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Non-Governmental Organisations in Estonia

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The task of the civil society is to regulate the strains in the state, market and community spheres, and to provide for the needs and protect the rights of different social groups. The main organs for performing these duties are non-governmental organisations. This summary concentrates on non-profit associations and foundations organised by groups of people working for a cause which is beneficial to society and contributes to the development of democracy in Estonia. The articulation of citizens’ demands is carried out by voluntary organisations — the number of which can be estimated at 3500. This includes a wide variety of organisations from small informal local initiatives to larger formalised structures.

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Background

Every development in civil society has been connected to the history of the country. The history of the development of civil initiatives in Estonia dates back to the 1860s — often called the era of awakening. This was the time of the "tutored" initiative, when mainly peasant Estonians formed societies according to the Baltic German model, in order to retain their cultural identity. The drive towards independence continued, but was limited by Russification in the period 1880—1918. Cultural and educational societies were the backbone of the movement in this era.

The period between the two World Wars was marked by the explosive growth of civil initiative encouraged by the period of independent statehood. The Estonian League of Singers, with its 742 member organisations, the Red Cross, women's unions should be mentioned among the most prominent.

The years 1940—1988 were marked by mass banning of associations and societies. The remaining ones were usually transformed into quasi-independent institutions of social control under communist regime. In practice, civil activities were directed towards amateur art and sports activities. The resistance against the regime once again took the form of cultural activities typified by the popular Song Festivals with massive participation.

The new era of major changes for non-profit organisations began in 1988. The changes could be summarised and characterised by three keywords: de-sovietisation, restitution and modernisation. Massive Soviet-type organisations such as the sports organisations Spartak and Dynamo were either dismantled or started to crumble when left without external support. On the other hand, the large-scale process of restoring the voluntary associations active before 1940 began. The Estonian Students Society, which publicly displayed the national flag, the Estonian Women’s League, the Defence League were among the first. Modernisation of civil society institutions was marked by intensive co-operation with Western Europe, particularly, Northern Europe and the introduction of democratic development models. The Swedish, Finnish and Danish models and assistance have been most notable in the field of adult education. This period was also characterised by political enthusiasm and the return of Christian values to Estonia. Massive popular movements such as the Green Movement, the Cultural Heritage Protection Society, the Popular Front, and the Estonian Citizens’ Committee were formed setting the tone for the newly emerging political parties. Estonia regained her independence in 1991 and this year marked a huge growth in the number of non-profit organisations.

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Legal framework

Between 1991 and 1994, the Citizens’ Unions Act regulated all non-governmental organisations established by private initiative. All types of organisations: associations, political parties, trade unions, foundations , etc. were covered by this law. No legal distinction was made between membership or non-membership organisations, political or non-political activities. The next step was the Non-profit Associations and Their Federations Act, passed in Parliament in March 1994. The Act regulated membership organisations but failed to regulate other non-profit organisations such as foundations. To found a non-profit association, at least 3 private individuals were needed but legal bodies were not allowed to join.

The next stage of legal development started in 1995 when separate laws on religious entities and political parties were passed. The Non-profit Associations Act and Foundations Act became into force on 1 October 1996. Both of the laws took into account the principles of the General part of the Civil Code regarding the legal capacity, location and name of the organisation.

The Non-profit Associations Act regulates the activities of all membership non-profit organisations. The Act states clearly that profit cannot be the principal purpose of the not-for profit association and revenues raised may only be used to achieve statutory goals. The Act also specifies requirements for the members, order of admission, secession, exclusion of members, and the rights and obligations arising from membership. Members can be individuals as well as juridical persons.

The Foundations Act states that a foundation is a non-membership legal entity set up to manage property and to pursue stated objectives. The Act sets limits on the activities of foundations, stating that a foundation is allowed to engage in economic activities, but that disbursements can only be made for charitable or social purposes. Founders of a foundation may be individuals as well as juridical persons, and further that it may be established by the last will and testament.

Both Acts regulate the activities of governing bodies in detail. The chapters concerning dissolution, merger and separation are regulated more explicitly than in any previous law.

A legal register of non-profit associations and foundations, maintained by courts on a regional basis will be open to public inspection.

The opportunity to make transactions prior to registration as a legal entity, as also to pursue one’s activities without registration as a legal entity (in the form of a contractual institution "seltsing") are also considerable advances.

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Fiscal rules

The Estonian not-for profit associations and foundations do not have automatic tax exemption. The two main laws effecting these NGOs in Estonia are the Income Tax Act and Value-Added Tax Act. Both of the laws have been frequently amended. The Income Tax Act of 1 January 1994 states that non-refundable funds, received from foreign donors, in addition to membership and entrance fees for non-profit organisation are tax-exempt and enables them to apply for tax exemption on donations and income from economic activities. The exact requirements for applying for tax-exempt status and deadlines are indicated in the Government Order (of 11 June 1996). In order to qualify, an organisation’s activities must be connected with support to charity, science, culture, education, sports, health care, social welfare, environment protection, or religious congregations in the public interest. The respective list of organisations is determined by local divisions of the Tax Department on a case-by-case basis each year. The final decision is made by the Government.

As for donations, juridical persons qualify for tax-exemption of up to 10 per cent of their income if the donation is made to a "listed" organisation. Individuals have to pay taxes on funds they donate to the non-profit sector. The stipends and grants are tax-exempt for beneficiaries only if the grant or organisation is on the "list" and the provision of grants is an activity envisaged in the organisation’s statutes.

Non-profit organisations are not exempted from VAT, but the goods and services, purchased or imported by the organisations through non-refundable foreign aid are tax-exempt (as stated in the amendment to the VAT act of 22 February1995). Specific rules are set out by Ministry of Finance regulations.

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Non-profit sector today

The level of activity of non-profit organisations is remarkable today. Over 5700 civic groups and organisation have been documented by the Institute of International and Social Studies since the beginning of 1990s. Numerous community- level organisations have not been registered but at the same time many organisations have ceased their activity. All non-profit organisations dealing with culture and recreation, education and research, health, social services, environment, development and housing, law, advocacy and politics, philanthropic, international activities, religion, business and professional associations and unions are represented in Estonia. In 1995 the number of active associations, societies and organisations was estimated to have reached 4000, including approximately 440 professional and 500 religious associations (congregations), over 800 sports associations, 230 foundations, etc.. There were about 30 unions or federations of organisations. According to the latest data (Oct. 1996) from the Statistical Office of Estonia the number of registered non-profit organisations was 3145 (including about 20 political parties but excluding religious organisations). This number, though, is not exact as the Office uses a unique classification system and to calculate the total, numerous sub-groups should be taken into account. Besides, the Office lacks accurate data on the dissolution of organisations. Furthermore, to estimate the number of active non-profit organisations, the data available from the official lists of tax-exempt organisations could be used as an indicator. 1510 organisations (including religious congregations) were included in the 1995 list.

In terms of geographical distribution, the largest number of active organisations was in Tallinn (1600) and in Tartu (600). Of all organisations 64.2% were urban. The average number per county being 150. Seventy-five per cent of the organisation consider themselves proficient at dealing with local issues and 20% with national. Four per cent of organisations represented international organisations in Estonia.

It is practically impossible to estimate the number of people active in the non-profit sector. The last comprehensive surveys conducted in 1993 and 1994 showed that Estonians prefer very large organisations, with more than 100 members, or very small ones, with less than 30. At least one in seven Estonians participated in non-profit activities and, taking into account the church congregations and trade unions, the ratio increased to one in four. Women have traditionally been more involved, and made up two thirds of the total membership. The age distribution showed that people aged between 40 and 59 were most likely to participate ( 39.3 % of the age group).

Estonian Human Development Report, conducted by the UNDP in 1996, showed that people connect themselves with trade unions (14%), religious organisations (4.5%), professional associations (3.7%) and sports clubs (3.2 %). However, a very large percentage of individuals are not aware of their membership of civil organisations. There was a significant gap between membership numbers and active participants. Religious congregations, for example, claim that the number of their members was 220 000, but according to research the number does not exceed 45 000. The political parties indicated 12 000 as a total number of members, while only 7000 individuals are cited by the survey. One reason for not esteeming their membership could be that citizens do not consider civic initiatives to be a solution to their problems. Integration of civic initiatives and their influence on the public has been slow. However, positive tendencies for the development of the sector are apparent.

The significant reduction of the State’s role in social welfare has resulted in the emergence of many self-help and charity organisations. Non-profit organisations addressing disease and disability problems have increased the most. For example, the Union of Societies for the Disabled initiated the law granting unemployed status to the partially disabled, which facilitates the group’s participation in the labour market.

The emergence of a pensioners’ movement must to be stressed as well. The organisation of pensioners’ has been very active both at the political party level and local, non-partisan level. It resulted in the state giving priority to old age pension over other social-welfare payments.

On the other hand, the weakness of organisations designed to help children, and those dealing with environmental protection and also the deficiencies in the trade unions’ protection of their members’ economic interests have to be highlighted.

No data is available about revenue sources for not-for profit associations and foundations, though it has be estimated though that in many cases foreign assistance accounts for more than two thirds of all income. For these organisations self-sustainability is a critical issue. The level of private donations has been extremely low and economic activities undertaken by non-profit organisations have been seriously hindered by unfavourable tax laws. Only some 50 NGO-s have been supported also by the state budget through the intervention of Ministries of Social Affairs, Culture and Education. Whilst there is a support scheme for institutions dealing with adult education. The general tendency is to support different projects instead of organisations in general from the state budget.

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Conclusion

The diverse non-profit in Estonia continues to grow. The organisations’ immediate tasks are to react to changes in legislation and meet the new requirements. The established framework will hopefully contribute to the overall development. The new type of register for non-profit associations and foundation will enable the analysis of current situation and the prevision of reliable data. Remarkable efforts have been made by the Jaan Tõnisson Institute and the Estonian Federation of Non-Profit Associations and Foundations, which serve as NGO support centres, to classify existing organisations and provide data about them and to consult and train other organisations. One of the major problems non-profit organisations jointly have raised is insufficient financing for their activities. They will continue their efforts to convince the State to delegate some of its tasks with adequate funding to NGOs, whilst continuing to press for a favourable climate for philanthropy through tax-exemptions, also for individuals. Non-governmental organisations in Estonia have become more focused, active and professional in lobbying and advocacy. The role of the civil society in development has been acknowledged more and more.

Heli Kask

Heli Kask is a member of the board of the Estonian Federation of Non-Profit Associations and Foundations.

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This fact sheet is published by the Estonian Institute in February, 1997 and is intended to be used for reference purposes. It may be freely used in preparing articles, speeches, broadcasts, etc. No acknowledgement is necessary.