CultureWatch

Bill Muehlenberg's commentary on issues of the day...

Let’s Tax Those Pesky Churches Out of Existence

Aug 27, 2008

Every once in a while calls are made to take away any tax-exempt status for churches or religious groups. There may be many reasons for this. Non-religious folk may not think it fair that they should subsidise religious bodies with their tax dollars. And hardened atheists and secularists may see this is yet another way of wiping religion off the map, or at least neutralising it even further.

Whatever the reason, it is back on the agenda again. The Rudd Government is undertaking a taxation review which will examine whether the concessions offered to the $80 billion non-profit sector are justified. A recent piece in the Australian put it this way:

“Most of the country’s religious groups, which make up about $25 billion of the sector, run commercial enterprises. Among them is the Seventh Day Adventists’ cereal giant Sanitarium, which generates more than $300 million a year. Many of the operations have little to do with charitable work but are exempt from various taxes including corporate tax and capital gains tax. The Catholic Church has long opposed reforms such as the creation of a national charities commission to regulate the sector, or charging tax on commercial enterprises.”

It continued, “Business enterprises run by religious groups range from pizza chains, insurance companies, wineries, farms, schools, hospitals and aged-care facilities. All are exempt from tax. Australia is one of the few countries in the world where religious groups are not forced to pay tax on business ventures.”

So should these groups, especially faith-based groups, lose any fiscal advantage?  Columnist Angela Shanahan discussed this issue in a recent article, also in the Australian. She began this way: “The argument is a compelling one and it goes something like this. Religious bodies and charities are not taxed, so religion can run businesses and not-for-profit organisations in the guise of charity. These charities, run as businesses and employing thousands, make and are given huge amounts of money that are churned back into the organisation. How is that different from any other business? Well, precisely because it isn’t like another business. The turnover is not the object. Personal gain is not the object. The object is community good. That should be justification enough for not taxing such organisations.”

She is worth quoting at length: “True, religious bodies and their affiliated not-for-profit organisations employ large numbers of people. The Catholic Church, for example, employs about 100,000 people. But it is indicative of the nature of this argument that most of those people are teachers, and nurses and other medical staff. In fact once the church employed very few personnel because the work was done by unpaid religious. But times have changed and the operations of the church have become, of necessity, business-like.”

“They also have become part of the mainstream fabric of society in a way they were not 100 years ago. So, for example, some of the best hospitals in this country are run by religious institutions and most of them are public hospitals, such as St Vincent’s in Sydney. And of course one-third of Australian children, Catholic and non-Catholic, are educated in Catholic diocesan schools, which are part of the mainstream education system. Although they receive government funding, they save the taxpayer an enormous amount since they are funded at less than half of what it costs to educate a child in a state school. Non-diocesan schools receive even less.”

“Large religiously based charities such as the St Vincent de Paul Society, Mission Australia and the Salvation Army run everything from homeless shelters to youth outreach and aged-care facilities, and lately the Government even expects them to find jobs for the unemployed. These charities are financed by a mixture of donations, government support and their own businesses, such as the famous op shops. Would Australians seriously want the op shops taxed?”

So what about those religious groups that have profitable business concerns? “The Sanitarium Company, which makes Weet-Bix is operated by the Seventh-Day Adventist Church. It earns millions. Surely it should pay tax? This is a slightly grey area. However, even if Sanitarium were officially taxed, in effect the company would not end up paying any tax because all profits go back into the church and it partly funds things such as the Sydney Adventist Hospital, the San.”

And Shanahan rightly points out that if we go after religious groups, then we should go after them all. As I have argued before, secular humanism is a religion. Indeed, atheism is too: “So if we tax religion, we must tax the Secular Association, too, and the Humanist Society and all the rest of the anti-religionists. Of course the anti-religionists don’t make much money, but then they don’t have to. They are not running hospitals, schools, orphanages, old people’s homes. They don’t generally organise themselves to go around at night in a van picking up drunks and taking them to Matt Talbot. They’d rather tax the proceeds of the silver circle at the Talbot.”

She concludes, “So, by all means, let’s have a charities commission that weeds out bogus charities, such as those set up by rich athletes to further enrich themselves. Let’s make sure that the money does go where it is supposed to, since this is really the point. But please don’t let secularist ex-senators Lyn Allison and Andrew Murray try to pretend that charity can be assessed like any other business.”

Amen, sister.

www.theaustralian.news.com.au/story/0,25197,24225533-7583,00.html

[899 words]

14 Responses to Let’s Tax Those Pesky Churches Out of Existence

  • My thoughts (and I have to be honest, I’m not trained in taxation law) run something along the lines of this:

    If a family are all living together and one member gives money to the other member, does the recepient have to declare it as extra income? Or is it just sort of assumed that each of the individuals in the family are taxed and if say the husband chooses to give $10, 000 of his income to his wife to buy a car, because he has already paid tax on that income, his wife doesn’t need to list the money as income for her personally? (This is tricky with marriage, so substitute husband/wife with parent/adult child or something if it makes it easier).

    Similarly, with religious bodies, every person in a religious organisation is taxed (unless they are below the tax threshold). What we do as a Church is simply pool some of these funds together to be redistributed.

    Some would say “that’s OK, but only if it’s spent on humanitarian pursuits”. This is the thing though: we are theists, not humanists, so although a sizeable portion of our money will go to feeding, clothing, educating, healing the poor, etc., we will also spend money on the electricity bills for our worship services, salaries for our admin staff, and others things which are not technically “humanitarian” in nature.

    I’m all for Sanitarium, etc., being taxed (or any other commercial business venture for that matter). But as far as funds that go towards the running of the Church and it’s programs, so long as these are either specifically related to worship of GOD, or are used charitably for other people, they should not be taxed. This is not a business making a profit. It is a group of individuals (or as the Bible calls us, a family) pooling our money together to resource the communal living out of our faith.

    Amanda Fairweather

  • We do need to weed out the charlatans. They have been looking at this in the US Senate’s Finance Committee. That takes one to a page in the Trinity Foundation website. A problem is that Wikipedia point to accusations that the Trinity Foundation is as bad as those it hunts.
    Michael Boswell

  • Yeah … lets tax those greedy organisations … you know, the ones that generate the money which funds most of the social work in this country. Not to mention that many of these organisations employ 100’s of 1000’s of people — some would get put out of work. Great idea. NOT. There’s already plenty of rules and regulations governing the charitable sector. We don’t need more.

    The government is (arguably, or at least hopefully) not so stupid. They ought to know that if the charitable sector had to substantially cut back on its social/welfare/charitable activities, the impact on our communities around the country would be devastating. Right now the government are getting a “free ride” off the 100’s of 1000’s of hours of charity work donated by volunteers, and the 1,000,000’s of dollars of charitable works contributed by these institutions. The government surely could not be so stupid as to shoot themselves in the foot. Could they?

    Not to mention: if the charitable institutions had to cut back and the government had to pick up the tab … does anyone really think that they’d be able to do the same job for the same price? Of course they couldn’t. The delivery cost of the same services would go through the roof. Who’d pay for that? The average Australian taxpayer would have to pick up the tab.

    Ref: http://www.accord.org.au/social/infobriefs/nonprofit.html

    Quote: … non-profit organisations “Made an economic contribution larger than the communications industry and about equal to that of the agriculture industry; a contribution almost twice as large as the entire economic contribution of the state of Tasmania”

    I’d like to see how the Federal Government would plug that hole in its budget if it gets its policies wrong.

    — Stephen Frost, Melbourne.

  • Further quotes from that link above:

    * During 2000, 3.7 million Australians volunteered a total of 600 million hours of labour for non-profit organisations of all sizes
    * This voluntary contribution was equivalent to an additional $8.9 billion worth of income to the non-profit sector
    * When this voluntary contribution is added to the financial data, Australia’s nonprofit sector contributed $29.6 billion or 4.7% to GDP. This is a larger economic contribution than the mining industry.

    — Stephen Frost, Melbourne

  • I speak from experience in operating a small not-for-profit organisation. Few people realise the amount of work and services provided to such an organisation at no cost, to enable the community to benefit. How could a tax be assessed?
    Tom Wise

  • Let us be in no doubt concerning the underlying motivations of the charities commission; they are not charitable but malign. Whilst wearing the mask of equality, fairness, justice and inclusion, they come from the same stable as the homosexual lobby which, with its implacable hatred of God, would remove any last trace of Christian influence within society. Some time back Melanie Phillips wrote:

    “Local authorities and government bodies are systematically bullying Christianity out of existence by refusing to fund Christian voluntary groups on the grounds that to be Christian means that they are not committed to ‘diversity’. Thus local and central government refused to replicate the vocational training provided by the Highfields Happy Hens Centre in Derbyshire for young offenders and pupils excluded from school despite its impressive record of success, simply because it was run with a clear Christian ethos. Norfolk council objected to the inclusion of the word ‘Christian’ in the constitution of Barnabas House in King’s Lynn, Norfolk, which houses homeless young men. And the Housing Corporation, the major funder of Romford YMCA in Essex which looks after hundreds of needy young people, objected to the fact that only Christians were board members — which meant, it said, that the YMCA was not capable of ‘diversity’, even though it was open to all faiths and none. The ‘diversity, tolerance, inclusion, non-discrimination agenda, is a fig-leaf for an attack on Christianity.”

    David Skinner, UK

  • Hmm, I suggest that you all ask your own tax advisers about the rate of tax on “not-for-profit” organisations.

    Last time I checked (sorry, but it was a while ago) it was 48.5% on profits not applied to the charitable purpose of the organisation.

    John Angelico

  • John, you’re right. I’m very familiar with this area, as I teach churches about their obligations. One thing churches sometimes don’t realise is that they have to register (apply) for Charitable Institution status in order to be exempt from income tax. If they don’t, as you say above, they would need to pay tax.

    Other issues that may arise are where the church gets involved in things that are not in keeping with their dominant purpose, which falls under the “religion” category. If they get into politics in an inappropriate way (e.g. by supporting a candidate for political office), that would likely be a disqualifying purpose and they would then lose tax exemption status.

    But if they do the right thing, in the “normal course of events”, then they are rightly exempt, along with sporting clubs, cultural groups, and so on.

    – Stephen Frost, Melbourne

  • Stephen,

    Why shouldn’t churches “get into politics”?

    Ewan McDonald.

  • Why shouldn’t churches “get into politics”?

    Talking specifically about Australian churches, if a church is seen to get involved in politics by, for example, advocating a particular candidate or party, then it will lose its tax exempt status. Now if that church deoesn’t mind paying income tax, and losing the ability to pay its pastor non-reportable fringe benefits, then that’s fine. But from the ATO’s perspective, they have ceased to be a religious institution.

    There were some interesting scenarios in the past few years where Family First was concerned, and people were trying to make links between the AOG and Family First. Indeed, there was at least one serving AOG pastor who ran for parliament under the Family First political banner. The ATO would have been watching him very closely, to see if he mis-used his pulpit in order to gain a political advantage.

    There are also restrictions on things like “seeking to change Government policy”. This strikes me as a grey area. Provided the church is making “fair comment” based predominantly on the intersection between government policy and the church’s dominant purpose (e.g. the propogation of the Gospel of Jesus Christ), then some comment will be tolerated.

    — Stephen Frost, Melbourne

  • I’m late to the party, but I wanted to respond anyway.

    I notice both the comments and the original post miss an important point. The issue is not the taxation of charities, or taxation of the revenues churches put into charity. The issue is with the revenue churches do not put into charity.

    The suggestion seems to be that those who support taxation of religious organisations (which includes me, by the way) wish to tax religiously based charities. This is simply not true. St Vincent de Paul, for example, is a legitimate charity, whose works and funds go towards some of the poorest people in our country. That meagre revenue should not be touched. But then again, no one is saying it should be. The argument is simply a straw man.

    The issue of Sanitarium has been raised. It’s commendable that they fund the Sydney Adventist Hospital. But how much of the profits of Sanitarium go towards these sorts of good works, and how much of them are simply the profits of a major multinational company, no different to Kelloggs or Coca-Cola? If a company (such as Coca-cola) were to pay 10% of its proceeds towards a charity, that amount would be tax deductable. If a religious company (like Sanitarium) pays 10% of it’s proceeds towards a charity what is the difference? The only difference is that Sanitarium does not pay tax on the remainder, and Coca-cola does. What happens to the rest of the revenue of Sanitarium?

    The straw man above was from Angela Shanahan, and so is this passage.

    “This was the thrust of an opinion article published recently by Max Wallace, director of the Australian National Secular Association and author of The Purple Economy: Supernatural Charities, Tax and the State. His argument completely ignored that religion does not make money for itself. It does not provide dividends to shareholders; it provides services for others.”

    Does it? The actual services it provides are not in contention of paying tax. The only thing that people want to see taxed are actual profits made by religious organisations that are not put towards services for others. And I would have to say that “missionary work” does not count as a service to others. Merely an advertising cost.

    From the original post here: “And Shanahan rightly points out that if we go after religious groups, then we should go after them all. As I have argued before, secular humanism is a religion. Indeed, atheism is too.”
    This is a common statement. But it’s not true. Atheism is not a religion. But that really is semantics, and not actually relevant. I’ve never heard an atheist say they shouldn’t be taxed on the basis that their endevours were not serving God. Of course we should tax non-religious groups as well. The issue is one of equal taxation. Atheistic and other secular groups do pay money on their income, unless they’re a registered not for profit organisation.

    Those of us who support taxation of the vast profits of religious organisations (and by the way, it’s not a secret agenda) simply want equality. We want religion to not be above the laws that affect everyone else.

    Matt Burgess

  • Thanks Matt

    But you clearly have an inadequate grasp of what Christian ministry entails, or what Christian missions is all about. Real Christian ministry and mission involve the whole man. Both body and spirit are tended to.

    When you read about the 2,000 years of Christian outreach and service, you read not just about Christians telling non-Christians about Jesus, but you see social action aplenty. The two go hand in hand.

    Wherever Christian missionaries went, the set up schools and hospitals, provided food programs and shelter. They were involved in literacy work, improving living conditions, working with women and children, involved in prison reform, stamping out corruption, working against slavery, helping the poor and needy, etc., etc.

    So you have a faulty notion of what constitutes Christian work. One cannot divorce what a biblical-based church body does in terms of evangelism and in terms of social work. The two are inexorably linked.

    And I have dealt with the religious nature of atheism and secular humanism elsewhere.

    Bill Muehlenberg, CultureWatch

  • What happens to the rest of the revenue of Sanitarium?

    If its a wholly-owned subsidiary of the Seventh Day Adventist Church (I am surmising that it probably would be!), then any profits would be passed back to the sole shareholder and then be used for supporting the other activities of the church … hence, a perfectly legitimate use of those funds. But if you’re in doubt, I suppose you could run an ASIC search on the shareholders and see who owns it. It might be a trust too, who knows? As to whether churches should be allowed to operate profit-making businesses … well … that’s not my call to make. But I can tell you that the use of trusts (whether disgressionary or fixed) is well established at law and unless the government introduces laws to tax trusts, its futile pointing the finger at churches for utilising the law just like anyone else.

    Stephen Frost, Melbourne

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