By CHRIS DANIELS
Charity organisations are forming their wagons into a circle to defend their tax status.
Charities at present do not pay company tax or income tax on money they earn.
But Revenue Minister Michael Cullen has launched a review of this - prompted in part by a belief that charitable status, and the tax benefits it brings, has been abused.
Launching the review last week, Dr Cullen promised that charities were not losing their special tax treatment.
"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."
He said that if charities retained their trading profits, they should be taxed like any other business.
But Spirit of Adventure Trust chief executive John Lister is unimpressed by these claims.
He has been mobilising opposition to the plan, saying that tax bureaucrats and Treasury officials should instead be grateful for the amount of work charities and the voluntary sector do.
Mr Lister says he has no doubt that a small number of charitable trusts were taking advantage of their tax-free status, but there was no need to "throw the baby out with the bathwater."
It was not necessary to change the rules for 37,000 just to "catch a few cowboys," said Mr Lister.
"Why should the Government choose to tax charities that in many cases do the work of Government?"
Inland Revenue Department spokeswoman Michelle Davie said the proposals were intended to be "revenue-neutral."
"I smell a rat," said Mr Lister. "No Government puts a paper together like this just to find out if they are being fair."
Mr Lister said that the money the Spirit of Adventure Trust earned from trading activities - chartering out its tall ship - was being put aside to pay the expected $20 million for a replacement ship, which would be needed in 15 years.
This money, which would not be spent on the charity in the year it was reported, would be taxed under the Government's plan.
Proposals for the new rules include an updated definition of charity, limiting tax exemption to those groups who register as charities and requiring them to file public accounts.
Charities could also be monitored to ensure that they are still doing the charitable work they were set up to do.
Mr Lister said he had no problem with charities being transparent, but the IRD could already demand information from trusts it thought were misbehaving.
The Government plans to charge income tax on the trading operations of charities, unless profits are used for the organisation's charitable purposes in the same year.
Charities would also face fringe-benefit tax, at present paid by companies who provide cars for private use of employees.
Mr Lister plans to confront Prime Minister Helen Clark with his concerns when she addresses a Rotary meeting in Auckland on Monday.
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