF NONPROFIT ORGANIZATIONS

Abstract

This article focuses on the comparisons of the tax exemption schemes in the US and China through a three-fold discussion. Despite the tremendous development of China’s nonprofit sector, not many comprehensive studies have been completed on such reforms. The tax treatment of Chinese nonprofit organizations, as a crucial component to constructing a nonprofit sector, is unsophisticated and short of practical significance. The expansion of the nonprofit sector in the past decades has resulted in many problems concerning its tax framework: incoherently defined public benefit or charity purpose of nonprofit organizations; the unavailability of an enforceable fiscal incentive system to promote charitable donations, arduous and discouraging administrative procedure of obtaining the tax exemption, burdensome requirements for the application and registration of nonprofit organizations, such as dual management, high threshold of capital endowment for foundations, and prohibition on cross-region development. Moreover, from a jurisprudential perspective, in the Chinese tax context two cautions are methodologically identified. First, the scarcity of decent comparative legal tax scholarship in general does not support quality comparison. A shortage of paradigmatic discourse shows the simultaneous existence of bluntly conflicting arguments, parallel courses, and irregularities in analysis. Second, the tax cultural traditions as well as social, political, and legal settings of a systematic tax governance framework should be included in tax comparatists’ theorizations. A tax study ultimately has to be conducted from a “big-picture” perspective, in which a tax system is embedded. Otherwise, a comparative study may easily turn into a descriptive, mechanical, and perfunctory analysis. It argues that a comprehensive tax transplant effort of valued ideas and practices, although bold and uncomfortable for the recipient country at the beginning, is what China needs to build a robust nonprofit sector.

RIGHTS & PERMISSIONS

2014 Higher Education Press and Thomson Reuters