Reconsider tax on incomes

Govt reminded of dire effects of Income Tax Act amendment on religious bodies

KUCHING: The government has been called on to review its decision to amend the law that may see religious institutions in the country being taxed.

In voicing out their concerns, Association of Churches Sarawak ( ACS) chairman Rev Datuk Dr Justin Wan said he did not expect that the government would impose tax on religious bodies like churches.

“Previously, no Bi l l was introduced to tax the churches. The imposition of tax will not be conducive to the churches. We are religious organisations and not business organisations, so why tax us?” he asked when contacted by The Borneo Post yesterday.

ACS is the umbrella body for all the churches in Sarawak. Christians represent about 48 per cent of the state’s population.

Wan, who is also Borneo Evangelical Mission ( BEM) president, pointed out that religious organisations like churches operated based on donations from members, society and even funding from the government.

“Since we receive funding from the government, then why is the government taxing us back when they should be giving us more funding to assist us?”

Even if it (the Bill) has been passed, we are still appealing to the government who had introduced the tax to relook into the possibility of how to help the religious bodies and not burdening religious bodies. Tax will definitely burden us. Rev Datuk Dr Justin Wan, Association of Churches Sarawak chairman

Therefore, it is illogical for the government to tax religious bodies when they have all these years been helping the government from the religious aspect to build the community, society and country at large, he claimed.

“The churches have contributed a lot to the society. If we are going to be taxed, it will defeat the vision and mission to help the society and government at large.”

Besides putting more burden on religious bodies, Wan foresaw that the imposition of tax might result in churches cutting down their activities and programmes to assist the society, especially the poor in the rural areas, due to lack of money.

“Even if it (the Bill) has been passed, we are still appealing to the government who had introduced the tax to relook into the possibility of how to help the religious bodies and not burdening religious bodies. Tax will defi nitely burden us.”

In Sibu, Finance Committee of Methodist Church member John Ting, when contacted, said the committee was still discussing the matter and had not come to a solution on how to deal with it yet. A source from the Catholic Church in Sibu also said the leaders were also discussing this matter to seek a solution.

Sarawak Sikh Temple Association president Dr Kalwinder Singh Khaira said all incomes derived by the Sikh temple were used for religious purposes and for the development of the Sikh community.

“We don’t get any fixed year grants from the government so our income varies from year to year. Taxation will have effect on our income and consequently the activities of our temple,” he said when contacted.

Dr Kalwinder hoped that the government would retain the status quo and ensure that the incomes of houses of worship and legally constituted religious organisations are exempted from income tax.

Meanwhile, Sabah Council of Churches president Rev Datuk Jerry Dusing was quoted by Malay Mail Online that local churches were not consulted by the government before the amendment was tabled and passed in Parliament recently.

“It’s a surprise to me. I represent Sabah Council of Churches, so at the very least I should be consulted. I also sit in NECF and CFM, these two bodies were not consulted at all,” he said when contacted.

CFM stands for the Christian Federation of Malaysia, the umbrella body for churches nationwide, comprising three component members: the Catholic Bishops Conference, the Council of Churches of Malaysia ( CCM) whose members are largely of the Protestant denomination and the National Evangelical Christian Fellowship ( NECF).

In a statement on Monday expressing its concern over various matters, the Sabah Council of Churches urged the government to resolve the uncertainty arising from the amendment.

“The recent amendment to the Income Tax Act 1967 that seeks to tax donations for non-Muslim religious bodies has caused lots of confusion.

“We urge the Prime Minister to explain the rationale behind the amendment, define clearly the intended targeted bodies and clarify why it involves only ‘nonMuslim’ religious bodies,” the statement by Dusing said.

Rev En Hong Seng, current chair of CFM and NECF, said he would be meeting Second Deputy Finance Minister Datuk Lee Chee Leong on Jan 4 for a better understanding of the details of the amendment.

In an interview with Oriental Daily, Hong said he did not have any details of the amendments and had not been able to obtain related information and thus he hoped that the meeting would clarify the matter.

“The amendment wou ld definitely affect the religious organisations and institutions, only that we don’t know how far reaching are the effects. We need an explanation urgently with regards to the issue. Therefore, I shall be meeting Lee on Jan 4 to clarify the matter,” Hong told Oriental Daily.

Revd Dr Hermen Shastri, general secretary of CCM, noted that religious people driven by their deeply- held religious convictions would do things both for the religious community and as outreach in service to others, adding that donations made go to such causes.

“Since the founding of our nation, the government has recognised this spiritual role of religions and have exempted them from tax from the income derived,” he told the Malay Mail Online.

“So if there is need to revisit this matter on the part of the government in regard to recent amendments made in Parliament, the first duty is to dialogue with religious groups on how they conduct their religious work and how they find the funding for it.

“Second, the government must ensure that all religions are on a level playing field with regard to what is taxable and what is not. One religion cannot be privileged among the rest,” he added.

As an example, he highlighted that Islamic banking was exempted from the Goods and Services Tax (GST).

“Are we to expect the same with the current amendments and its implications on the work of religious communities in the country? We will see after the dialogues which should be forthcoming from the government side to hear our views,” he said.

The Income Tax Act’s Schedule 6, which lists down income which is exempt from tax, includes under paragraph 13(1)( b) “a religious institution or organisation which is not operated or conducted primarily for profit and which is established in Malaysia exclusively for the purposes of religious worship or the advancement of religion”.

However, the Finance Bill 2016 that was passed in the Dewan Rakyat on Nov 23 and by the Dewan Negara on Dec 15 has an additional requirement that the income be meant for ‘charitable purposes’, which was highlighted by The Borneo Post.

This was done through a clause in the Bill to replace the original line with ‘a religious institution or organisation in respect of any contribution received for charitable purposes in the basis year for a year of assessment provided such institution or organisation is not operated or conducted primarily for profit and is established in Malaysia exclusively for the purpose of religious worship or advancement of religion’.

The explanatory note for the Bill says this amendment to the tax exemption requirement will take effect from the year of assessment 2017 and onwards.

It has also been interpreted that mosques and Muslim welfare bodies in Sarawak would not be affected by the amendment as they fall under state Islamic law, the Majlis Islam Sarawak Ordinance 1984.