THE RESEARCH ON FISCAL AND TAX EFFECTS ON DONATION INCOME OF CHINA’S FOUNDATION

In this paper, which is based on China’s current fiscal and tax policies and datacollected from national foundations in 2010, we used donation income as a dependent variable,and pre-tax deduction qualification, government grants, type of the foundation (charitable ornot) as explanatory variables, and thus propose three hypotheses. Total assets, investmentincome, public benevolent activities expenditure, and definitive net asset ratio were also usedas control variables in constructing an econometric model to analyse the effects of the fiscaland tax policies.We conclude that: Pre-tax deduction qualification has a significantly positive effect on thedonation income of a foundation. The income of government grants and the donation incomeshow a U-shape relationship, which suggest the existence of crowding-out effect andcomplementary effect. Given its charitable nature and necessity, however, charitablefoundations do not receive more donation income. Total assets, philanthropy expenditure anddonation income present significantly positive correlations, while investment income anddonation income are negatively correlated, although not significantly. Definitive net asset ratioand donation income present a U-shape relationship. We finish by forwarding severalsuggestions on the current fiscal and taxation policies based on the above findings