Friday, April 12, 2013

Mike Butler: Tolerating tribal 'charities'

How long will taxpayers tolerate the tax-exempt status of tribal “charities”? Last week Dr Michael Gousmett in his guest column on this site titled “Tax-payer subsidised charities and their business activities - time for change” looked at the operation of three New Zealand taxpayer-subsidised charitable businesses and argued that there was time for change in the tax-exemptions.

Gousmett cited the Sanitarium Health Food Company, a business of the Seventh Day Adventist Church that makes breakfast cereals; Hawke's Bay’s Mission Estate, a winery, function venue, and location of the annual Mission concert which is owned by Marist Holdings (Greenmeadows) Limited which pays a dividend to the Society of Mary; and Shotover Jet, a business of the Ngai Tahu Charitable Group, a South Island tribal charity.

The column showed that because charities do not have to justify, in their annual reports or returns to the Department of Internal Affairs, what it is that they actually do for that privilege, those charities in fact contribute little to charitable causes.

A significant difference between Ngai Tahu operations and those of the Seventh Day Adventists and the Catholic Church is that Ngai Tahu seed money was a $170-million public government grant dressed up as financial redress whereas the other two operations started with their own money, much of which was privately donated.

Ngai Tahu sold most of the South Island to the government in a series of 10 transactions over 20 years from 1844 for a total of ₤14,750, complained, and received a series of five settlements starting in 1868, with the $170-million payment agreed upon, with relativity top-ups, in 1998.

Ngai Tahu leaders appear to feel the need to justify their settlement since they continue to argue that they settled cheaply. Chairman Mark Solomon told Q&A television current affairs programme on June 6, 2010, that "the figure of loss to Ngai Tahu is between 18 and 20 billion".

He does not say that Ngai Tahu chiefs had sold much of the South Island before 1840, and that the Treaty of Waitangi confirmation that chiefs possessed their property and the promise that pre-1840 land transactions would be investigated enabled Ngai Tahu to sell the South Island yet again.

The Ngai Tahu settlement is just one of the 53 tribal deals agreed upon and mostly paid to January of this year for a total of nearly $2-billion. Most are not aware the extent to which tribal corporations go to minimise tax obligations.

When the Crown settles with tribal claimants, the money must go to a post-settlement governance entity that cannot be tax-exempt. This entity is usually a Maori authority that pays tax at 17.5 percent, and tax on the settlement is paid at the 17.5 percent rate.

However, a Maori authority may give or settle money to a charity. Therefore, the remaining 82.5 percent of the settlement may be settled in that tribe’s charitable trust. The charitable trust may claim a refund of the 17.5 percent paid in tax. This means claimants retain 100 percent of the settlement received. In this way a tax credit is available for a Maori authority. No similar tax credit is allowed to an ordinary company, which pays 28 percent tax.

The Inland Revenue page on Maori organisations says that from April 1, 2003, any organisation that administers a marae situated on a Maori reservation may qualify for an income tax exemption as a charity, as long as it uses its funds to administer and maintain the marae's physical structure and land, or for charitable purposes. As of July 1, 2008, marae needed to be registered by the Charities Commission to qualify for an exemption from income tax.

Former National Party leader Don Brash vehemently opposed treating tribes as charities. He suggested one way to make the tax treatment of tribal businesses more equitable would be "to make the payment to the shareholding charity a deductible payment and then have them pay tax, at the same tax rate as any other company would, on what is left," This proposal is similar to charitable tax law reforms planned in Australia.

Revenue Minister Peter Dunne said that a review of the Charities Act 2005, to be completed by 2015, would include a look at how the charitable operations of commercial entities were taxed.


Anonymous said...

Mike wrote: "[Ngai Tahu] Chairman Mark Solomon told Q&A television current affairs programme on June 6, 2010, that 'the figure of loss to Ngai Tahu is between 18 and 20 billion.'"


Ngai Tahu were originally from the East Cape of the North Island, from where they migrated south to present-day Wellington. In the late 17th century they began migrating to the northern part of the South Island.

In typical Maori fashion they annihilated the small hapu they found there, killing and eating the menfolk, and forcing the women of the vanquished into concubinage.

By 1690, Ngai Tahu were established in parts of Canterbury, Banks Peninsula, the West Coast, and further south.

We do not know how many Ngai Tahu there were before 1840. What we do know is that in the late 1820s, their numbers were substantially reduced by the Kai Huanga (Eat Relation) feud, which split the various Ngai Tahu hapu.

This caused many deaths and lingering animosities, substantially weakening Ngai Tahu's ability to deal withn later external threats.

Soon afterwards, Ngai Tahu were attacked by Ngati Toa from the lower North Island led by Te Rauparaha, and driven out of the top part of the South Island.

It was only after this invasion that Ngai Tahu ceased fighting among themselves in order to unite against the common enemy.

Around 1790, Europeans had begun to establish shore-based whaling and sealing stations. and associated trading posts and farming activities, at various places around the South Island coastline.

Through intermarriage, many of those claiming today to be Ngai Tahu are descended from these early visitors.

Edward Shortland's 1846 census found some 2, 500 Ngai Tahu, resident at several coastal locations. To suggest that 2, 500 people [a] lived on; [b] cultivated; or [c] hunted and gathered over 13 million hectares of the South Island is arrant nonsense.

By the late 1860s, Ngai Tahu numbers had declined to around 1, 600 -- of whom one third were already halfcastes.

In 1868, when the Crown made its final land purchases of the lower South Island and Ruapuke (Stewart Island), it was obliged to make separate reserve provisions for half castes, who were not at that time regarded by full bloods as tribal members.

There are now around 900, 000 New Zealanders resident in the South Island. This means any Maori blood in anyone claiming today to be Ngai Tahu must be so attenuated as to be negligible in determining that individual's ethnic makeup.

"Ngai Tahu" leaders such as Tipene (call me "Stephen") O'Regan and Sandra Lee are 1/8th Maori.

Go figure!

Dave Hill said...

Only one word sums it all up MONEY... These mostly white racist opportunists are on a roll to huge riches, who can blame them when we have a weak sickly government intent on a cash driven guilt trip. Stephen and his mates must be amazed at their luck, like winning lotto every week.

Tony R said...

Interesting this B/S that continues to go on and on

I did an Official Information Act request asking when a person would CEASE being Maori

ie 1/16th 1/32th 1/64 1/256th etc

Logic would suggest that it would SHOULD end at some point - wouldnt it?


we have to post the NZCPR links to all on our data base and wake the sheeple up - or if it goes in a way that i fear - Tonga sounds good - and they will have won...

Anonymous said...

I am curious to know why it matters where the source of the original funds for a charity comes from. The key question is not where the original funds come from but rather where the profits go to. As i understand the tax code if the distributions go to charitable purposes then there is no problem. I would have thought the success of the iwi businesses is essential to ensure the durability of the settlement process. In the case of all iwi they need to be able to grow their economic base as well as to try to make meaningful distributions for educational, social and environmental purposes. The other thing Is that these businesses generate other tax revenue and boost local economies. I suspect they don't spend as much as other companies do on tax lawyers and tax accountants.

Mike Butler said...

To the "anonymous" who commented on the source of charity wealth, does it make a difference if money is taken from taxes paid by you, I, and every other taxpayer, under threat of penalty, and given an entity to use as it wishes and not be required to pay tax on? Tribal "charities" start with taxpayer money whereas Sanitarium and Royston started with private money, probably freely given. You say that if a tribal business fails, the settlement would not be durable. which would seem to imply that at best, settlements are only final if businesses succeed. I'm sure the Minister of Treaty Negotiations would disagree. You say tribal charities must grow their businesses to make distributions meaningful when in fact the most meaningful distributions tribal charities make are the multi-zero salaries paid to their CEOs. The only taxes tribal charities pay are GST and the low 17.5 percent rate for Maori authorities that can be claimed back. Moreover, GST can be a one-way street benefiting the tribal charity if property is bought by a GST-rated entity. These tribal charities do not need to spend money on tax avoidance because the tax has already been legally avoided.