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PostPosted: Sat Jul 08, 2017 11:26 am 
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Open Brethren Charities Under Investigation in NZ

According to an article by Matt Nippert, Business investigations reporter, NZ Herald,
Quote:
A network of Open Brethren-run charities that have quietly accumulated hundreds of millions of dollars in farmland are facing a Charities Service investigation following complaints their tax-free status allows unfair competitive advantage.
. . .
Tax and trust experts spoken to by the Weekend Herald said the Trinity Network's structure and reinvestment fell within the law, but the case raised wider issues that should trigger debate about possible reform.

Trust lawyer Vicki Ammundsen said Trinity's operations were entirely within the law, but they appeared inequitable.

"It is what it is, and I appreciate it does from a commercial perspective ... it does create an anti-competitive advantage. If one of you is paying tax and the other isn't, it's hard to dress that up as OK," she said.

Andrea Black, a tax commentator and former adviser at Inland Revenue, said current tax and charity rules set no requirements on how much of their income charitable companies should distribute to good causes.

"Ultimately tax concessions given to charities are because they do good things for the community. The current rules, however, allow businesses connected to charities to build up capital and for charities to create reserves rather than fully distribute their income and capital," she said.

"I would love to see rules which required all tax free income and all donations receiving a tax credit to have to go directly to community causes."

Michael Gousmett, an adjunct fellow at the University of Canterbury, said he'd run the numbers in 2015 and found the Government was missing out on $50m in tax from the commercial operations of New Zealand's 28,000 charities.

"That is fundamental flaw in terms of tax policy, because I don't think the intention was ever for commercial activities of charities - where the activity is unrelated to their charitable purpose - to be exempt from tax," he said.

"It's the same with Trinity: This is an issue that needs to be addressed at government, and tax policy, level."

Australia changed its tax laws in 2014 requiring charities making commercial income not directly related to their charitable purpose only tax-free if it was distributed to a good cause.

See the rest of the article at http://www.nzherald.co.nz/business/news ... d=11883740


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PostPosted: Sat Jul 08, 2017 11:35 pm 
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Joined: Sun Jan 26, 2014 11:32 pm
Posts: 286
Ian McKay wrote:
Open Brethren Charities Under Investigation in NZ

According to an article by Matt Nippert, Business investigations reporter, NZ Herald,
Quote:
A network of Open Brethren-run charities that have quietly accumulated hundreds of millions of dollars in farmland are facing a Charities Service investigation following complaints their tax-free status allows unfair competitive advantage.
. . .
Tax and trust experts spoken to by the Weekend Herald said the Trinity Network's structure and reinvestment fell within the law, but the case raised wider issues that should trigger debate about possible reform.

Trust lawyer Vicki Ammundsen said Trinity's operations were entirely within the law, but they appeared inequitable.

"It is what it is, and I appreciate it does from a commercial perspective ... it does create an anti-competitive advantage. If one of you is paying tax and the other isn't, it's hard to dress that up as OK," she said.

Andrea Black, a tax commentator and former adviser at Inland Revenue, said current tax and charity rules set no requirements on how much of their income charitable companies should distribute to good causes.

"Ultimately tax concessions given to charities are because they do good things for the community. The current rules, however, allow businesses connected to charities to build up capital and for charities to create reserves rather than fully distribute their income and capital," she said.

"I would love to see rules which required all tax free income and all donations receiving a tax credit to have to go directly to community causes."

Michael Gousmett, an adjunct fellow at the University of Canterbury, said he'd run the numbers in 2015 and found the Government was missing out on $50m in tax from the commercial operations of New Zealand's 28,000 charities.

"That is fundamental flaw in terms of tax policy, because I don't think the intention was ever for commercial activities of charities - where the activity is unrelated to their charitable purpose - to be exempt from tax," he said.

"It's the same with Trinity: This is an issue that needs to be addressed at government, and tax policy, level."

Australia changed its tax laws in 2014 requiring charities making commercial income not directly related to their charitable purpose only tax-free if it was distributed to a good cause.

See the rest of the article at http://www.nzherald.co.nz/business/news ... d=11883740


What needs to be considered is that these charities fund operations which in many cases otherwise would be an impost on the public purse. So how many of us are prepeared to pay higher tax to cover the cost of the benefits from these operarions if the law is changed?

However, it is true that some activities result in a non level playing field when the profit making operations e.g. commercial businesses owned by churches compete with normal businesses. An example in Oz was/is the major lawn turf company in Victoria owned by one of the 2nd tier mainstream protestant churches, and all profits went to that church's public benevolent arm. It in effect had a monopoly.

In Oz there is no tax payable by a tax exempt beneficiary of any business trust, which is usually the method used by religious organisations ... a normally owned commerical business operated through a trust has a tax exempt body as one of the beneficiaries. This is the peeb method and that of religions using tithing. Our other option would be to make tax deductible donationsto the tax exempt body.

I am yet to see a valid and realistically balanced argument on this topic.

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PETER F


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PostPosted: Sun Jul 09, 2017 8:45 am 
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Joined: Wed Feb 27, 2013 1:23 am
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The simple solution is to give no religious organisation a tax advantage.


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PostPosted: Sun Jul 09, 2017 11:27 pm 
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Joined: Sun Jan 26, 2014 11:32 pm
Posts: 286
The Questioner wrote:
The simple solution is to give no religious organisation a tax advantage.


... and we pay more tax to fund their truly admirable and necessary social, education and community functions?

A very shortsighted and biased view.

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PETER F


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PostPosted: Mon Jul 10, 2017 5:38 am 
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Joined: Sat Feb 23, 2013 8:04 am
Posts: 1373
A solution that appeals to me is to grant tax-free status if the net value of an organisation’s activities to the public is estimated to be greater than the costs to the treasury of its tax concessions.

The assessment of the value of the activities of a church, for example, would necessarily be very subjective, but it would be better than no assessment at all. It would require a team that included sociologists as well as accountants.

This type of policy would rule out tax-free status for an organisation that gains great advantage from its tax concessions while contributing only a token public benefit and at the same time inflicting substantial damage to social cohesion and human happiness.


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PostPosted: Mon Jul 10, 2017 8:52 am 
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Joined: Wed Feb 20, 2013 2:02 pm
Posts: 170
I think a psychologist would also be needed to assess detriment and harm


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PostPosted: Mon Jul 10, 2017 9:27 am 
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Joined: Tue Feb 26, 2013 7:16 am
Posts: 320
Thanks Ian. I saw this and was thinking about where to post it..... Then life took hold and I was distracted :( Pleased you picked it up. I'm hoping the EB is next on the list.
Take care
LadyKiwi


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