Charities escape GST

Press, 24 May 1985, Page 1

Charities escape GST

By

MICHAEL HANNAH

in Wellington

An assurance that charities and voluntary groups will not have to pay goods and services tax on charitable activities was given yesterday by the Minister of Finance, Mr Douglas. They would be expected to pay GST on any commercial ventures above a certain limit, said Mr Douglas in a statement which explained the effects of GST on charitable organisations. The statement included the first indication of what businesses will be included in the GST net. Mr Douglas said he favoured a high

turnover threshhold, and quoted examples of $40,000 annual turnover, included in the GST White Paper, and $50,000 turnover, which was the highest known in the world.

The statement was also a defence of the need the Government sees for introducing GST, and appeared to be a response to several statements issued in recent weeks by the Opposition spokesman on taxation, Mr Michael Cox, attacking the proposed new tax.

Last month, Mr Cox urged national charitable organisations to lobby Mr Douglas for exemption from

the tax. He maintained that the GST White Paper made it clear that voluntary organisations were not exempt, and even cake stalls would be deemed a “taxable activity.”

Mr Douglas said these statements defied common sense, and anyone who listened to them and believed them was doing themself a disservice.

He said a turnover threshhold would be set high enough to exclude groups like small-scale hobby or voluntary groups, clubs, Parent Teacher Associations, churches, and charitable groups.

Where these groups were involved in large-scale business activities, however, such as farms, factories and commercial property, Mr Douglas said they were clearly part of the web of tax collection and would have to pay GST on these activities.

He said that other groups, such as sheltered workshops, would find it in their interests to be goods and services taxpayers, as they could then reclaim the tax paid on materials, supplies and services. To be exempted from GST would be a disadvantage for these groups, he said.

Mr Douglas said that much of what had been said publicly about the impact of GST on charitable organisations, voluntary welfare agencies, and fund-raising activities had been based on a complete misunderstanding of the tax. “This misinformation has been put about maliciously with the sole intention of

stirring up opposition to the tax and to the Government,” he claimed.

Mr Douglas said the Government had no intention of disadvantaging people and organisations which did so much good work in the community by individuals giving up their time and making donations. “GST should be seen for what it is. It is to be a tax on consumer spending in New Zealand.

“It is not a tax on volun-

tary agencies, on charities, on schools, on P.T.A. committees, on churches, or on welfare work. Nor is it a tax on donations or gifts. Also, it is not a tax on trade unions.”

GST would apply to sales of goods and services made “in a business setting,” termed a “taxable activity” in the draft Bill. “To be a ‘taxable activity’ there must be certain hallmarks, sometimes called the ‘badges of trade’,”

Mr Douglas said. “These include that an activity which sells goods and services must do it regularly and display the features normally associated with a business. It must also have the form of a business, record-keeping and all the other things which go with what people normally understand to be a business.” A turnover ' threshhold would be set, below which the seller did not have to be bothered with the tax at all, he said.

“In the White Paper, the threshhold levels discussed were $2500 and $40,000. The lowest threshholds for this kind of tax anywhere in the world is $2500. The larges is around $50,000.1 am personally inclined to go for a high threshhold,” he said.

A high threshhold had the advantage that the smallscale selling activities of crafts people, knitting circles, schools, charities, churches, sports clubs, hobby clubs and many small and part-time businesses were not touched by the tax. “Cake stalls, fund-raising, gifts, and donations are not subject to GST. There is nothing sold when a donation is made, and so there is nothing for the Government to tax under GST. We already have a gift duty for large gifts. We cannot tax them twice,” Mr Douglas said. Cakes at a cake stall would already have borne GST on the ingredients, and so there was nothing in the way of tax for the Government to collect. The Government had to set up a tax system to cover “180,000 genuine businesses.” Given the breath of that task, it would not have the time, energy or people to chase after school lunches, charitable coffee mornings, and garage sales. Sports clubs could only be taxed on the goods and services they supplied, and this would include bar takings, or the takings from a "pro. shop” at a tennis club, which were clearly commercial activities. Mr las said.