Charities urged: Show us the money

The Mission Estate Winery in Church Rd, Taradale, Napier.

WHAT happens to the millions of dollars Mission Estate Wines pays to the Catholic Church should be visible to all, says charity expert Michael Gousmett.
It is one of thousands of New Zealand organisations that don't pay income tax because of their charitable status.
Michael Gousmett's work with the Pacific Leprosy Foundation 25 years ago piqued his interest in charities enough to complete a PhD on tax and charity. He has become an unofficial inspector-general of the country's $15 billion sector.
He said the public should be able to see if those benefiting from the income tax exemption were compliant with their trust deed.
Charities in England and Wales had to provide a written public report of how it benefited the public, but there was no such requirement in New Zealand.
"Charities might object to this requirement as yet another bureaucratic burden, but that is a small price in return for the privilege of being exempt from income tax," he said.
"It also forces trustees to take notice of the organisation's charitable purposes as described in the trust deed or constitution, and ensures that they work within those objects and not drift off into other ventures. It is called accountability and transparency."
The Mission Estate owner, The Society of Mary General New Zealand Trust, has received annual dividends of $1.5 million from Marist Holdings (Greenmeadows) Ltd, the operator of the winery.
The society qualifies as a charity because it undertakes religious activities, one of four approved reasons, including community benefit, advancement of education and relief of poverty.
The Department of Internal Affairs carries out the registration, education and monitoring of charities. Its Charity Commission's Compliance team monitors and investigates charities to ensure they continue to qualify for registration.
Mission Estate Wines is also listed as a charity.
Dr Gousmett said the Napier business had an advantage over its competitors because it did not have to pay income tax.
The chairman of Marist Holdings, Phil Hocquard, disagrees.
"We have a shareholder that requires funds just like any other company. Profits get repatriated to the shareholder. It is all about charitable purposes," he said.
"We operate as a full commercial company, we just simply happen to have a charitable shareholder."
Mission CEO Peter Holley said company tax was the only tax it did not pay. It paid all industry taxes such as GST, levies, excise and PAYE.
Profit that would be liable for income tax, if it were a non-charitable company, was paid to the church's religious order.
"We behave as if we are a competitive entity and the cash that we generate goes straight to the Society of Mary to further the religious works, manage the schools, pastoral activities and further advance the moral fibre of New Zealand," he said.
The society required a fixed dividend irrespective of how well the company did.
"If we have a very bad season we still have to meet that dividend commitment because the society needs to meet its own commitments.
"A normal company that had a bad season wouldn't pay tax, so in some ways it is actually harder for us because we have a higher bar to achieve. We don't qualify for any relief."
Mr Holley and Mr Hocquard said they were unaware that last year's Mission Estate results were not available for public viewing on the Charities Register, a request Mr Holley said was declined in previous years.
"We are a trading enterprise, so why should we be forced to put our financials in the domain when other companies don't have to?"
Property development is another activity Mission Estate may be involved with, with some of its land zoned for a 350-lot residential development.
Last year the Society of Mary had an income of $2.1 million and spent $1.3 million on "religious personnel and living expenses".
Dr Gousmett said while he was aware of the religious order's activities, it should be obvious to all.
"A person should be able to go on to the Charities Register and easily see what it is that justifies their exemptions from income tax.
"It is a failure of reporting in New Zealand."
Dr Gousmett is also critical of the lack of transparency from the Royston Hospital Trust Board, a shareholder in the publicly listed company that now controls the private Hastings hospital.
Its 2013 annual report shows a profit of $1.2 million and shareholder funds of $26.6 million, yet charitable spending was just $181,065.
It gave the Hawke's Bay District Health Board $100,000 "enabling additional patients on the public waiting list to be treated through Royston Hospital".
Money was donated to "assist the educational opportunities of staff and those associated with Royston Hospital", a high school endometriosis programme and a palliative care education programme.
The previous year the trust donated $68,345 for charitable purposes.
Trust chairman Jacqui Gray said many people thought charitable organisations' only income was public donations, but many needed to earn income.
"Some people say, 'look you've got all this capital - that's really bad', but sometimes a charity has to have capital to fulfil its purposes," she said.
She said the trust's main purpose was to make sure there were always private medical facilities available in Hawke's Bay.
"If you remove a certain level of demand on the public sector then that facilitates the public sector meeting its requirements. Some people will pay for it - they have that option - but we also assist some people to have surgery who may not easily get it through the public system."
Dr Gousmett said some charities appeared to accumulate wealth for its own sake.
Earlier this month it was announced children's charity Cure Kids was given a $1 million donation by the Duke family trust (Briscoes).
"I thought that was very generous of them but when I had a look at Cure Kids accounts I was rather amazed to find out they have $30 million invested in the bank.
"How is it that an organisation that has got $30 million in the bank still needs to have a $1 million or more donation from private individuals for their particular purposes?
"I'm sure Cure Kids do a fantastic job for children, there is no doubt about that, but again you look at these organisations and say, why have $30 million in the bank that's generating income and exempt from income tax?
"Surely we should expect them to be spending those funds or have some evidence that demonstrates what it is they are doing to accumulate so much money that is not applied to charity.
"We don't have that in New Zealand and I ask, why not."
The New Zealand income tax concession dates back to 1892, following a centuries-old British tradition.
The National Party government of the 1960s introduced a tax rebate for donations to charities, which currently sits at 33 per cent. The annual cost to the government is $212 million and growing.
Dr Gousmett said IRD should be policing charities.
"The question is how are these organisations, that are getting this huge tax credits to its donors, how are they actually benefiting the public and are they complying with the deed - are they doing what they say that they do?
"Surprisingly you don't see the IRD doing that at all. I ran a charitable organisation for 19 years and never once in that time did they ring me up and say someone made a donation to your organisation, can you confirm it is bona fide. They don't tend to follow up and check up on people making donations to the organisations themselves.
"Technically that is supposed to be the job of the Charities Commission, but they tend to pick the low-hanging fruit rather than going for the more complex cases such as St Georges Hospital."
In 2012 the private Christchurch hospital reported, from total income of $44 million and an asset base of $175 million, philanthropic payments of $91,463 - 0.2 per cent of income.
"The Commission came back and said they couldn't see anything wrong with a very interesting corporate structure that leads to a whole lot of private individuals."
He said charities that failed to donate should be taxed "as is effectively happening in North America and Australia through their unrelated-activities tax".
One of the most conspicuous charitable companies is Sanitarium, owned by the Seventh Day Adventist Church and makers of Marmite, Weet-Bix and dozens of other brands.
Since 2007 its New Zealand-based companies have invested about $13 million into three ventures in the United States, which IRD said was permitted provided they retained control.
Dr Gousmett said all religious denominations in New Zealand held wealth, especially the Anglican Church.
"I went to an Anglican Church luncheon recently and afterwards the vicar was sitting down with a group of people counting the meagre donations.
"So I wrote to the Anglican bishop and said, 'I've just attended one of your church's luncheons out there in the east and I was rather surprised to find a vicar struggling for money so she could feed her people next week. But on the other hand you've got millions of dollars in the bank, so why don't you help them?'
"I never heard back.
"Pope Francis was calling his church the Church of the Poor.
"I am looking forward to seeing the Catholic Church following Pope Francis' lead and giving away some of its $2 billion of wealth in New Zealand.
"I haven't seen any sign of it yet.
"So you do have to wonder what it all actually means. The accumulation of wealth is not a charitable purpose. The function might be to generate funds but they should be applied to a charitable purpose and if you are accumulating funds, for heaven's sake tell your donors why you have the money in the bank and what you are intending to do.
"There are so many struggling charities out there struggling day to day to keep their heads above water that are doing great work."
He said some organisations had their financial statements "in a great big consolidated mess".
The Charities Register shows the financial statement for the Ngai Tahu Charitable Trust, which includes Ngai Tahu Holdings Corporations and its subsidiaries and trusts.
The statement includes 38 limited liability companies, three trusts including the Ngai Tahu Charitable Trust, and a scholarship fund.
For the year ended June 2012 it reported gross revenue of $220 millon, had $59.5 million in current assets and total equity of $449 million. No grants were listed.
Dr Gousmett said the National Party was quite happy for charities to thrive "because it means that in essence they don't have to go to government for money".
The National Party candidate for Mission Estate's Napier electorate, Wayne Walford, said the philanthropic sector needed to be nurtured "to ensure that level of community funding continues".
"If tax exemptions encourage donations then that either reduces the tax payer impact and enables charitable organisations to do the work they do."
He does not encourage public scrutiny of charities - regulatory authorities alone should know charities' machinations.
"We need to let the organisations that regulate these areas get on with their work and keep the community and charitable organisations working."
His Labour opponent, Stuart Nash, said the law needed to change.
"For a reason I simply do not understand, charities don't have to provide any detail on how they have distributed their income in a charitable way," he said.
"This lack of transparency, however, is wrong and needs to change.
"I have no doubt that the vast majority of registered charities do a fantastic job in the area in which their charitable endeavours are targeted.
"I don't doubt that most would welcome the requirement to be held to account to the people of New Zealand in a way that they are, no doubt, to their governance boards and committees."