By JAMES GARDINER
If you thought choosing between donating your hard-earned dollar to the Red Cross, IHC or crippled children was tough enough, be grateful you don't get appeals from all 17,000 entities that call themselves charities.
New Zealand has one registered charitable trust for every 314 people - about 10,800 at last count and growing at a rate of 70 a month. On top of that are incorporated societies and charitable companies.
Yet the rules that govern charities - or even define what constitutes a charity - are loose by comparison with other countries and the sector is largely left to monitor itself.
The issue of charitable trusts has come to public attention because of the controversy surrounding the Team New Zealand yachting syndicate and the trust behind it.
Unregistered trusts such as that one are relatively rare, says the Ministry of Economic Development.
Its deputy secretary of business and registries, Neville Harris, says that while there is no legal requirement for charities to register, the great majority do.
No one appears to keep records on the number of unregistered charitable trusts because there is apparently no way of tracking them, but Mr Harris estimates there would be between 100 and 200.
Inland Revenue formerly required all charitable trusts to apply for tax-exempt status - and says it is aware of 7500 with that status - but it now allows trusts to make their own judgment about whether they qualify or not, although it has the final say.
The department says 5348 incorporated societies and 437 charitable companies are tax-exempt.
Revenue Minister Michael Cullen has promised a review of the law covering charitable trusts, to be carried out this year or next.
The Trustees Association says that cannot come soon enough and should lead to compulsory registration of charitable trusts with tax-free status.
Unregistered charitable trusts do not have to make their trust deeds or any other information public.
Association executive officer Errol Anderson says that if a trust's deed and constitutional documents are secret, potential beneficiaries would not be identified.
"If they don't know who they are, the essential process of trustees being accountable to beneficiaries is missing. The whole area of charity is a mish-mash of regulations and interpretations."
Mr Anderson says the association has lobbied for a Government-funded board with representation from various organisations to determine what constitutes charity.
That would be preferable to Inland Revenue being the sole judge in terms of charities seeking tax-exempt status, he says. The department's process "often defies logic and consistency."
He cites a trust that applied to the IRD in Auckland for tax-exempt status, was told by letter from the Westport IRD office that it did not qualify, then reapplied only to be turned down again, this time by the Timaru office of IRD.
Mr Harris says he believes most charitable trusts do register because registration gives them credibility and helps them to meet the IRD's criteria for tax-free status. By international standards, the level of compliance and disclosure required of charitable trusts in New Zealand is very low, he says.
"That said, we have a fairly low level of complaints about charitable trusts, so any calls for further disclosure, etc, should be balanced against the perceived problem."
However, he acknowledges that, as Mr Anderson suggested, beneficiaries who did not know they were beneficiaries would not know they had missed out.
Any complaints about charitable trusts are referred to the Solicitor-General, who has the power to investigate and wind up a trust.
The IRD's national manager for technical standards, Margaret Cotton, says the rules that apply to charitable trusts are based on self-assessment - "no different from any other taxpayer."
"They determine themselves whether they meet those requirements. If we subsequently consider they don't, then they run the risks of penalties and those sorts of issues."
She says trusts, like any other entity, can be audited, but agrees that "if we don't know anything about it, then it's hard to do something about it."
"There is nothing in the legislation at the moment that requires them to obtain Inland Revenue approval [to act as if they are tax-exempt]."
Ms Cotton says if a trust employed staff and paid PAYE or ran a business and paid GST, that would alert the department to its existence.
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