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