Difficult to strip Destiny Church of tax free status?
A petition calling for Destiny Church to be stripped of its tax free status has called into question why religious groups are defined as charitable organisations.
The petition calling on the Government to cull Destiny Church’s tax free status has so far gathered 122,701 signatures and will be presented to the Prime Minister, John Key, once it reaches 150,000.
Internal Affairs Minister, Peter Dunne appears to be an ally after tweeting last week: “I do not favour taxing genuine churches and real charities but as Destiny (Church) is obviously neither, it should pay taxes like every other business.”
The anger at Destiny Church spurs from Bishop Brian Tamaki’s recent speech where he blamed the earthquakes on gays, sinners and murderers - sparking widespread outrage from both lay people and other religious groups.
Why are Religious organisations tax free especially when they don’t appear short of cash?
Sue Barker is director of the law firm, Charities Law and also the co-author of The Law and Practice of Charities in New Zealand.
She says under the Income Tax Act there are several exemptions for charitable organisations in sections CW41 and CW42. That exempts all income including business income to the extent of the charity carrying out its work within New Zealand.
“The purpose is that it is one of the Governments ways of supporting charities and the work they do within communities,” she says.
There is also the ‘donee status’ meaning that anyone who gives a monetary donation to an organisation can claim a tax credit.
Ms Barker says Destiny Church Auckland Trust is a registered charity which means its income is exempt from income tax, but it will pay tax if it is running a business as it will be registered for GST and any staff it employs will be subject to PAYE.
“Brian Tamaki himself is not a charity. His income should be taxable. I am not aware of his tax profile but I’m presuming he is an employee and he should pay tax on the income that he receives, unless he has an exemption but I can’t think of one that he would qualify for,” she says.
All registered charities are required to file financial statements that are prepared in accordance with financial reporting standards issued by the external reporting board.
“That’s a new requirement. It’s just come in for financial reporting periods that started on 1 April 2015 and they’re starting to come in now. The purpose of these rules is for transparency and accountability so that people will be able to see all financial information on Destiny Church on the charities register, it will be all there for public viewing,” she says.
Could the petition successfully get Destiny Church deregistered as a charity?
It would not be as simple has getting 150,000 signatures and putting pressure on the Government.
This is because under the Charities Act 2005, the Department of Internal Affairs charity services assesses whether an organisation is eligible for charitable registration.
The key criteria is that their purposes are charitable and if charity services registers a group, that means they are satisfied the threshold is being met.
If an organisation seeks to access the charitable income tax exemption that is administered under the Income Tax Act by the Inland Revenue Department, then one of the main ways of doing this is by being registered as charitable.
“One way of losing income tax exemption is if the Department of Internal Affairs deregistered the organisation on the basis they don’t think their purpose (Destiny’s Church) is charitable, but that is the million dollar question,” she says.
Difficult to prove?
“Whether an organisations purpose is charitable is a very significant issue in New Zealand at the moment. There are many organisations that have been deregistered,” she says.
Section 5 of the Charities Act defines what a charitable purpose is;
- The relief of poverty
- The advancement of education
- The advancement of religion
- Other purposes beneficial to the community
“Those four heads date back centuries to the statute of Elizabeth 1601, so there is four centuries of case law on what is a charitable purpose,” she says.
So on the surface Destiny Church probably meets those purposes?
“Yes, because it advances religion. The advancement of religion is a very interesting head because it’s not just religion but the advancement of it,” she says.
And Destiny Church offers family services and education which arguably means it is also fulfilling the other obligations under the Act.
It’s not that simple in Sue Barker's opinion.
“It’s very interesting because if you look at section 3 of the Charities Act, one of the key purposes of the whole framework of charitable regulation is to promote public trust and confidence in charities. So if there is a petition with 120,000 signatures opposing an organisation being a charity, how does that tie in with public trust and confidence?
"I think it’s a very interesting issue which ties into another issue and that is political advocacy work by charities,” she says.
Greenpeace fought as far as the Supreme Court over that issue and won after about a five-year fight.
And Family First won a favourable decision in the High Court last year after being deregistered, over their submissions on Gay marriage.
However the Charities Services Board has indicated to Family First that it still wants the organisation deregistered, something Family First says it intends to defend.
“But what Brian Tamaki said recently is not so much advocacy as he is not really trying to change the law or engage with Government but it all ties into the same fundamental issue which is what can charities say in furtherance of their charitable purposes. I would say that Brian Tamaki would have said what he did because that is his reading or interpretation of the bible and he is advancing religion as he sees it. A lot of people find it offensive but that’s his interpretation,” she says.
Ms Barker says the key issue is in the Bill of Rights Act where freedom of expression is a fundamental right in New Zealand.
“So it comes down to, I might not agree with what they say but I defend to the death their right to say it, much the same as the people holding the petition. They’re expressing their fundamental rights as well.
"You have to ask yourself whether you want a framework of charity regulation where the charity regulator is also chief censor. I’d argue that people can judge for themselves and if they don’t like what they’re saying, then don’t support that charity,” she says.
Ms Barker says it’s the same situation for Greenpeace in that not everyone will agree with their advocacy in protection of the environment, however their right to do so should be upheld as part of their charitable services.
Do you want to live in a community where charities cannot speak?
That is what we have for two reasons, she says.
“One is that so many charities have Government contracts, they get their funding from Government and if they speak out they might get a call to inform them that they’re not indispensable.
“That is having an enormous silencing effect and the other is the approach that the charities regulator takes to advocacy by charities, and so many charities now fear they cannot speak out because of how it could be interpreted. The balance is not right and this is not about Brian Tamaki, if a charity sees social policy that needs changed, don’t you want them to say something,” she says.
Last updated on the 16th September 2019