Bishop Brian Tamaki speaking at a rally he organised along with members of Destiny Church on 7 December 2023 to show support for Israel. Photo: RNZ / Angus Dreaver
The government is set to review charities' tax-free status, which sees churches avoid paying income tax. An atheist professor says changing the laws would be devastating for New Zealand.
If the thousands of churches in New Zealand paid income tax, the government's coffers would be much richer.
They don't, because most of them are registered religious charities, giving them tax-free status.
That is under review by the government with submissions closing today. But one expert says they should be left alone, including the controversial ones such as Destiny Church and Gloriavale.
Without churches, says Dr Juliet Chevalier-Watts, New Zealand would plunge into poverty and chaos.
"Our societies would be horribly poor and would never recover from that," she says.
And our taxes would rise as the government would have to pick up the work done by the churches' thousands of volunteers, says Chevalier-Watts, associate professor, Te Piringa - Faculty of Law at Waikato University.
She started researching religion and charity law, including the economic impact and value of religious charities more than 10 years ago, with the belief that churches should pay tax.
But she changed her mind and is defending churches as they face losing their tax-free status in a government review, with an announcement expected in the May budget.
Chevalier-Watts and her research colleague Professor Frank Scrimgeour of Waikato University's School of Accounting, Finance and Economics based their research on the hypothesis that churches should not be exempt from paying tax income.
They calculated that the country's 3000 churches that are registered as religious charities and their 65,000-odd volunteers were worth $6.1 billion to the New Zealand economy in 2018 alone.
That excludes indirect benefits and flow-on effects across health and well-being, life-expectancy, employment, finances, education, social cohesion and pro-social behaviour.
Chevalier-Watts says the next phase of research will aim to put a value on that by looking at how the many churches provide food and accommodation, financial and job advice, as well as care for poor and elderly people.
She points out that churches already pay taxes such as PAYE on salaries, and in some cases GST and when it comes to the government's review of the tax-free status of charities, she says churches should be left alone, including Destiny.
"I think it's a very easy target and I think it takes away from what it actually is that Destiny Church does.
"This is not to say that I condone the actions that took place the other week with some members of Destiny Church, certainly not. But also I should make it clear as well that some of those that carried out those acts were not part of Destiny Church.
"For people to leap up and down and say Destiny Church must be stripped immediately of its [charity] registration status, well I think what they really need to be doing is actually looking overall at the real benefits of Destiny Church and what they have contributed to society."
Under scrutiny in the government review are more than 29,000 charities, including churches, which raise funds through their business activities, RNZ money editor Susan Edmunds says.
"They're looking at any loopholes that are being exploited that could mean that charities are avoiding tax that they probably should pay," she says.
For example, questions have been raised over charitable businesses, such as Sanitarium, owned by the Seventh-day Adventist Church and Best Start childcare centres owned by charity Wright Family Foundation, that are competing with non-charitable businesses.
"There's a concern that [because] they don't pay tax they've got a bit of an advantage, or that they might set their prices unsustainably low," Edmunds says.
She says New Zealand has become an international outlier for its charities' tax exemption which has been in place since 1940.
"I don't think there's an easy answer. It will be interesting to see what the government comes up with."
Sue Barker of Charities Law thinks that New Zealand is a world leader, along with Australia, in its tax treatment of charities. She said in her submission that she strongly recommended the proposals not proceed.
"When the approach taken by other jurisdictions is properly examined, it becomes clear they are a cautionary tale rather than a precedent to be followed. The proposals would act as an unnecessary blanket barrier to much-needed charitable work at a time when the charitable sector is already struggling with increasing costs, increasing demand for services yet diminishing revenue streams.
She said any issues with specific charities could be addressed with existing tools, and there was no need to impose unnecessary complexity.
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