Big charities are claiming income tax exemptions while small non-profits struggle to gain official charity status under the current rules, a new report says.
The New Zealand Initiative’s latest report, titled Giving Charities a Helping Hand, calls for the Government to provide greater transparency in the charity sector, set clearer rules and processes, and remove the “unfair” tax advantages enjoyed by the for-profit arms of charity groups.
The business lobby group analysed 12 years of regulatory change to find the current legislation allowed the commercial arms of large charities to claim income tax exemptions with little oversight into how much money was passed on for charitable purposes.
At the same time, smaller operators were struggling to achieve or keep registered their charity status, threatening the important work they did in New Zealand communities, report author Jason Krupp said.
“With about $16 billion flowing into charities a year, it is absolutely necessary to have effective regulation in place to maintain the public’s trust in the sector,” he said.
“Unfortunately, we appear to have set the regulatory bar too high in some places.”
The current law is inconsistent with some small charities struggling to get registered, while large trading companies are registered.
The same legislation allowed large charities with commercial arms to keep their earnings within the business tax free, regardless of how much of the profits were distributed to charities or what the charities did with the funds.
Such companies included food giant Sanitarium, Ngai Tahu’s 38 limited liability companies (which included Shotover Jet and Whale Watch Kaikoura), private schools, and private hospitals like St George’s Hospital in Christchurch.
“We’re not saying religious and cultural groups can’t be charitable but we need a levelling of the playing field,” Krupp said.
He wanted the Government to “rebalance” the charity sector by reviewing the Charities Act and the definition of charitable purpose.
I’d like to see it reviewed. I do not think the advancement of religion should be a charitable purpose. There is no benefit to society in having groups promote a belief in a supreme being or beings. Many religions do a lot of very good charitable work, and would still qualify for charitable status. But it should be based on what they do, now on promoting a belief system.
Who should promoting evolution or jihadism (both tenents in holy books) be a charitable purpose, but promoting science is not?