Govt backing down on taxing charities

Press, 17 June 1988, Page 2

Govt backing down on taxing charities

By

OLIVER RIDDELL

in Wellington

The Government is backing away from its intention to oblige charities too pay provisional taxation on their income.

The Minister of Revenue, Mr de Cleene, said at a press conference yesterday that there might not now be any need for the Government to convene the Brash Committee on Taxation so that charities could make submissions to it. Instead, the Ministers of. Finance, Social Welfare, and Revenue would meet next week to discuss the matter.

At this meeting the Ministers would review the announced policy on the taxation of the income of charities. A further statement on the taxation of charities would be made after that meeting. If the Brash committee was not to be convened the Government would have to make provision for charities to make submissions on the question of GST provisions, Mr de Cleene said. These provisions had recently been removed from the Taxation Reform Bill No. 4

now being considered by Parliament. Those GST provisions had been removed from the bill pursuant to the undertaking given in March by the Ministers of Finance and Revenue that charitable bodies would have a chance to make submissions to a Brashtype committee. The Government intended to honour that commitment, he said, and

would allow until July 16 for any charitable bodies which wanted to make submissions to the Government on GST and how it affected them. These submissions would then be referred to someone familiar with the topic for an independent report on the intended provisions. At this stage it was still the Government’s intention, in spite of the removal from the No. 4 bill, to proceed with the GST policy, Mr de Cleene said. Such provisions could be

reintroduced into future taxation legislation. The Government’s plans to remove the $2OO taxfree rebate on donations would still go ahead, said Mr de Cleene. Charities had been told they could make submissions to a Brash-type committee, and hundreds had. Next week’s Ministerial meeting would take many of these submissions on board.

Charities had told the Government it was using a sledgehammer to crack nuts, Mr de Cleene said, and there was some justice in that viewpoint. But charities had agreed to two of the Government’s concerns: ® That charitable status should not be abused by people seeking to avoid taxation, because although some charities were bona fide charities in the course of big trading operations some were not and so traded in a way unfair to their com-

petitors. ® That security checks had to be made to ensure that money raised for charity was genuinely used for charity. But the problem — and one that was a problem world wide — was that no-one had come up with a legally satisfactory definition of what was a “good charity” and what was a "bad charity,” Mr de Cleene said.

Thus there was no tax law that could identify who was getting away with abuse of charitable protection from taxation. “The point was made by the charities, and I accept it, that taking GST from charities and then giving it back if they are real charities is not the way to deal with this problem,” Mr de Cleene said. As charities did not make tax returns, he had no idea how much more was not being taxed or how much revenue the Government could make by taxing it.