The revelation that the Australian $80 billion not-for-profit sector is facing two reviews, one by Treasury and one by a Senate Committee, which entails a long overdue look at tax exemption for the unrelated-to-religion commercial businesses of the churches, prompted a response by the ABC’s Religion Report of 6 August.
The program’s introduction made clear its purpose: to “dispel a few myths about church based charities.”
The program was heavy with denial and generalisations about complexity. The guests on the program were Father Brian Lucas of the Catholic Church, Rodney Brady of the Seventh Day Adventist Church and the barrister representing the Christian mission, Wycliffe Bible Translators, Murray Baird. Wycliffe is involved in a court case with the ATO. This article will only touch on matters raised in the interview with Father Brian. They relate well enough to the views of the other speakers.
Firstly, it’s important to understand that any religion that satisfies the criteria established by the High Court in its 1983 definition of religion in the Scientology case, is eligible for tax-exempt status. Briefly, these are a belief in a supernatural being, thing or principle and canons of conduct that give effect to that belief.
An organisation must have a building, be paying a stipend to a minister or similar, have a congregation, perform rituals and be open to the public. Secondly, all religions are legally charities. To “advance religion” is a tax-exempt charitable activity. Atheism is not tax-exempt because it does not entail a supernatural belief.
There are about 1,500 religious organisations that are coded into the ABS’s data base. Their numbers seems to be increasing while at the same time Christian belief in Australia has declined steadily at every census.
The justification for religious organisations running tax-exempt commercial businesses is that the money goes back to the community through charitable spending, so what’s the problem? The program did not consider the idea that maybe there are religious organisations that tithe their members to create a base of capital, start tax-exempt businesses, do a cosmetic amount of charitable work or none at all, and directly or indirectly manage to live very well.
Currently in the United States, the Republican Senate Finance Committee is investigating six televangelist ministries who run vast commercial empires and openly flaunt their wealth. They can do this because, as noted, the “advancement of religion” is a charitable activity. The question the US Committee is asking, turns on whether that advancement means ministries can live so high on the hog and be so far removed from the original intention of the charitable status. We are seeing some of that in Australia.
Opening the batting on related matters, Father Brian said firstly there was no problem with Catholic Church Insurances, one of Australia’s largest corporations, because it is merely spreading risk among the church’s many thousands of different organisations and properties. That is not how Broken Rites, the organisation that fights for victims of s-xual and other abuse by the church’s clergy, see it. They claimed in 2002 that the church had insured itself in the 1990s in anticipation of abuse claims through its own company while it simultaneously did nothing to expose the perpetrators of the abuse.
Father Brian then referred to the 1995 Industry Commission report that ticked off on the income tax exemption for the commercial businesses of the churches, stating they were not anti-competitive. Really? I’ve read the report and a submission made to the Commission in 1994 by a company called the Fitness Corporation of Australia. Fitness, in a well written submission, complained bitterly about the tax advantage they claimed the YMCA received in its competition with them in the leisure industry. When I went to the Commission’s library in Canberra to read this submission I was told I would not be able to photocopy it.
I could only take manual notes. Some years later after the perceived danger of the document had passed, and Fitness had gone out of business, I was allowed to photocopy the submission. I cannot say for sure that it was the competitive edge that YMCA that drove Fitness out of business, as the directors were untraceable, but their experience is mirrored in the experience of other companies.
The next matter that arose was the fact that in other jurisdictions churches may not run unrelated tax-exempt businesses. Father Brian said that in Britain ‘all that happens is that that particular business, if you want to call it that, gives its surplus back to the charity.’ Maybe. But a visiting Scandinavian professor, Professor Gjems-Onstad, an expert in this field, said in his 1993 paper on Australian charities entitled Money Pouring Out of Its Ears that only Israel and Hungary allowed unrelated commercial activity of this kind to be tax-exempt. He believed that Australia was “a tax haven for certain non-governmental institutions.” (The privilege varies in states of the US).
The next line of defence was the fact that here and there, religious organisations do pay some tax. Payroll tax, stamp duty, land tax, council rates especially, “vary enormously from state to state.” That may be so, and it would require quite a bit of work to tease all that out. But in a paper published in 2002 Professor McGregor-Lowndes, an expert in charities and head of the Centre for Philanthropy and Non-profit Studies at the Queensland University of Technology, and his co-author, wrote that “Many charities are exempt from sales tax [pre-GST], land tax, stamp duty, financial transaction duties, gambling taxes, payroll tax and other minor indirect taxes.”
Also, what was not mentioned in the interview was the considerable losses to consolidated revenue from the churches paying no income and capital gains taxes, in addition to the cost to revenue where those state payroll/land/stamp duty privileges do apply.
Next item for discussion was whether there should be a Charities Commission to oversight the charity sector as recommended by John Howard’s 2000 Charity Definitions Inquiry (CDI).
Father Brian said “Well, the Catholic Church doesn’t have a position on that in terms of one solid Catholic position.” He then went on to say “if [a Charities Commission] is constructive and positive and will contribute something to the community, no-one would oppose it.” Quite so, but in fact, in its 36 page submission to the CDI the church did oppose the setting up of a Commission. The submission states in its Executive Summary that it was made on “behalf of the Catholic Church in Australia under the auspices of the Australian Catholic Bishops’ Conference and the Australian Conference of Leaders of Religious Institutions.”
The Religion Report did not succeed in “dispelling a few myths.” It may have succeeded in perpetuating a few. The most important myth of all was not discussed: the myth that there is a constitutional separation of church and state in Australia at a Federal or State level. I suggest this fact may have something to do with the tax privileges for religion. Pity they forgot to mention that.