Brazilian universities establish endowment funds | AGÊNCIA FAPESP

Institutions face challenges due to the absence of a culture of educational philanthropy and a lack of laws that provide tax incentives for donations, says the president of the Technological Institute of Aeronautics

Brazilian universities establish endowment funds

February 26, 2014

By Elton Alisson

Agência FAPESP – The endowment fund at Harvard University in the US recently surpassed $31 billion. In Brazil, at least eight institutions of higher education and research are in the process of establishing this type of investment fund, based on donations from individuals and corporations, to reduce dependence on single sources of funds to finance their education and research activities.

To duplicate this experience in Brazil, however, a change will have to be made to the current absence of a culture of private corporate investment and educational philanthropy, and laws will have to be drafted that offer tax incentives for investments in endowment funds at Brazilian universities.

This assessment was made by Rui Albuquerque, an advisor to the president of the Technological Institute of Aeronautics (ITA), in a talk given on January 23 at the Excellence in Higher Education symposium at FAPESP.

“The more endowment funding proposals that we have in Brazil and the clearer the importance of this type of private financing to research becomes, the higher will be the number of examples that will enable us to change the absence of a culture of private corporate investment in Brazil,” Albuquerque stated.

“If we can succeed in effecting new regulations for endowment fund investment tax issues, we will also be able to take a qualitative step forward, and this will surely give rise to a number of opportunities for establishing funds,” noted Albuquerque at the event, which ended on Friday, January 24.

Sponsored by FAPESP in partnership with the Brazilian Academy of Sciences (ABC), the meeting served as a forum for a discussion of what determines excellence in higher education in Brazil and for formulating recommendations that can inform public policy.

According to Albuquerque, the ITA; the Polytechnic School (Poli); and the School of Economics, Business Administration and Accounting (FEA) of the University of São Paulo (USP), in addition to the Getúlio Vargas Foundation (FGV), the Federal University of Rio de Janeiro (UFRJ), the Insper Institute of Education and Research, the Mauá Technology Institute and Mackenzie Presbyterian University, are in the process of establishing endowment funds.

However, the number of Brazilian universities and research institutions that are starting down this path is still low compared with the number in the United States.

“In Brazil, we’re not used to the idea of public interest donations that don’t have an immediate social and financial return,” Albuquerque said. Furthermore, according to the researcher, Brazil has a restrictive tax and legal system that offers no tax incentives, such as tax deductions or exemptions for donations made to funds already in existence, such as the one at Poli.

That institution’s endowment fund, which was established in 2011 and seeks to raise R$25 million in donations, pays approximately 10 different types of taxes today, similar to a regular company.

Any donation made to the institution’s fund is taxed at 4%, despite the non-profit nature of the investment, said Albuquerque.

“We need to change the laws in order to allow investments in endowment funds to offer tax incentives to donors and thus ensure the funds’ survival,” Albuquerque said.

Draft laws

One bit of good news, according to Albuquerque, is that there is a draft law – number 4643 of 2012 – under review in the Education Committee of Congress that proposes the establishment of an endowment fund at every federal institution of higher education in Brazil.

The law, drafted by federal representative Bruna Furlan (PSDB-SP) also calls for making donations to these institutions’ endowment funds tax exempt and for granting individual or corporate donors up to 12% in income tax deductions.

“This draft law was approved in December 2013 and received a favorable opinion by the rapporteur of the Education Committee [federal representative Leopoldo Meyer (PSB-PR)],” said Albuquerque. “Because it is a federal law, it will very likely have an impact on state and municipal laws as well.”

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