To Inland Revenue,
On behalf of Community Governance Aotearoa, we submit our feedback on the proposed changes to the taxation of charities, not-for-profits, and voluntary organisations in New Zealand.
Who’s benefitting most?
The tax settings proposed could further drive the wealth divide by reducing charities and not-for-profits ability to sustainably fund services that directly benefit our communities.
The flow on effect of the proposed tax changes could put pressure on already strained organisations through diverting revenue streams that directly support those in our communities e.g., those who rely on our services and employees of our charitable sector.
If the charity sector feels challenged to have to divert income and/or can’t rely on income generated by unrelated or directly activities (as presented by IRD), the unintended consequences could be, more charities facing closure, more job losses and a continued strain on the community sector.
Consultation period lacking
We highlight concerns about the lack of engagement with Iwi, Māori entities, charities and not-for-profits. The consultation period has lacked genuine engagement with the community sector and grassroots organisations – this raises an on-going concern as we see the rise of consultants and businesses positioning themselves to take the lead in advocating and engaging with our community sector rather than allowing time for meaningful dialogue that should be led by the community.
Statistics and Data
The lack of clear definitions for “related” vs. “unrelated” activities makes it difficult to reliably categorise incomed derived by charities and not-for-profits. We would like to see more evidence provided by government, concerning what is deemed related or non-related taxable income, we encourage IRD to use case studies to demonstrate what this might look like for the charitable sector, including on-going or other costs that may arise in accountancy and compliance requirements.
Recommendations
Community Governance Aotearoa summary of our recommendations:
- Work directly with those who hold governance roles in the community sector, we are the key to ensuring compliance, policy settings and information is directly shared with our charitable organisations.
- We would like to see demonstrated case studies and financial information that we can share with our governing community sector to better understand the tax changes, including what IRD anticipates as potential revenue forecasted by these tax changes, and where will this tax go?
- We want to see more information about what the impact on Tier 3 and Tier 4 charities from the proposed tax changes, including not-for-profits with annual revenues up to $2 million will be, considering many of these community groups do not hold significant reserves, nor have excessive revenue incomes.
- Adopt a values-based approach to genuine engagement and consultation, such as adopting the Community Governance Aotearoa’s Good Governance Code, rather than just a financial one.
On behalf of Community Governance Aotearoa, we encourage the government to ensure that information is directly provided to the community sector. It is essential that those in governing roles are adequately resourced and kept up to date with any tax changes the government intends to implement.
Ngā mihi,
Rose Hiha-Agnew
Chief Executive – Tumu Whakarae
Community Governance Aotearoa
