Declare religious bodies as charitable trust, state govt urged

KUCHING: The state government should declare the religious bodies, charities and institutions incorporated and operating in the state as charitable trust under the Sarawak Charitable Trust Ordinance 1994.

Besides that, the state government should make a representation to the federal government to ask that all these institutions or organisations be approved by the director-general of Inland Revenue Board for the purposes of Section 44(6) of the Income Tax Act, Batu Lintang assemblyman See Chee How suggested.

See, who is state PKR vice chairman, opined that even though the federal government has the legislative authority to levy taxes, the taxes over which Sarawak wields legislative power were assigned to the state, in the same way as revenues of local councils, proceeds from sales and rental of state land and properties, and income from licences issued by the state under its legislative power over lands, mines and forests.

“Since the tax incomes are assigned to Sarawak, the state government should have the say to exempt taxes on incomes of those religious charities, charitable trusts and institutions incorporated and operating in Sarawak,” he told The Borneo Post yesterday.

See, who is also a lawyer, maintained that the state government could and should step in to assist the religious charities, charitable trusts and institutions from being unreasonably tormented by the federal government to pay taxes on their incomes.

He agreed with the assertions of the religious bodies that they had contributed enormously to the society and state through their charitable and benevolent activities in helping the poor, besides their main purposes of religious worship or the advancement of religion, hence the government should be supporting and funding them instead of levying taxes on their incomes.

“Religious worship and the advancement of religion has been an integral part of our amiable Sarawakian society. Through the good works of all the different religious bodies and institutions, they have contributed enormously towards Sarawak’s nation-building particularly the peaceful and harmonious co-existence of our populace.

“To levy taxes on their incomes will impede their efforts for the advancement of religion and religious worship in the state and thereby cause detriment to our society.”

See pointed out that unless the Inland Revenue Board (IRB) had evidence that the religious bodies, charities, charitable trusts and institutions were making use of their incomes not for charitable and benevolent purposes or for the purposes of religious worship or the advancement of religion, any tax levied on their income is outrageous and dishonourable.

The IRB, through its Corporate Communications and Multimedia Division of Corporate Services Department, in a press statement on Tuesday, confirmed that religious institutions or organisations need to pay tax for their incomes derived from businesses or rental.

“The amendment to paragraph 13(1)(b) of Schedule 6, Act 53 explicitly provides that religious institutions or organisations automatically qualify for the exemption on income from donations contributed by religious worshippers solely for the purpose of religious worship activities or the advancement of religion. This exemption is applicable to all religious institutions or organisations,” the statement clarified.

The IRB further said: “Income from business or rental are income taxable under Act 53 and are outside the scope of income which is exempted under Schedule 6. The taxable income is income after deducting all expenses incurred in the production of said business or rental home. This treatment is consistent with the principles under Act 53.”

IRB justified that the amendment to paragraph 13(1)(b) of Schedule 6 Income Tax Act 1967 (Act 53) in Budget 2017 seeks to provide clarity of the law on the application of exemption to religious institutions or organisations.

“Prior to this amendment, there has been some confusion among taxpayers as to whether or not religious institutions or organisations automatically qualify for the exemption under 13(1)(b) Schedule 6 or are required to obtain approval from the director general of Inland Revenue under Section 44(6) Act 53.”

The amendment to the Income Tax Act was passed by the Senate on Dec 16, with no objections from both sides of the political divide. The amendment was passed in Parliament on Nov 23.

Meanwhile, Natural Resources and Environment Minister Dato Sri Wan Junaidi Tuanku Jaafar who is currently on holiday in England, when contacted, acknowledged that he had not read the amendment.

“Anyway, our practice is to get approval from the Ministry of Finance (MoF), unlike in Britain where organisations are classified into charitable or non-charitable to gain tax-free or tax exemption.

“Once the MoF approves then the donation is exempted (from tax), not withstanding the law. Whether this practice is taken from the MoF by the new amendment to the law is the question that begs the answer,” the Santubong MP said.

Deputy Chief Minister Datuk Amar Douglas Uggah Embas, when contacted by The Borneo Post yesterday, said he preferred not to comment on the issue until he had got the details of the amendment.

“I have just discussed with the IRB officer to get her feedback. I am waiting for her detailed explanation,” Uggah said.

Attempts to get Deputy Chief Minister Tan Sri Datuk Amar Dr James Jemut Masing and Second Finance Minister Dato Sri Wong Soon Koh to comment on the issue were unsuccessful as at press time.