Sunday, October 4, 2015

Michael Gousmett: Ngai Tahu’s Charitable Status as a Land-Dealing Property Developer

The Press of 3 October carried yet another story on Ngai Tahu’s continuing successes, this time focussing on its property developments at Wigram Skies, the former air force base. 

The CEO of Ngai Tahu Property Limited, Tony Sewell, in responding to people who criticise Ngai Tahu’s income tax exempt status as a charity, stated that he thinks that Maori in New Zealand are easy to criticise for being successful, and in so doing misses the point altogether.

When I lecture my advanced tax students at the University of Canterbury on charities and income tax I make the point that Ngai Tahu is to be congratulated for being so successful, whether or not they are Maori, and that I am not “Maori-bashing.”  I also make the point that because a shareholder has charitable status and is therefore exempt from income tax, as also stated by Mr Sewell, why is it then that that status colours the commercial activities undertaken by the shareholding company with the same income tax privilege? 

This is not a failing of charity law; it is a failure of tax policy and of successive governments to address the issue. 

Since 1967 numerous tax reviews have argued that trading by charities should be taxed.  If the commercial activity is not directly related to the charitable purposes of the entity, then it should be liable to income tax, as happens in the UK where this concept dates back to the 1920s. 

To explain: a private school charges fees for the provision of education.  Under charity law, the advancement of education is one of the four heads of charitable purpose as laid down in the famous Pemsel case in England in 1891.  The fees are directly related to advancing education. 

What then is the activity in property development that is a related charitable purpose?  Are homes for the disadvantaged built at Wigram Skies and provided at minimal cost to the purchaser regardless of race?  If so, that falls under Pemsel’s fourth head, public benefit. 

However that does not appear to be the case with Ngai Tahu Property, but I will stand corrected if I am wrong. 

But when we are talking of property development, there is another issue that needs to be considered.  Under the Income Tax Act 2007, dealing in land with the intention of making a profit creates an income tax liability. 

The Press article states that Ngai Tahu bought Wigram Aerodrome in 1997 for $16 million.  The Press also recently reported that Ngai Tahu Property’s assets have grown from about $3 million to an equity value of $553 million at June 30 2015 with total property assets valued at $700 million. 

Clearly Ngai Tahu deals in land with the intention of making a profit.  What for-profit property developer could possibly compete against an entity with such a privileged fiscal status? 

How is it that such dealing, which has nothing to with charitable purposes other than claiming that as its shareholder has charitable status therefore dealing land is also coloured with that privilege, is not coming under the scrutiny of Inland Revenue?

Dr Michael Gousmett FCIS PhD is an independent researcher and public historian.


Alan said...

Who, in deed, is playing the racial game??

Mike K said...

Tribal Maori are easy to criticise in the same way that the Klu Klux Klan are easy to criticise

Anonymous said...

Isn't the answer already present in tax law. Remove the charity status of these organisations but allow them a tax deductions for charitable donations as exists for other companies. This will allow them to feed money to the beneficiaries tax free but not to hoard it inside the entity.

Anonymous said...

Ngai Tahu along with all these Maori trusts are racially dictated as none of their profit's are outside Maoridom, where as the Pemsel case is non discriminatory it was/is for the benefit of education.
I to stand to be corrected as under Ngai Tahu`s many settlements the last being they have first option on all Crown land owned at that signing date that comes up for disposal gave Ngai Tahu first option, the price being set by the Crown, but negotiable and written off as part payment to their settlement. Land purchased after that date is not and Wigram was owned prior to that therefore Sewell would appears highly elusive in his comments.
Take a step back to the Christchurch earth quake, Christchurch had the good fortune of the Student Army and the Farmy Army, all voluntary with the freezing companies (At the farmers expense.)assisted by the Farmy Army handed out free meat parcels, not only to New Zealanders, but Maori as well, while Ngai Tahu had their mare upgraded by the Justice Dept. (Govt.)and rented to the Crown.

None of these cost have been disclosed. To top it off the Honorable J Brownlee, negotiated with Ngai Tahu to lease for certain govts.,departments to occupy to which the tax payer has to pay and Ngai Tahu avoid taxing. It says a hell of a lot for National`s "private enterprise."

The Christchurch City Council did the same under Mayor Moore with the ex., post office building, costing the rate payers while Ngai Tahu sit on the fence laughing like hell.

It makes one wonder if Government servants and politician's are under and afraid of Maori necromancy or taken in by their convenient reference to customary rights in the name of money. As for land being sacred, ha ha.

Robert Patterson.