Tax ex­emp­tions cost bil­lions

Sunday Star-Times - - BUSINESS - RACHEL CLAY­TON ACT party leader David Sey­mour

Many New Zealan­ders may be un­aware their favourite break­fast ce­real is owned by a church. The break­fast sta­ple Weet­bix is owned and made by San­i­tar­ium Health and Well­be­ing Com­pany, which was es­tab­lished by the Sev­enth-day Ad­ven­tist Church in 1898 to pro­mote and pro­duce plant-based health foods.

On its web­site, the com­pany said this was based on the Church’s be­lief that plant­based di­ets are des­ig­nated by God for the health of the hu­man race.

But be­cause it is a church, San­i­tar­ium have never paid in­come tax.

Un­der New Zealand law, churches are ex­empt from in­come tax be­cause they have a char­i­ta­ble pur­pose – they pro­mote re­li­gion.

While San­i­tar­ium is a com­mer­cial busi­ness, its sole share­holder is The New Zealand Con­fer­ence As­so­ci­a­tion, which is a reg­is­tered char­i­ta­ble trust.

Bri­tain amended this char­i­ta­ble tax loop­hole in the 1920s and ACT party leader David Sey­mour wants New Zealand to catch up and do the same.

‘‘I don’t know what their [San­i­tar­ium’s] pur­pose is. They would ar­gue they do char­i­ta­ble stuff to the same value as what they would have paid in tax,’’ Sey­mour said.

Nga¯i Tahu is another com­mer­cial op­er­a­tor that doesn’t pay in­come tax be­cause the sole share­holder for all its char­i­ta­ble op­er­a­tions is Nga¯i Tahu Char­i­ta­ble Trust.

In the year to 30 June 2016, Nga¯i Tahu Hold­ings Cor­po­ra­tion Lim­ited made a net profit of $210 mil­lion, but only dis­trib­uted $44m to the trust.

A Nga¯i Tahu spokes­woman said the re­main­ing profit was rein­vested into Nga¯i Tahu Hold­ings Cor­po­ra­tion.

‘‘Our dis­tri­bu­tion model is sim­i­lar to many of the larger com­mu­nity trusts in New Zealand and in­ter­na­tion­ally renowned Yale and Har­vard En­dow­ment Funds, so we com­pare well with na­tion­ally and in­ter­na­tion­ally recog­nised

gives Nga¯i Sey­mour in­ter­gen­er­a­tional Tahu’ssaid the funds,’’Go char­i­ta­bleBus busi­nessshe said.tax loop­holea com­pet­i­tive ad­van­tage to bid for the Auck­land Trans­port bus con­tract. "Peo­ple should be able to get a tax ex­emp­tion for do­nat­ing to char­ity, but when you’ve got those com­pa­nies that are kind of like char­ity, kind of like a busi­ness, then it would make sense to split them,’’ Sey­mour said. The com­mer­cial side of the char­ity can then do­nate to its char­i­ta­ble side, he said, then claim the tax credit of 33.33 per cent that ap­plies to all char­i­ta­ble dona­tions of at least $5. "If it’s re­ally true that they give all their prof­its to their char­i­ta­ble side then they won’t pay any tax. But if some peo­ple sus­pect they are get­ting away with­out pay­ing tax and not putting as much into char­ity as they should, that will level the play­ing field for other com­peti­tors.’’ Uni­ver­sity of Can­ter­bury char­i­ties re­searcher Dr Michael Gous­mett, has been re­search­ing New Zealand char­i­ta­ble trusts for more than a decade, and said although many char­i­ta­ble busi­nesses had been hugely suc­cess­ful, there was an is­sue when a com­pany work­ing the for-profit sec­tor has to com­pete with a sim­i­lar busi­nesses that pays no in­come tax. ‘‘Then you clearly have a fis­cal ad­van­tage,’’ he said. New laws were in­tro­duced in 2014 to crack down on the num­ber of com­pa­nies try­ing to achieve char­i­ta­ble sta­tus through the In­ter­nal Af­fairs’ Char­i­ties Ser­vice. Since 2014, 527 groups have been re­jected in­clud­ing na­tional sports ad­min­is­tra­tors such as New Zealand Cricket and Ta­ble Ten­nis NZ, a me­dieval re-en­act­ment group and dozens of re­li­gious groups. "But the point is no gov­ern­ment has ever gone to the point of lay­ing this on the ta­ble and go­ing through a se­lect com­mit­tee process, so that in­ter­ested par­ties on both sides of the is­sue can have a demo­cratic de­bate about whether it’s fair char­i­ties are able to run busi­nesses and not pay in­come tax. I think the time for that de­bate is long over­due.’’

Dr Michael Gous­mett

Weet­bix favourite

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