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 one billion dollars, on top of over one hundred and ten thousand not for profit organizations. Legislation leaves the definition.
Of a charity pretty broad.
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.
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.
I was shocked.
I didn't know what they were doing and why they were doing it.
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.
With us to discuss.
Andrea, so, can you tell me a little bit about how the Charities Act works at the moment.
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 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 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 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 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 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.
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.
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 looking into some of that, but I'll leave that for them. Do you think that they should be a charity?
Just to push back Paster?
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.
What kind of review would you like to see done?
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 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.
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.
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 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.
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 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 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 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 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 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 in the system anyway.
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.
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 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 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.
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, 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.
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 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 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.
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 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?
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.
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.
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 tax treatment of businesses, which strikes me as a much more manageable way of approaching things.
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 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.
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.
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 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 want that has an opportunity to submit and provide views.
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?
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. 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.
Thanks for joining us, Andrea.
No problem.
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 Front Page on iHeartRadio or wherever you get your podcasts, and tune in tomorrow for another look behind the headlines.