Submission Deadline For Tax On Charities Extended
The deadline for submissions on the Tax and Charities discussion document has been extended by one month, from 31 July to 31 August.
Announcing the extension today, Revenue Minister Michael Cullen said the government was acknowledging the high level of interest in the subject, and the importance of getting the framework right.
"I am also aware that the National Party has been running a scaremongering campaign around the issue. Let me make it clear from the outset: this government places a high value on the role of the charitable sector in our society.
"Charities make an invaluable contribution, and in recognition are given support through the tax system. Most of that support comes in the form of an income tax exemption for charities and a tax rebate or deduction for charitable donations.
"That support will continue. In fact we are proposing raising from $500 to $600 the maximum tax rebate for individuals. It may be possible to institute further increases later, once the regime has been tidied up and we can be confident that the assistance is well-targeted.
"There has been concern for some while that the tax exemption may be open to inappropriate use. The possibility of this abuse, and the adverse impact it might have on bona fide charities, obviously does not bother the National Party. As Revenue Minister, however, it is my duty to protect the integrity of the tax system, and that means keeping it clean.
"We have proposed changing the law to clarify once and for all that charities and other non-profit bodies are allowed to claim GST refunds on most of their activities, a decision clearly in their favour.
"Other proposals mooted in the document include possibilities for modernising the definition of a charity and increasing our knowledge how charities receiving tax assistance operate, so that both the government and the public know how their money is being spent and by whom," Dr Cullen said.
"We recognise that increasing the reporting requirements for charities will increase their compliance costs. For this reason, we are looking to introduce an income threshold below which these requirements will not apply and are asking at what level this should be set.
"National is wrong and alarmist in trying to paint this as an attack on charities. Over the years many charitable organisations have themselves suggested changing the way that tax support is provided.
"Another proposal is to put the profits of charity trading operations on the same tax footing as those of other businesses. Profits retained will be taxed at the normal corporate rate. Profits used for the charitable purpose for which the charity was set up will not be taxed.
"This is not a case of charities 'losing their special tax treatment', as some have claimed. Instead, it is a matter of recognising that the income tax exemption may give businesses run by charities an unfair advantage over their taxpaying competitors.
"I will be interested to receive the public's view on this issue, in particular what level of threshold might be appropriate for small-scale trading activities.
"A further proposal is that fringe benefit tax, which charities already pay in relation to their business, be extended to their charitable activities.
"The whole point of the discussion document is to seek the views of both charities and the public on these important issues for the purpose of developing policy. I encourage all those interested to make submissions.
"The submissions will be crucial in terms of the final decisions the government makes and I would emphasise that the proposals are just proposals at this stage, not government policy," Dr Cullen said.
Tax and charities is available at Bennett's Government Bookshops and on-line at http://www.taxpolicy.ird.govt.nz and http://www.treasury.govt.nz.