Charity legislation ‘favours’ big companies

Stuff co.nz 18 May 2015
Big charities are claiming income tax exemptions while small non-profits struggle to gain official charity status under the current rules, a new report says.

The New Zealand Initiative’s latest report, titled Giving Charities a Helping Hand, calls for the Government to provide greater transparency in the charity sector, set clearer rules and processes, and remove the “unfair” tax advantages enjoyed by the for-profit arms of charity groups.

The business lobby group analysed 12 years of regulatory change to find the current legislation allowed the commercial arms of large charities to claim income tax exemptions with little oversight into how much money was passed on for charitable purposes.

At the same time, smaller operators were struggling to achieve or keep registered their charity status, threatening the important work they did in New Zealand communities, report author Jason Krupp said.

“With about $16 billion flowing into charities a year, it is absolutely necessary to have effective regulation in place to maintain the public’s trust in the sector,” he said.

“Unfortunately, we appear to have set the regulatory bar too high in some places.”

Under the Charities Act, non-profits had little say into how the Department of Internal Affairs assessed whether their purpose was charitable or not, and appeals could be made only to the High Court – a costly option that was out of the reach of many groups.

The rules had seen the Sensible Sentencing Trust threatened with de-registration, while Swimming New Zealand was stripped of its charitable status last year, as was the National Council of Women in 2010 – which had been operating for more than 100 years – until an appeal allowed it back on the register three years later.

The same legislation allowed large charities with commercial arms to keep their earnings within the business tax free, regardless of how much of the profits were distributed to charities or what the charities did with the funds.

Such companies included food giant Sanitarium, Ngai Tahu’s 38 limited liability companies (which included Shotover Jet and Whale Watch Kaikoura), private schools, and private hospitals like St George’s Hospital in Christchurch.

“We’re not saying religious and cultural groups can’t be charitable but we need a levelling of the playing field,” Krupp said.

He wanted the Government to “rebalance” the charity sector by reviewing the Charities Act and the definition of charitable purpose.

The Government had promised in 2010 to carry out such a review, but reneged on its commitment in 2013 due to fiscal cost fears.
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