Episode Transcript
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Speaker 1 (00:06):
Yoda. I am Chelsea Daniels and This is the Front Page,
a daily podcast presented by the New Zealand Herald. If
you ever feel like you're always being asked to donate
money to some cause or another, you're probably not wrong.
In New Zealand, there are more than twenty eight thousand
registered charities with an annual income of more than twenty
(00:28):
one billion dollars, on top of over one hundred and
ten thousand not for profit organizations. Legislation leaves the definition.
Speaker 2 (00:37):
Of a charity pretty broad.
Speaker 1 (00:38):
If you say you're tackling poverty, advancing educational religion, or
beneficial to the community in any way, you could probably
sign up to the charities register. That broad definition is
in the spotlight again this week, though, after an aggressive
protest by Destiny Church members at a Rainbow Family event
sparked backlash over the church's charitable status.
Speaker 3 (01:03):
They came inside and they were trying to get up
the stairs, and the library staff were just like trying
to calm them down and to tell them they can't
come upstairs, and then they got wrapped up and started
china hit people.
Speaker 2 (01:16):
I was shocked.
Speaker 3 (01:18):
I didn't know what they were doing and why they
were doing it.
Speaker 1 (01:22):
So is the law up to date or is it
time we take a look at what organizations are getting
a tax break today on the front page. Former independent
advisor to the Tax Working Group, Andrea Black is.
Speaker 2 (01:41):
With us to discuss.
Speaker 1 (01:45):
Andrea, so, can you tell me a little bit about
how the Charities Act works at the moment.
Speaker 2 (01:50):
The Charities Act itself on application allows any entity or
trust that has the objectives of advancing education, religion, relief
of poverty or general good things the community can become charitable.
You also have to show that the charity itself, any
(02:14):
funds that it's getting, are going towards those objectives and
that there aren't any sort of off the scale amounts
of money going to any trustee or anybody connected with
a charity. Now, if you've gone through these hopes and
Charity Services says yep, your charity your registered charity. And
every year you have to file something called mean your
(02:36):
return which shows who are your offices, and you generally
have to, depending on how large you are, file some
form of accounts in some form of reckoning of what
you've done in a year. Now, if you've hit all
those highlights to the purposes of the Income Tax Act.
Two things happen. One, you are exempt from the income
(02:59):
tax system as a whole, so any income or anything
or receipts or things like that are not subject to tax.
And similarly, any businesses that you own that have the
objective at advancing those heads of charity are also not
subject to tax. The other thing that you get is
(03:21):
access to something called the donation's tax credit, which means
that if anybody gives you money, then one third of
what they give you up to their taxable income, they
get back from the government. So if I earn one
thousand dollars in a year and I give away one
thousand dollars in a year, give away one thousand dollars
(03:42):
to a registered charity, the government will give me effectively
one third of that back. But if only at five
hundred dollars and I gave a thousand dollars, it would
only be up to the five hundred dollars. So it
means that you can give quite large amounts of money
and the government will give a back. So that that's
the effect of being a registered charity.
Speaker 1 (04:05):
In a post cab this week, Prime Minister Christopher Luxen
mentioned something regarding a possible review of charities and their
tax status. It was when he was asked about Destiny
Church's charity status.
Speaker 4 (04:17):
Well, look, I have to say I thought the Destiny
Church protests cross the line. That's not the care we way.
When you're intimidating public officials and public facilities, that's not
the way that we expect things to be in this country.
We expect people to have free speech, we expect them
to protest peacefully but also respectfully, and we certainly value
the diversity it exists here in New Zealand. I know
some of those matters are before the police and they're
(04:39):
looking into some of that, but I'll leave that for them.
Do you think that they should be a charity?
Speaker 1 (04:43):
Just to push back Paster?
Speaker 4 (04:44):
Do you think that Destiny is right to have that
charitable Well, it is a broader question at play, which
you know we've said that we would look at and
due course around the registrant charities and their charitable status
and therefore the attacks treatment as a consequence, and they
will form part of that brought a piece of work.
Speaker 1 (05:00):
What kind of review would you like to see done?
Speaker 2 (05:04):
Okay, Well, I think that the Prime Minister was talking
about was not so much charities in general, but more
their business operations. To be perfectly honest, taxing a charity
there's probably nothing in it because on the whole they
well to the extent that they distribute all that they receive.
You only pay tax on a profit. Also, the other
(05:27):
thing with charities, if their income is donations. Donations is
just traditionally outside the tax base. So if I were
to give you one hundred dollars, Chelsea, you pay tax
on your income, but you wouldn't be paying tax on
that hundred dollars. So unless you were to change the
rules for charities, tax on their ordinary operations would be
neither here nor there. Businesses, however, are a bit different now.
(05:49):
A lot of people get upset that businesses, you know,
Sanitarium tends to be the post a child for this,
are not paying tax on their profits, while I think
cupboards are.
Speaker 5 (06:03):
Arguing policy lobbying government isn't charity. It's activism, and that's fine.
It's just highly debatable as to whether you should get
special as tax status to do it, and I would
argue you shouldn't. Sanitariut they're a charity because of its
church connections, and yet they make week picks. What's that
got to do with being a charity? Church is a charity,
which on the surface makes perfect sense. But what about
the churches that hold some of the largest land holdings
(06:25):
in the world, and as a result, are richer than God.
Why does someone with that sort of wealth then deserve
a tax break? And in that lies the complexity of
it all. Once you start making exceptions, once you start
widening the criteria, all in sundry on a piece of
the action, and when that happens, sooner or later a
few decisions again to get made that rub people up
the wrong way.
Speaker 2 (06:50):
I mean, to be honest, I would say whether people
pay tax is only something in land revenue will know.
All you can ever hope for is know is whether
somebody is in the taxis. You don't know whether they're
actually paying tax. Now, Sanitarium, I've got no idea. I've
never looked at their accounts. But the Tax Working Group
was of the view that the only issue is really
(07:10):
what happens to their profits as to whether or not
there is any form of competitive or comparative advantage. So
like if hubbrid and Sanitarium both earn one hundred dollars
public pays say twenty eight cents tax, Sanitarium pays nothing,
but that twenty eight cents is then effectively transferred to
the benefit of the Seven day Adventist Church. That fits
(07:33):
within we say the policy parameters of taxing charities that
neither here nor there and will not actually make any
markets distorted. Where it becomes more interesting is if Sanitarium
or their equivalent don't pay tax on that income and
then roll it up, and if now have a larger
capital base because they haven't paid tax. Now that was
(07:57):
the problem that the Tax Working Group was conned about,
and to be honest, that's my view of the world.
I see that as the potential concern. But to me,
the real issue that I always have with charities, religion
and the tax system is the donation's tax credit. Because
the donations Let's say, for example, Destiny has a million
(08:19):
dollars of donations, it has a million dollars under any system,
it wouldn't be taxed, but the individuals who've given that
money to Destiny will be entitled to a third back.
So strictly speaking of say a million dollars, a third
of that comes from the tax path, comes from the
(08:40):
tax base, and I personally have problems with in a
secular society subsidizing organized religion. Now, organized religion is a
net positive in my view, but so are a lot
of things like political parties, unions, action station all these
are net positive. But there isn't a one third subsidy
(09:05):
in the system anyway.
Speaker 1 (09:06):
That third that you get back if you donate to
a charity on the charity registered charity, the government pays that, right,
the government's giving you that third back.
Speaker 2 (09:16):
Yep, absolutely there But two things. One we've got no
real idea of how much it is. Two, it's open
ended because anyone who decides to make that donation gets
the benefit irrespective of how much the government wants to spend.
And finally, it's the individual that makes the decision of
where to allocate basically governmental taxpayer money. While normally when
(09:40):
the government is spending money through the budget it is
elected representatives who are making those decisions Minister of Finance
and it goes through parliament. I see those as fairly
substantial differences. So to me, when a lot of things
go on about tax and charities, I'm not particularly concerned
(10:01):
about charities paying tax themselves or necessarily with businesses with businesses.
To me, the issue is whether or not the norn
the lack of tax has been passed on for a
charitable benefit. And my particular concern is the donation's tax.
Speaker 1 (10:19):
Critit seems like the tax status of churches and charities.
It's a topic that crops up from time to time,
and when I say time to time, quite often. Right,
(10:40):
I've read that some of the foundations of our charity's
law actually dates back to England's Charitable Uses Act sixteen
oh one. Do you think that these exemptions are still
justified in this day and age.
Speaker 2 (10:54):
Yeah, well, if you go back to the date you mentioned,
it kind of made sense because the church is were
our social welfare system. The fact that they didn't pay
tax or even the people contributing to you know what
was effectively the social welfare system made sense. And so
to be fair, I don't have a problem per se
(11:16):
about organizations that are still doing that sort of thing.
So like Wellington City Mission, Salvation Army, Catholic Social Services.
It's completely reasonable. I think that the government does support
them in some form. The only issue I have is
that any support given through a donation's tax credit is
(11:37):
completely non transparent, while with money that goes through a budget,
the Minister of Finance has to put that to Parliament
in the scrutiny. So if they want to give money
to the Salvation Army that forms part of a budget
that Parliament approves or not.
Speaker 1 (11:54):
I guess if we look at Destiny Church as an example,
and that's why I kind of guess we're talking about
this again. This week police are investigating allegations of assault
after about fifty members swarmed the Tiata two Community Center
to protest a Pride event. So in the Charities Act
I read it says an entity may be removed from
the register if it has engaged in serious wrongdoing or
(12:16):
any person has engaged in serious wrongdoing in connection with
that entity. Now would storming a council facility and intimidating
staff and the public can be considered serious wrongdoing?
Speaker 2 (12:28):
Do you think? Well, it would be from my perspective,
but there's probably case law as to how that's properly defined.
I'd be surprised if charity services we're looking at it.
Speaker 1 (12:39):
If a review was to start tomorrow, what do you
think the scope should be? Do you think there's just
too many charities? On the register at the moment I
read somewhere there's one charity in New Zealand for about
every one hundred and eighty people.
Speaker 2 (12:53):
Charities reviews are fraught with danger because even if the
politicians or the Minister of Finance wishes to restrict it
in some way, there's a risk that they end up
expanding coverage rather than reducing it. I think this government
is not looking at charities per se. It's just the
(13:15):
tax treatment of businesses, which strikes me as a much
more manageable way of approaching things.
Speaker 6 (13:26):
I'll tell you what else isn't okay. The fact that
this outfit, this Destiny outfit, is out there bullying people,
dishing out their hatred, but because they call themselves a church,
they enjoy all the tax benefits that come with that.
I was reading this morning that a few years back,
some Destiny Church charities were removed from the charities registered
for the lot filing their annual tax returns. And before
that happened, you might remember this, more than seventy thousand
(13:47):
people signed a petition calling for Charity Services to strip
the churchill its tax exempt status. At went nowhere. I've
had a look at the register this morning and the
Destiny Church, New Zealand Trust is still there and there
are still some regional branches registered as a charity to
include in Christ Church, which is a rut.
Speaker 1 (14:06):
And obviously at the moment when what I said before
about Destiny Church, there's been uproar online about whether it
should get its tax status taken away. But do you
think that that could set a risky precedent if individual
charities start getting deregistered.
Speaker 2 (14:22):
Well, the tax needs to be connected to whether or
not there are charity and so a lot of it
would come down to charity services rather than inland revenue
you mentioned before, serious wrongdoing. That's a great test. I
would expect that charity services would be revealing that. But
just generally charity being having their status with drawn because
(14:45):
someone doesn't like it is problematic. I think we've got sufficient.
You know, we've got a sort of arms length body
in the form of charity services that is doing that.
If someone really doesn't like the religion aspect, then the
charities law needs changing, which is in a you know,
its own process going through Parliament where everyone who doesn't
(15:08):
want that has an opportunity to submit and provide views.
Speaker 1 (15:14):
Just Finally, how much benefit will we actually get from
making charities pay taxes? Is there some kind of golden
egg out there that we're missing out on?
Speaker 2 (15:24):
Yeah, well, I think it absolutely is wrong to think
it's a golden egg with the normal part of charities.
First of all, it's very unlikely any donations that they've
received would be taxable, and that's the basis of their income. Secondly,
most charities will spend all their income and you only
ever pay tax on profits or surplus. So there we go.
(15:47):
And similarly, if you wanted to start taxing charitable businesses,
well you could do that. Yeah, I don't know whether
it's necessarily a golden egg because I don't know how many,
you know, sanitariums there are, And again it depends on
how profitable the businesses. You only put texts on profits.
Speaker 1 (16:07):
Thanks for joining us, Andrea.
Speaker 2 (16:09):
No problem.
Speaker 1 (16:09):
Addle. That's it for this episode of The Front Page.
You can read more about today's stories and extensive news
coverage at enzdherld dot co dot nz. The Front Page
is produced by Ethan Sills and Richard Martin, who is
also our sound engineer. I'm Chelsea Daniels. Subscribe to the
(16:32):
Front Page on iHeartRadio or wherever you get your podcasts,
and tune in tomorrow for another look behind the headlines.