IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i8p4116-d531666.html
   My bibliography  Save this article

Tax-Exempt Status and Associated Factors among Charitable Foundations in China

Author

Listed:
  • Shuyang Wang

    (School of Business, Macau University of Science and Technology, Macao, China)

  • Xiaoyu Wu

    (School of Business, Macau University of Science and Technology, Macao, China)

  • Zhilin Li

    (School of Business, Macau University of Science and Technology, Macao, China)

  • Jing-Hua Zhang

    (School of Business, Macau University of Science and Technology, Macao, China)

Abstract

Tax exemption plays an important role in the sustainability of charitable organizations (COs). The 2016 Charity Law of China provides stronger tax incentives for charity donations. Using 767 observations of Chinese charitable foundations (CFs) during 2010–2018 from the China Foundation Center database and manually collected tax-exempt status data, this study applies multivariate logistic regression analysis to examine the association between tax-exempt status and related key factors, such as transparency and donation dependency. This study found that a one-point increase in the transparency score of a CF is associated with a 3.9 percentage points higher likelihood of having at least one type of tax-exempt qualification (OR = 1.039, p < 0.01). There is in general a significantly positive association between tax-exempt status and donation dependency of CFs in China. After 2016, the CFs responded actively to the tax incentive provided by the Charity Law, which in return requires a higher level of transparency. These results suggest that taxation under the legal system may effectively function to promote the sustainability of charity foundations in China in the long run. Further studies are needed to explore in-depth why CFs with advanced tax-exempt qualifications concentrate in Beijing and Shanghai.

Suggested Citation

  • Shuyang Wang & Xiaoyu Wu & Zhilin Li & Jing-Hua Zhang, 2021. "Tax-Exempt Status and Associated Factors among Charitable Foundations in China," Sustainability, MDPI, vol. 13(8), pages 1-15, April.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:8:p:4116-:d:531666
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/8/4116/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/8/4116/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Denis Cormier & Walter Aerts & Marie‐Josée Ledoux & Michel Magnan, 2010. "Web‐Based Disclosure About Value Creation Processes: A Monitoring Perspective," Abacus, Accounting Foundation, University of Sydney, vol. 46(3), pages 320-347, September.
    2. Liping Xu & Shuxia Zhang & Ning Liu & Li Chen, 2018. "Corporate Hypocrisy: Role of Non-Profit Corporate Foundations in Earnings Management of For-Profit Founder Firms," Sustainability, MDPI, vol. 10(11), pages 1-24, November.
    3. Victor R. Fuchs, 1996. "Individual and Social Responsibility: Child Care, Education, Medical Care, and Long-Term Care in America," NBER Books, National Bureau of Economic Research, Inc, number fuch96-1, May.
    4. Marianne Bertrand & Matilde Bombardini & Raymond Fisman & Francesco Trebbi, 2020. "Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence," American Economic Review, American Economic Association, vol. 110(7), pages 2065-2102, July.
    5. Duquette, Nicolas J., 2016. "Do tax incentives affect charitable contributions? Evidence from public charities' reported revenues," Journal of Public Economics, Elsevier, vol. 137(C), pages 51-69.
    6. Tiehen, Laura, 2001. "Tax Policy and Charitable Contributions of Money," National Tax Journal, National Tax Association;National Tax Journal, vol. 54(4), pages 707-723, December.
    7. Fuchs, Victor R. (ed.), 1996. "Individual and Social Responsibility," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226267869, December.
    8. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
    9. Paloma Escamilla-Fajardo & Juan Manuel Núñez-Pomar & Ana María Gómez-Tafalla, 2020. "Exploring Environmental and Entrepreneurial Antecedents of Social Performance in Spanish Sports Clubs: A Symmetric and Asymmetric Approach," Sustainability, MDPI, vol. 12(10), pages 1-17, May.
    10. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    11. Sebastian Ion Ceptureanu & Eduard Gabriel Ceptureanu & Vlad Liviu Bogdan & Violeta Radulescu, 2018. "Sustainability Perceptions in Romanian Non-Profit Organizations: An Exploratory Study Using Success Factor Analysis," Sustainability, MDPI, vol. 10(2), pages 1-23, January.
    12. Tiehen, Laura, 2001. "Tax Policy and Charitable Contributions of Money," National Tax Journal, National Tax Association, vol. 54(n. 4), pages 707-23, December.
    13. Hazem S. Kassem & Mohammed Aljuaid & Bader Alhafi Alotaibi & Rabab Ghozy, 2020. "Mapping and Analysis of Sustainability-Oriented Partnerships in Non-Profit Organizations: The Case of Saudi Arabia," Sustainability, MDPI, vol. 12(17), pages 1-25, September.
    14. Qingmei Xue & Yuning Niu, 2019. "Governance and transparency of the Chinese charity foundations," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 27(2), pages 307-327, May.
    15. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-1458, December.
    16. Kitching, Karen, 2009. "Audit value and charitable organizations," Journal of Accounting and Public Policy, Elsevier, vol. 28(6), pages 510-524, November.
    17. Lalin Anik & Lara B. Aknin & Michael I. Norton & Elizabeth W. Dunn, 2009. "Feeling Good about Giving: The Benefits (and Costs) of Self-Interested Charitable Behavior," Harvard Business School Working Papers 10-012, Harvard Business School.
    18. Antonio Luis Moreno-Albarracín & Ana Licerán-Gutierrez & Cristina Ortega-Rodríguez & Álvaro Labella & Rosa M. Rodríguez, 2020. "Measuring What Is Not Seen—Transparency and Good Governance Nonprofit Indicators to Overcome the Limitations of Accounting Models," Sustainability, MDPI, vol. 12(18), pages 1-20, September.
    19. Jun Zhuang & Gregory Saxton & Han Wu, 2014. "Publicity vs. impact in nonprofit disclosures and donor preferences: a sequential game with one nonprofit organization and N donors," Annals of Operations Research, Springer, vol. 221(1), pages 469-491, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zachary Halberstam & James R. Hines Jr., 2023. "Quality-Aware Tax Incentives for Charitable Contributions," CESifo Working Paper Series 10250, CESifo.
    2. Yamamura, Eiji & Tsutsui, Yoshiro & Ohtake, Fumio, 2018. "Altruistic and selfish motivations of charitable giving: The case of the hometown tax donation system (Furusato nozei) in Japan," MPRA Paper 86181, University Library of Munich, Germany.
    3. Julia Cagé & Malka Guillot, 2021. "Is Charitable Giving Political? Evidence from Wealth and Income Tax Returns," Working Papers hal-03877993, HAL.
    4. Amee Kamdar & Steven Levitt & John List & Brian Mullaney & Chad Syverson, 2015. "Once and Done: Leveraging Behavioral Economics to Increase Charitable Contributions," Natural Field Experiments 00775, The Field Experiments Website.
    5. Benediktson, Mathias Nylandsted, 2018. "Investigating the U-Shaped Charitable Giving Profile Using Register-Based Data," DaCHE discussion papers 2018:1, University of Southern Denmark, Dache - Danish Centre for Health Economics.
    6. Hou, Deshuai & Meng, Qingbin & Zhang, Kai & Chan, Kam C., 2019. "Motives for corporate philanthropy propensity: Does short selling matter?," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 24-36.
    7. Raphael Duguay, 2022. "The Economic Consequences of Financial Audit Regulation in the Charitable Sector," Journal of Accounting Research, Wiley Blackwell, vol. 60(4), pages 1463-1498, September.
    8. Nathalie Monnet & Ugo Panizza, 2017. "A Note on the Economics of Philanthropy," IHEID Working Papers 19-2017, Economics Section, The Graduate Institute of International Studies.
    9. repec:prg:jnlcfu:v:2021:y:2021:i:1:id:554 is not listed on IDEAS
    10. Eiji Yamamura & Yoshiro Tsutsui & Fumio Ohtake, 2023. "An analysis of altruistic and selfish motivations underlying hometown tax donations in Japan," The Japanese Economic Review, Springer, vol. 74(1), pages 29-55, January.
    11. Eiji Yamamura & Yoshiro Tsutsui & Fumio Ohtake, 2017. "Altruistic and selfish motivations of charitable giving:Case of the hometown tax donation system in Japan," ISER Discussion Paper 1003, Institute of Social and Economic Research, Osaka University.
    12. Dittrich, Marcus & Mey, Bianka, 2021. "Giving time or giving money? On the relationship between charitable contributions," Journal of Economic Psychology, Elsevier, vol. 85(C).
    13. Ashantha Ranasinghe & Xuejuan Su, 2023. "When social assistance meets market power: A mixed duopoly view of health insurance in the United States," Economic Inquiry, Western Economic Association International, vol. 61(4), pages 851-869, October.
    14. Simon G�chter & Arno Riedl, "undated". "Moral Property Rights in Bargaining," IEW - Working Papers 113, Institute for Empirical Research in Economics - University of Zurich.
    15. Maha Faisal Alsayegh & Rashidah Abdul Rahman & Saeid Homayoun, 2020. "Corporate Economic, Environmental, and Social Sustainability Performance Transformation through ESG Disclosure," Sustainability, MDPI, vol. 12(9), pages 1-20, May.
    16. Bruno Amable & Donatella Gatti & Jan Schumacher, 2006. "Welfare-State Retrenchment: The Partisan Effect Revisited," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 22(3), pages 426-444, Autumn.
    17. Kim, Sang-Joon & Bae, John & Oh, Hannah, 2019. "Financing strategically: The moderation effect of marketing activities on the bifurcated relationship between debt level and firm valuation of small and medium enterprises," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 663-681.
    18. Susan Dynarski & Daniel Hubbard & Brian Jacob & Silvia Robles, 2018. "Estimating the Effects of a Large For-Profit Charter School Operator," NBER Working Papers 24428, National Bureau of Economic Research, Inc.
    19. Marco Allegrini & Giulio Greco, 2013. "Corporate boards, audit committees and voluntary disclosure: evidence from Italian Listed Companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(1), pages 187-216, February.
    20. Bettis, J. Carr & Bizjak, John & Coles, Jeffrey L. & Kalpathy, Swaminathan, 2018. "Performance-vesting provisions in executive compensation," Journal of Accounting and Economics, Elsevier, vol. 66(1), pages 194-221.
    21. Yingying Xin & Xiao Zeng & Zhengying Luo, 2022. "Customers' tone in MD&A disclosure and suppliers' inventory efficiency: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3833-3853, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:13:y:2021:i:8:p:4116-:d:531666. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.