Law favours big players over small charities
Big charities are claiming income tax exemptions while small nonprofits struggle to gain official charity status under the current rules, a new report says.
The New Zealand Initiative’s report calls for the Government to provide greater transparency in the charity sector, set clearer rules and processes, and remove the ‘‘unfair’’ tax advantages enjoyed by the for-profit arms of charities.
The business lobby group analysed 12 years of regulatory change to find the law allowed the commercial arms of large charities to claim income tax exemptions with little oversight into how much money was passed on for charitable purposes.
Yet smaller operators
were struggling to achieve or keep registered their charity status, report author Jason Krupp said.
‘‘With about $16 billion flowing into charities a year, it is absolutely necessary to have effective regulation in place to maintain the public’s trust in the sector,’’ he said. ‘‘Unfortunately we appear to have set the regulatory bar too high in some places.’’
Under the Charities Act, non- profits had little say into how the Department of Internal Affairs assessed whether their purpose was charitable or not, and appeals could be made only to the High Court – a costly option that was out of the reach of many groups.
The rules had seen the Sensible Sentencing Trust threatened with de-registration, while Swimming New Zealand and the National Council of Women had been stripped of their charitable status.
The same legislation allowed large charities with commercial arms to keep their earnings within the business tax free, regardless of how much of the profits were distributed to charities or what the charities did with the funds.
Such companies included Sanitarium, Ngai Tahu’s 38 limited liability companies, and private schools and hospitals.