Both major party leaders told Paddy Gower in the leaders debate that if they became Prime Minister they’ll be “looking at” whether charities with trading ventures such as Sanitarium should pay income tax.

It’s perfectly reasonable that from time-to-time governments test whether charity rules remain fit for purpose, but New Zealand needs to tread carefully before cancelling the centuries-old tax exemption for charities. It could be a Pandora’s Box of unintended consequences which could damage an already cash-strapped charitable sector. If the rules are changed to make trading charities pay income tax it will mean less money for not-for-profits like the Cancer Society, St John, Girl Guides, Hospice, Presbyterian Support, Forest & Bird and many others. If a poll was done on whether these organisations should pay tax on their fundraising, most would answer no.

There’s a lot of misunderstanding about charities, and it’s a myth that charities aren’t allowed to run commercial operations. Many charities have trading arms and a subset of those manufacture and trade consumer products to raise funds to be spent on fulfilling their charitable purpose.

Generating dollars by selling goods and services is a way many survive. It allows them to bridge the gap from public donations or underfunded government contracts.  A profitable, consistent fundraising venture can make a big difference and create a reliable income stream.

Weet-Bix is just one of many successful consumer products on the supermarket shelf or sold online manufactured or marketed by charities. In the cleaning aisle shoppers will find dishwash and laundry liquid made by the Hilary Barry favourite Will & Able, a social enterprise which creates jobs for Kiwi’s with disabilities. The Cancer Society has had a successful range of sunscreens for decades and the income from that supports Kiwis with cancer including melanoma. The Girl Guides have sold biscuits for decades working with Griffins. In the sauces aisle one of the world’s most well-known charities, Newman’s Own Foundation has marketed salad dressings under the Paul Newman’s Own brand since the 1980s. Online and through direct sale environmental charities like Thankyou and Forest and Bird sell soaps, shampoos and other personal products. St John has cornered the market for first aid kits.

The success and scale of such ventures vary, but all surpluses generated by New Zealand charities must legally be applied to fulfilling their charitable purpose formally registered with the government’s Charities Services.

While consumer goods like Weet-Bix have made the news, it’s the tip of any charitable trading iceberg.  In New Zealand many charities, including the churches and faith-based organisations, have extensive commercial operations. There are significant real estate holdings and income from leases. Presbyterian Support, Salvation Army and Hospice have retail stores i.e. “op shops” that generate dollars which help bridge the gap from delivering underfunded government services. Some own private and community hospitals, rest homes and dementia units. Many early childhood education centres are owned by charities.

Receiving charitable status and being exempt from taxation is a serious privilege bestowed by society in return for performing services which are deemed to benefit that society.

It’s not easy to make the grade and the responsibilities are high. The charity must exist exclusively for charitable purposes and its work must contribute to societal benefits that fall under four headings: relieving poverty, advancing education, advancing religion or a catch-all category of “other activities that will benefit the community”.

These principles have been consistent for centuries, but that doesn’t mean that they are not open to challenge or modernisation.  However, if the next government wants to do another review of charities and tax then another Tax Working Group or some other expert process should consider the policy detail. The analysis needs to be objective and not as some citizens would prefer, be a case of determining which charity they support or don’t support.

Over the last decade there’s been a big tidy up in the sector with new rules and responsibilities for charities. Reporting and transparency have increased dramatically. Charities must clearly state their purpose and demonstrate how their work contributes to the charitable objectives. The level of detail is greater for the larger charities. All this information is online so any member of the public can see the financial reports and stated purpose for each charity.

As for Sanitarium, some citizens have the impression that the company is doing something wrong by conducting itself as a legal charity. It’s not. While it is owned by a church even if the “advancement of religion” charitable objective was canceled by the next government, Sanitarium would still be a charity due to its registered primary purpose being the “production and distribution of healthy foods, promotion of a healthy lifestyle..”.

Since 1898 the company has been a healthy lifestyle promoter and trailblazer. In a past-New Zealand that drank, smoked and ate meat three times a day, long before vegan and plant-based diets became fashionable, the company was a lone voice for healthy lifestyles promoting plant-based diets, meat-free meals and the importance of fibre. It was the first to promote tofu, for example. Every year it donates tonnes of food annually to community groups, schools and other charities. It’s surpluses are spent supporting schools, resthomes and the Adventist Development and Relief Agency which has a big footprint of charitable programmes in Papua New Guinea, Timor Leste, Vanuatu and as far as Cambodia and Somalia.

I’ve included such detail because few critics take the time to investigate what Sanitarium achieves through the humble production of Weet-Bix. Working with them for 13 years while running the Food & Grocery Council it was clear to me that unlike corporates with big comms teams and corporate social responsibility public relations campaigns, Sanitarium never sought media coverage or public praise for their donations or charitable work. This is not unusual for faith-based charities which seldom seek to generate self-congratulatory PR coverage preferring to focus on their community work and the people they serve.

I don’t support removing tax exemptions for the churches or faith-based social services like Presbyterian Support, Anglican Family Care, Catholic Social Services, the City Missions, Salvation Army or Barnardo’s. They serve New Zealand’s poor and vulnerable in areas where governments don’t reach and regularly fail. Neither do I support the secular charities like the Cancer Society, Will & Able and a long list of others paying tax on their revenue from trading. 

When the government already shortchanges the charities it contracts to deliver core government social services, the idea of asking them to hand fundraising back in the form of tax will not be supported by the public. It’s clear that what was an easy soundbite on the campaign trail is a complicated Pandora’s box full of political trouble.