“HEAR the pennies dropping. Listen while they fall. Everyone one for Jesus. He will get them all.” Thus goes the eternal refrain of the Sunday School hymn which is not exactly true even as the politicians this week argue over whether those pennies should be tax deducible.
After all, the pennies do not “go to Jesus”, but rather they go to a legal entity called the Anglican Church or the Catholic Church, which in turn invests those pennies and earns interest upon them.
And those churches for the past couple of centuries have not paid a skerrick of tax on those pennies or the interest earned on the investment of those pennies. This is because the common law and various tax Acts since have exempted “charities” from taxation.
Lord Macnaughton — famous for his rules that determine criminal insanity – is less famous for his 1891 rules about what constitutes a “charitable purpose” at law and with it all the attendant tax and trust advantages.
Macnaughton put forward four charitable purposes: the relief of poverty; the advancement of education; the advancement of religion; and other purposes beneficial to the community.
By and large these still apply in Australia today but later jurisprudence suggests that underlying all four purposes must be a requirement that the activity be of benefit to the public.
But what if this requirement were more strictly enforced and that the “pennies dropping” be scrutinised more thoroughly? What if the old common law were codified and for “the benefit to the public” became a legal requirement before tax deductibility flowed?
The established churches, particularly the Catholic Church, would not like that one drop. What if the church had to show that the dropping pennies were applied only to charitable purposes with a community benefit or otherwise pay tax on them and the interest that flows from them?
For example, what possible community benefit could be shown for parishioners’ pennies to be dropped into a fund for vowed-to-silence Trappist monks who do not even communicate with the community let alone provide any community benefit?
Now you can begin to understand why Prime Minister Tony Abbott and his mate Cardinal George Pell are vehemently opposed to Labor’s Charities and Not-for-profit Commission and want to get rid of it. They also want to repeal the Charities Act which is to come into force on 1 January. The Charities Act defines “charity” and “charitable purposes”, bringing clarity to centuries of common law.
Earlier this month, Social Services Minister Kevin Andrews tried to postpone the operation of the Charities Act, but he failed and he will have to wait for the new Senate to sit after 1 July next year for another attempt.
The churches fear that legislative definitions will cause people to ask questions like: “Of what possible community benefit is there in providing priests and preachers to talk about a mythical all-powerful man in the sky, or in providing for semi-naked, painted dancing people to talk about a sky serpent?”
Why should we have tax deductibility for the propagation of such nonsense?
Under present legislation, the Charities and Not-for-Profits Commission monitors those organisations that call themselves charities or not-for-profits. Its fundamental task is to ensure that money the public donates goes were it is supposed to go – to charitable purposes or community benefit – and to ensure the charities are properly governed along the lines of the requirements of the Australian Securities and Investment Commission.
But the churches hate the idea of meddling bureaucrats looking at what they spend their money on.
My guess is that Cardinal George Pell would like the income that provides his splendid satin and silk vestments to be tax deductible even though there is no demonstrable public benefit in it.
Andrews is on his side. Andrews has said, “It is a relationship that requires government to balance the need for accountability of public finance with the trust and confidence that the community holds for these organisations.
“It is a relationship in which the government should seek to empower civil society, and not itself. So civil society is free to get on doing what it does best, which is to respond to the issues of concern within our communities.”
This government-should-get-out-of-the-way approach is rank hypocrisy by the Coalition Government. And why shouldn’t such sentiments apply also to trade unions? But no Labor Government has introduced legislation to apply greater scrutiny to the finances and governance of unions. And for good reason. Unions have been up to a lot of malfeasance recently, but so have some organisations that hold themselves out to be charities.But for the Coalition it is hands-off for charities and hands-on for unions.Labor, of course, is arguing the other way.The only consistency here is that each side is looking after its special mates. Indeed, that is becoming ever more the driving force in Australian politics. Treasurer Joe Hockey’s budgetary speech this week was riddled with it – the Coalition’s big end of town left untouched or even helped while money is ripped from those who can least afford it.How about the national interest? All the non-religious charities have welcomed the charities legislation. It is an efficient one-stop shop rather than having to deal with eight state and territory bureaucracies. I was chair of Barnardos, the children’s charity, for five years and have some knowledge of how onerous this bureaucracy is.If Andrews was genuinely concerned about allowing the charity sector to “get on doing what it does best” he would let the streamlined national system continue.
Other than a few religious charities, the charities argue, quite reasonably that national regulation will bring greater confidence to the sector and make people more likely to give to it.
With any luck the incoming minor-party senators will see that point.
In the meantime, Labor would do itself a favour if it supported much greater legislative scrutiny and democratisation of unions. It would obviate it having to bear the stench of scandals like the Health Services Union in the future. It would also drive the party to diversify its funding sources.
The sort of regulatory requirements that apply to public companies are needed for charities, not-for-profits and unions. It will not stop all malfeasance, but it will stop a lot of it or catch it earlier. It will go a long way to restoring much-needed trust in these organisations.
CRISPIN HULL
This article first appeared in The Canberra Times on 21 December 2013.
Most giving to churches is not tax deductible so one of your key complaints in this article is void. When I attend my local church and make a contribution, I don’t get a tax receipt and neither do any of the other million or so reasonably regular attenders in Australia.
I also contribute to charities, some of them church based, and I do often receive a tax deductible receipt. But there is a fair amount of accountability from the ATO and, if it survives, the ACNC, about that money being directed in accordance with a charitable purpose. I doubt it makes its way to anyone’s vestments.
Having said that, I agree with better oversight and clearer definition of charity and do not oppose the ACNC despite being a ‘man in the sky’ believer and working for a Christian charity (which also has supported the previous government’s attempt to improve regulation in this area). Views my own.