Monday, 1 June 2009

VAT on pro bono services

Should pro bono legal services be subject to a value-added tax? Some jurisdictions do impose VAT on the value of pro bono legal services, while some limit VAT to the amount of fees actually charged.

As the U.S. contemplates imposing a value-added tax -- see 'Once Considered Unthinkable, U.S. Sales Tax Gets Fresh Look' for background -- the issue should be explicitly considered as related to pro bono, and lawyers presently subject to value-added taxation doubtless have a great deal to share.

What are your views and experiences in this area?

Posted by Robin Westbrook
IBA Pro bono and Access to Justice Committee


  1. Jacek Kowalewski9 June 2009 at 07:51

    The issue is being under discussion in Poland. Let me share a few words on it but please mind I am no expert in taxes and I am not following the discussion that thoroughly.
    According to one interpretation, the one defended by the government, pro bono advice is subject to VAT. Apparently the Polish Ministry of Finances claimed that the European Comunity law did not provide for any exemptions in this respect. However, the Polish Ombudsman replied such exemption was possible, indeed, unless to the detriment of free competition.
    A recent draft bill aiming at exempting pro bono legal advice from VAT provides the following conditions: 1) that the advice was commissioned by organisations of various legal professions or by pro bono associations (generally speaking: qualified NGOs recognised under a separate bill); 2) that the providers kept due records, for the sake of transparency.
    The value at stake, that has to be balanced with broadening access to justice, is free competition. As I am involved in clinical legal education, where similar tension appears, clearly I find this discussion worth keeping track.
    Interesting is then the issue of transparency. I am not certain whether the term is referred to often enough in connection with legal clinics. Apart from assuring sponsors their money is spent reasonably, transparency may be a key issue when it comes to convincing legal bars that clinical students are no substantial competition, and may be actually a partner in common service...

  2. It is worth noting for those not already aware of it, that the IBA Pro Bono Declaration asks governments to encourage pro bono legal service by exempting it from, or by rolling back, such taxes.

    The Declaration addresses this issue in operative paragraph 7 as follows:

    7. The Council calls on governments to promote and support the pro bono efforts of the
    legal profession in their countries and to desist from in any way deterring the provision
    of such service. Further, governments should assist and encourage pro bono legal service,
    through measures such as treating it as not being subject to tax, and where such service is
    presently taxed, such taxes should be rescinded.

  3. I was counsel on a case in Canada seeking to abolish a provincial tax on lawyers' bills, as an infringement on a litigant's right to access justice as implied in the very concept of the rule of law, particularly as the tax affects low income clients who are ineligible for what little legal aid is available. We succeeded in abolishing the tax, in part, at the trial level and at the Court of Appeal, only to be overturned by the Supreme Court of Canada. The trial and court of appeal decisions are particularly fascinating for those interested in these issues.

    Christie v. AG of B.C. et al, 2005 BCSC 122:
    Christie v. British Columbia, 2005 BCCA 631;
    British Columbia (Attorney General) v. Christie, 2007 SCC 21

  4. In Australia, I believe there is an acceptance that pro bono services are too difficult to value thus making taxation rather difficult. However the debate is now going on about whether law students debts to the governemnt for study fees could be forgiven in return for community and pro bono legal work. They will have to be valued if this proposal goes ahead.

  5. Robin Westbrook, Pro Bono and Access to Justice Committee18 June 2009 at 12:42

    How interesting to look at debt repayment programs for information on valuation of pro bono work. On the subject of debt forgiveness, you might look at Yale Law School's COAP program, which forgives debt obligations to the University in years in which graduates earn, in general, less than $60,000 per year. Thus it offers debt forgiveness without requiring valuation of the borrower's pro bono contributions. (Indeed, the borrower need not be employed in pro bono work to benefit from the program; it is available to government employees and others earning less than the threshhold amount). See

  6. Robin Westbrook, PB&A2J2 July 2009 at 15:28

    Thank you "batorego" for the references to the Christie litigation in Canada. Do I properly understand that the lower courts required a waiver for low-income persons only and would leave the 7% tax in force for others?

  7. Robin Westbrook, Pro Bono and Access to Justice Committee2 July 2009 at 15:55

    Further, is the tax imposed only on the stated "purchase price" of the services, so that services rendered for no fee are not taxed?