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Should churches be taxed?

April 22, 2015

I saw a link yesterday on the Australian Secular Party’s Facebook page linking to an article where the Uniting Church challenged the tax dodging arrangements of some multinational companies.

Here we have The Uniting Church, which does not pay tax, challenging the tax dodging arrangements of some multinational…

Posted by Secular Party of Australia on Monday, April 20, 2015

The Secular Party suggested the Uniting Church was being hypocritical,

Here we have The Uniting Church, which does not pay tax, challenging the tax dodging arrangements of some multinational companies. Is the pot calling the kettle black?

Ok, but how?

I responded to the Facebook post and asked how the Government would tax not for profit groups?

This is a critical question because in order to tax churches the Government needs to work out a way of taxing them that is both practical and legal.

Practical because on what basis should churches be taxed? On their income, on their ‘profit’ or on something else? For-profit companies are not generally taxed on their income, but on their profit. There seems to be a fundamental difference between taxing a for profit multinational, rather than a not for profit church. So how should churches be taxed? No adequate solution is proposed.

But the more difficult issue for the Secular Party to overcome are the legal issues because the advancement for a religion is one of the key definitions of a charity. My understanding of Australian not-for profit taxation law is that it is based on the definitions developed by Lord Macnaghten in a case in 1891 where he defines charity in four ways:

“‘Charity’ in its legal sense comprises four principal divisions: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads.

Hence the ‘advancement’ of religion’ is a legitimate legal definition of a charity and is treated as such under Australian Taxation law. This increases complexity in the issue because taxation of churches is not simply a ‘church vs state’ issue. It is now ‘state vs church vs legislature’. It appears punitive (and based on an anti-religious agenda) on the part of the Secular Party to single out tax treatment of ‘religious’ organisations without developing a clear policy for how to deal with the broader not for profit and charities covered under these other definitions.

Inconsistent policy

Indeed part of the Secular Party policy platform is the ‘abolition of government subsidies and tax breaks for religious organisations.’ Yet as this article points out this policy position is either dishonest or ignorant (neither of which is a particularly good place to be!).

As presented by these parties, there is a special religion-only loophole in our tax system which specifically exempt religious non-profits from paying tax at the expense of everyone else.

The problem with this is that it simply isn’t true. These parties are being either deliberately dishonest, or simply do not understand how our tax law works.

The author correctly points out that many other not for profits receive tax exemption. And I cannot but agree with their conclusion.

As such, to single out organisations that exist to promote religion and hit them with a specific and punative [sic] tax hike that does not apply to other non profits is unfair an unjust.

Moreover the article points out the potential confusion over DGR status, which churches do not automatically receive.

Profit or Prophet?

Hence the Secular Party in pushing their anti-religious agenda has overlooked an important (indeed prophetic?) voice of the Uniting Church on on the taxation of multinational organisations (who can certainly afford it, and indeed there would appear to be some moral obligations for them to pay more tax). Whilst it is a legitimate conversation to discuss taxation on the not for profit sector, discussion should be based on the not for profit sector as a whole, considering all legal and practical issues, not simply on one small part of that sector the Secular Party disagree with on ideological grounds.

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From → Comment, News

4 Comments
  1. I think the issue is that “non-profit” doesn’t mean “not rich”. I don’t know much about the uniting church which is mentioned in the article, but I’ve looked a little into the Catholic church and it is an extremely wealthy organisation.

    When the general public see a charity organisation working with minimal paid staff, who are paid ‘average’ salaries and a significant contribution from volunteers, the status of tax free sits well.

    When the general public sees a non-profit organisation making millions of dollars, owning countless pieces of priceless art work, having millions of dollars worth of gold, and owning more property than almost any other organisation in the world, and not paying tax…it leaves a distasteful feeling.

    So yes, maybe the churches don’t make profit. But the do make money.

    That’s all aside from my feeling that ” trusts for the advancement of religion;” have no place having an exemption in a secular society.

    • Phill chadwick permalink

      Indeed, well put mrozatheist. Surely a legal definition of “charity” set down by an English Law Lord in 1891 is due for review. The advancement of religion may have been seen as a good thing then. Is it still valid in Australia in 2015?

      • Good question, but given that there are more members of churches than are beneficiaries of most charities, I’d say that there is still a good case. Appreciate your comments.

    • Thanks for your comments (and sorry for the delay in responding). I tend to agree that ‘non-profit’ may not necessarily mean, ‘rich’, but that usually means asset rich i.e. lots of property. How (and if) should these organisations be taxed?

      I must confess, I don’t know much about the exact financial state of the Catholic church – it may well be extremely wealthy – but I suppose I’d just like clarification on exactly how much ‘profit’ they make. Where does the profit come from? Do you have any income stats or anything on that?

      Your final comment is perhaps the most interesting and controversial. It does beg the question over what a ‘secular’ society looks like. Is secular ‘without religion’ or ‘with and without’ religion?

      Always good to hear from you and thanks for commenting.

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