Overcoming Barriers to Cross-Border Philanthropy, Unleashing Ways Towards A More Ambitious and Resilient Europe

By Hanna Surmatz, Hanna Stähle and Stephanie van Berckel

The European Social Economy Summit organised by the City of Mannheim in partnership with the European Commission on 25-26 May brought together over 3,000 representatives of the growing social economy sector in Europe, including philanthropy and civil society. Foundations and philanthropic organisations play a key role in the European social economy sector as funders and investors as well as social economy actors in their own right.

“Enabling Philanthropic Action for Social Economy and Public Good” was the name of the roundtable at the Summit organised by Philanthropy Advocacy on 26 May with Ann Branch, Head of Unit at Directorate-General Employ of the European Commission, Vice-President of the European Parliament Nicola Beer, Laurence de Nervaux from Fondation de France and Dr. Oonagh B. Breen, Professor of Law at the University College Dublin, moderated by Ludwig Forrest, Head of International Philanthropy at King Baudouin Foundation.

Single Market is not yet a reality for civil society and philanthropy in Europe

The roundtable explored how the EU Institutions can help enable European foundations and other social economy actors to contribute as partners to a socially, environmentally and economically resilient Europe. Europe’s philanthropic organisations have responded in agile ways to the COVID-19 pandemic, mobilising tremendous support and showing much needed flexibility. As Ann Branch has emphasised, “The COVID-19 crisis has exacerbated existing inequalities. This is a massive investment challenge and we need to join all forces to tackle this challenge.”

“The COVID-19 crisis has exacerbated existing inequalities. This is a massive investment challenge and we need to join all forces to tackle this challenge” – Ann Branch, Head of Unit at DG Employ of the European Commission

To meet this “massive investment challenge,” Europe needs to mobilise all its existing resources, including philanthropy. As mentioned by Ludwig Forrest, the 2019 EESC Opinion “European Philanthropy: An Untapped Potential” acknowledges the added value that philanthropy can bring and its innovative and complementary role in our societies and has not lost its relevance today. At the same time, this study outlines the existing barriers to cross-border donations and investments.

Tax-effective giving and asset allocation across borders are complex and burdensome, for both large and small philanthropic organisations. This contradicts the non-discrimination principle established by the European Court of Justice. Yet theory and reality have not been aligned yet.

“I will not accept that it is easy to earn money within a Single Market, that there is flexibility for businesses but not for philanthropic actors” – Nicola Beer, Vice-President of the European Parliament

In her speech, Nicola Beer highlighted some of the barriers to cross-border philanthropy and reassured: “I will not accept that it is easy to earn money within a Single Market, that there is flexibility for businesses but not for philanthropic actors”. When a philanthropic organisation seeks to move seat or seeks to merge with another cross-border philanthropic organisation, it encounters many procedural and a lot of administrative and fiscal barriers that do not exist for for-profit organisations. Nicola Beer has emphasised her commitment to work on “enabling the single market for philanthropy for the benefit of the European citizen” so that “donors and foundations and philanthropic organisations can enjoy the full freedom of capital and are not discriminated against when acting across borders.”

Other barriers, which have been investigated by Dr. Oonagh B. Breen’s in her illuminating study on “Enlarging the Space for European Philanthropy”, stem from overtight implementation of EU  policy to counter-terrorism financing and money laundering and confirming fiscal and legal barriers to cross-border philanthropy arising from incompatible and EU law conflicting laws and practices.

Overcoming barriers to cross-border philanthropy

1. Making the case and speaking with one voice

The most important tool in overcoming barriers for cross-border philanthropy is speaking with a united voice of European philanthropy that tells the story of philanthropy. Few people know about philanthropy and its economic weight. In order to create visibility and credibility, Laurence de Nervaux and Nicola Beer called for storytelling and illustration of the multiple facets of the sector. There are different forms of philanthropy across Europe such as trusts, companies, foundations as well as different legal and cultural traditions to describe the space such as public benefit, philanthropy, charity.

However, some common core elements exist. Working towards “a European concept of public benefit” could be an important starting point for overcoming barriers to cross-border investments and giving, according to Nicola Beer. Member of the European Parliament Sergey Lagodinsky is currently leading a dossier that aims to create a European legal form for non-profit associations and philanthropic organisations. In addition, it would be worthwhile to work towards a better implementation of the non-discrimination principle, for instance, via a code of conduct.

“We are a philanthropic orchestra” – Dr. Oonagh B. Breen, Professor of Law at the University College Dublin

Such efforts should not be seen as uniformisation, on the contrary, there is strength in the diversity and the different forms of European philanthropic organisations. As Dr. Oonagh B. Breen has rightly pointed out, close cooperation is key: “We are a philanthropic orchestra; we are all singing the same song, but our pace may be different. If we can get everyone in the same room for the policy window to open, there can really be a chance to let the orchestra sound across Europe.” According to Laurence de Nervaux, working towards a common definition of public benefit could boost philanthropic giving and investments in Europe.”  In order to cooperate effectively, according to Ann Branch there is still work to be done: “exchange of practices, encouraging innovation and spreading awareness.”

“Ever tried. Ever failed. No matter. Try again. Fail again. Fail better” – Samuel Beckett

So how do we create a single market for philanthropy and public good? First of all, by letting the voice of European philanthropy be heard to policymakers, to the private sector and most importantly to civil society. We must try new and different methods for philanthropy to grow stronger in Europe. “Ever tried. Ever failed. No matter. Try again. Fail again. Fail better” – a powerful quote by Irish writer and poet Samuel Beckett, which Dr. Oonagh B. Breen linked to the efforts of the philanthropic sector.

2. Non-Discrimination and Momentum

The sector must try to gain greater protection of the free movement of capital in Europe. This is supported by the European Court of Justice, which advocates that free movement of capital is not only for business capital, but also for philanthropic capital. Domestic regimes cannot discriminate against charities and foundations of other Member States. The Social Economy Action Plan could include recommendations in this regard including soft law measures such as a code of conduct. As Dr. Oonagh B. Breen’s study on “Enlarging the Space for European Philanthropy” demonstrates, information around comparability processes operated by Member State tax authorities when faced with cross-border philanthropy cases must be made clear and publicly available in order to enable the fiscal space for cross-border philanthropy in Europe.

In addition, the philanthropic sector should simultaneously engage around EU instruments, such as the InvestEU Programme, Creative Europe Programme, Horizon Europe. It can use these instruments as a catalyst for co-granting and to grow a louder voice of philanthropy.

Philanthropic organisations still face barriers when operating across borders, but the visibility and credibility of philanthropy are growing. Ann Branch has pointed out that European institutions value the “partnership with foundations for the public good” and there is goodwill from European countries. It seems that there is a good momentum among policymakers, academics and citizens to promote a more enabling environment for cross-border philanthropy with the aim to mobilise resources needed to create an economically and socially resilient Europe.

About the European Social Economy Summit 

The #EUSES is a jointly organized digital conference by the European Commission and the City of Mannheim. The #EUSES is a conference that aims at strengthening the social economy in Europe and harness its contribution to economic development, social inclusion as well as green and digital transitions. The discussions will focus on three dimensions: digitalisation of the Social Economy, (social) innovation, cross-country and cross-sectoral collaboration. The #EUSES is an opportunity to bring all stakeholders active in the social economy together.

Relevant Links

Mannheim Declaration on Social Economy

Plenary session on Mainstreaming Social Economy in EU policies including a keynote speech of Commissioner Nicolas Schmit and messages from MEPs Patrizia Toia, Sven Giegold, Manon Aubry and SEE President Juan Antonio Pedreño

Keynote speech by Commissioner Thierry Breton

Mannheim Declaration on Social Economy, including 10 key proposals for EU action in the framework of the Social Economy Action Plan