The current tax system provides tax benefits for contributions, through income tax law for individual's contribution and through corporation tax law for corporation's contribution. The extent of tax benefits given to contributions of individuals depends on two factors, type of income of contributor and type of activity to which contribution is made. Usually, the extent of the tax benefit depends on the type of NPOs or activity. On the one hand, all contributions to NPOs engaged in the activities stipulated within certain tax laws, and, on the other hand, contributions to NPOs engaged in another activities are permitted partial tax deduction. According to tax laws, the extent of tax deduction for individual contributor depends upon whether he/she is a wage earner without business income including real estate, or timber income. And the size of tax deduction also depends on type of activity in which nonprofit corporation is involved as stipulated by the income tax law and other tax laws related to tax benefits or exemption for NPOs. For contributions by corporations, it depends only on type of nonprofit activity to which contribution is made.
The scope of nonprofit activities eligible for tax benefits of contributions are recommended to be extended to include activities that are not favored by the government, but deserve to attract more donations from the private sector. The tax laws, providing differential tax benefits for contributions to different nonprofit activities, are to be restructured based on objective and social welfare criteria. For nonprofit sector to be able to secure contributions enough to support activities, NPOs be allowed to solicit funds from the general public. But, government does not allow solicitation of funds from the general public because of possibility of fraud and abuse of the collected funds.
In Korea, the Control Act on Solicitation of Contributions imposes restrictions on nonprofit solicitations from the general public. The aim of the law is to prevent abuse or misuse of fund solicitation and to encourage proper use of solicited funds. It states that any nonprofit organization that intends to solicit funds from the general public should get approval from the competent authority, head of the local government, as prescribed by the presidential decree. Not allowing solicitation of funds world limit and weaken financial sustainability of NPOs. Therefore, it is recommended that the law restricting solicitation of contributions from the general public be amended or totally repealed from the civil sector. Related to government's policy for financial ability of NPOs, the issue is whether government should provide direct financial support through subsidy using public money or not. Recently, the Korean government has made legal basis by introducing NPO Supporting Law, through which the government can provide public funds to help civil and advocacy organizations carry out their programs. But it is still to be a controversial issue among Korean NGOs whether they should receive public money for possibility of financial dependence on government and losing their independence from the public sector. It might be too early to suggest any policy recommendation with respect to direct government's financial support.
It is not unusual that nonprofit corporations are, using the legal privilege, involved in misconduct in delivering services for the public good or financial embezzlements, related to use of donations and incomes from profit-seeking business. This has become a negative factor affecting society's view on the role of nonprofit corporations. Government should try to reduce or eliminate, in advance, the compelling worry of the general public by including the stipulations within the law, while encouraging and helping incorporation of nonprofit organizations for pursuance of nonprofit activities.
