Hon Dr Michael Cullen
Minister of Revenue
MEDIA STATEMENT
Charities working party appointed
Syd Ashton, the outgoing chief executive of Te Runanga O Ngai Tahu, will chair the charities working party.
Other members are:
- Pat Webster, Executive Director of the Council for International Development,
- Hemi-Rua Rapata, Chairman of the Federation of Maori Authorities O Aotearoa; the Taitokerau Federation of Maori Authorities; the Matauri X Incorporation,
- Gordon Copeland, Chair of the Inter Church Working Party on Taxation, Financial Administrator of the Catholic Archdiocese of Wellington,
- Frank Claridge, Treasurer of the Royal New Zealand Foundation for the Blind, member of the Federation of Voluntary Welfare Organisations national executive,
- Judith Timpany, Chair of Philanthropy New Zealand, Executive Director of the Whanganui Community Foundation,
- Pat Hanley, Manager of the Association of Non Governmental Organisations of Aotearoa and Chair of the Social and Civic Policy Institute.
Announcing the membership, Revenue Minister Michael Cullen said the charitable sector encompassed a broad range of organisations and interests and that the appointments reflected this diversity.
"The government resolved in response to submissions on the Tax and Charities discussion document that charities claiming tax free status should be subject to a registration, reporting and monitoring regime as applies in many overseas jurisdictions.
"To ensure we get the best system possible with maximum support and minimum compliance costs we decided to consult the sector on the design details. The working party was born out of that decision," Dr Cullen said.
It would also provide feedback on any wider impacts of applying the public benefit test to Maori organisations as discussed in the Taxation of Maori Organisations discussion document.
It had been asked to come back with its recommendations by the end of February so that the government's policy response could be incorporated into legislation for introduction in May.
The same legislative package would include the decision to raise the rebate for individual charitable donations from $500 to around $600 and to simplify the company deduction rules.
The working party had also been invited to comment on whether the definition of "charitable purpose" could be improved without altering the definition's overall scope and on the proposal to standardise the various tax assistance rules applying to New Zealand charities operating overseas.
The reporting date for this part of its brief was the end of May, Dr Cullen said.
Contact: Patricia Herbert [senior press secretary] 471-9412 or 021-270-9013. E-mail [email protected]
Terms of Reference
Working Party on Registration, Reporting and Monitoring of Charities [1]
Functions
The Working Party has been appointed to make recommendations to the government on the design of a method of registration, reporting and monitoring for charities, and to provide comment on other identified issues.
The functions of the Working Party will be:
i. to provide recommendations on the type of registration, reporting and monitoring arrangements that should be introduced in New Zealand and how they should be implemented;
ii. to comment (if it wishes) on any wider impacts of the issue of the public benefit test as discussed in the Taxation of Maori Organisations Discussion Document;
iii. to report to the Minister of Finance on its findings.
The Working Party is also invited to comment on:
- whether the definition of "charitable purpose" can be improved without altering its overall scope; and
- the proposal to standardise the various tax assistance rules applying to New Zealand charities with overseas purposes.
Context
The Government acknowledges the enormous contribution the charitable sector makes to New Zealand society. The work of these groups is highly valued by both government and the community.
The current government has initiated work focusing on improving the relationship between government and the community and voluntary sector, but also recognises that the legal and regulatory environment in which charities operate is in need of review.
Successive governments have expressed an interest in reform but have also expressed concerns about the degree to which the tax exemption for charities can be used for tax avoidance. These same concerns have at times been expressed from within the community and voluntary sector itself.
New Zealand is not alone in considering changes to the charities legal environment. A number of Commonwealth countries are considering reforms of the charitable sector, and we expect to follow developments in those countries closely.
The Government released a discussion document in June 2001 canvassing various options for change related mainly to tax issues. The document highlighted that there is a lack of information available about the charitable sector, including who benefits, and how, from the tax assistance the government provides.
The discussion document generated a large number of submissions from a wide range of individuals and groups within and associated with the charitable sector. From submissions it is clear that there is general support for a registration, reporting and monitoring system.
As a first step, therefore, the Government has decided on a package, which includes proceeding with a registration, reporting and monitoring system. It has set up this working party to work with officials in developing a simple cost effective system that is suitable for New Zealand.
This leaves several issues still to be considered, some of which were raised in the discussion document. The working party has been asked to comment on some of these, but the government acknowledges that there is further work to be done over the next few years. It is hoped that the information gathered through the reporting and monitoring system to be introduced, as well as observation of other jurisdictions, will contribute to an informed debate on the wider issues, and to reform that will assist the sector in its vital role within New Zealand society.
Purpose
In his press statement of 16 October the Minister announced:
"A decision in principle has also been taken to introduce registration, reporting and monitoring requirements for charities claiming tax-free status. This is common in overseas jurisdictions and, from the feedback we have received, is broadly accepted here.
"To ensure the new system works well and has wide acceptance, the government has agreed to consult the charitable sector on the design details - including ways to reduce the compliance costs for smaller charities.
"A working party comprising sector representatives will be appointed and asked to come back to the government with recommendations."
The Working Party will concentrate on the operational aspects of a registration and reporting system that is workable for charities and useful to the Government and the public. Their recommendations will form the basis of advice to the Government in this area.
Ideally the system should be simple, efficient, fair and reliable. It should not impose unnecessary compliance costs on charities, as the resources of the sector, including the time of employees and volunteers should be focused on the valuable work they do, rather than on administration.
Task of the Working Party
The Working Party will:
- identify the body which will register charities
- propose a clear, simple, cost efficient and straight-forward method of registering charities
- recommend a system for the on-going collection and monitoring of information from the sector having regard to the purposes for which that information is collected.
The Working Party is invited to:
- comment on whether the definition of "charitable purpose" can be improved without altering its overall scope;
- comment on the proposal to standardise the various tax assistance rules applying to New Zealand charities with overseas purposes;
- comment on the wider implications of the issue of the public benefit test as it applies to Maori organisations.
The recommendations on registration and reporting need to be sufficiently particular to provide a clear idea of the actual legislative change and operational policies that they would require, including any enforcement policies.
With the exception of their comments on the definition of "charitable purpose" and on overseas charitable purposes, the Working Party will submit its report to the Minister of Finance by the end of February 2002. The working party will provide its comments on those other issues by the end of May 2002.
Process Expectations
The Government will make available officials, and will expect them to contribute significantly in assisting the Working Party. It is likely that officials will provide a formal liaison between the Working Party and the relevant government departments.
A large number of submissions were received by the government on the Tax and Charities discussion document. The Working Party may have regard to those submissions, to the extent they are relevant to its work on registration, reporting and monitoring.
Both officials and the Working Party will keep Ministers informed of the progress of the Working Party.
The Working Party will liaise with the Community and Government Sector Steering Group. The Government will consider the recommendations of the Working Party, and indicate publicly its views on those recommendations by mid April 2002, with a view to introducing a package of legislation into the House in May 2002. The package will include the other charitable taxation issues on which decisions have already been taken, and a clarification of the definition to ensure that charitable purposes of any organisation must be ongoing for the tax exemption to be available.
1 Defined as "organisations with charitable purposes for the purposes of the Income Tax Act".