About the New Zealand Association of Rationalists

The New Zealand Association of Rationalists and Humanists (NZARH) is a registered charity and Incorporated Society that exists to serve the interests of the non-religious; those who do not believe in gods or the supernatural. We’ve been serving Aotearoa New Zealand’s secular community since 1927. We have over 300 members and supporters, and we support and campaign on behalf of over 2.6 million people in Aotearoa New Zealand, who declare themselves to be non-religious. Our Association’s purpose is to advocate for a secular, rational, science-based and humane society.

The interest of the NZARH in the taxation and the not-for profit sector consultation as a campaigning organisation

The NZARH has an interest in ending the unfair advantage of religious businesses receiving a tax benefit due to registering as a charity under the Charities Act 2005 with the purpose of advancing religion, regardless of whether the business provides charitable services to the community. We believe this amounts to a subsidy by the Government, which gives an advantage to organisations that promote religious and supernatural beliefs over those organisations that are secular or that actively oppose the promotion of religion and superstition. This discrimination runs contrary to NZ Human Rights legislation and is inconsistent with the NZ Bill of Rights. It compels taxpayers with no religion to be ‘vicarious donors’ to religious organisations they do not support and works as an indirect tithe on non-religious taxpayers.

We seek the repeal of the section of the Charities Act 2005 that includes the promotion of religion as a charitable purpose. We believe the Charities Act is being used as a means of avoiding taxation by religious organisations that do not conduct any programs of social benefit or education and instead focus on self-promotion. While some religious organisations may run genuine charitable operations that may merit a tax-exemption, there are many religious organisations that use their tax-exempt status to amass significant surpluses without spending those funds on programmes that provide social good to New Zealanders.

Some examples of the questionable use of the advancement of religion as a charitable purpose include:

• In 2011, the New Zealand High Court ruled that an interest-free mortgage scheme devised by the Christian Liberty Trust fell under the charitable purpose of advancement of religion.
• Mission Estate Winery (Marist Holdings (Greenmeadows) Limited), is a business that is a member of the Group of The Society of Mary New Zealand Companies. The winery no longer publishes Annual Returns on Charities Services. Instead, the business’s profits are consolidated into the Group’s Annual Returns, and there is a troubling lack of transparency in how the surpluses are used.

In 2012, we searched the then Charities Commission database and found that 4,000 registered religious charities held $7.3B in equity, with $1.4B liabilities. When we included entities that have religion as a secondary purpose, we estimated the figures climbed to over 6.500 registered religious charities, with $11B in assets and $2.1B in liabilities. It is very likely that these assets have only grown since this research was conducted.

In 2013, our member Dr Max Wallace and Professor Robert Nola expressed the view that the data above indicated that churches have become onshore tax havens which are subsidised by taxpayers so that the religious can pursue their interest in the supernatural. 

Our view is that it is too easy to exploit the charitable tax exemption for commercial businesses under the guise of promotion of religion. This view is supported by others. In 2015, the Church of the Flying Spaghetti Monster was approved to conduct legal marriages. Following this, in early 2018, the Church of the Flying Spaghetti Monster registered as a religious charitable trust in an attempt to draw attention to the tax-free status of religions in New Zealand and prompt a law change. 

A parody of a religion being able to be tax-exempt challenges the credibility of the current law allowing for the promotion of religion to be recognised as a charitable purpose, especially when fewer than 50% of the population in New Zealand are religious.

While the provision of religious privileges like tax exemption was acceptable in this country because the majority of New Zealanders were Christian, the NZARH has consistently argued against this viewpoint, asking instead for a fair playing field for everyone. After the 2013 census, when Christianity dropped to below 50% of the population, it was argued that most of us held a religious belief of some kind, even if those beliefs differed.  Now we’re at the point where the majority of New Zealanders are non-religious (51% in the 2023 census). We don’t think that the non-religious majority deserve privilege any more than the religious majority ever did, but for those who have used this line of reasoning in the past, it’s obvious that it’s no longer applicable as a justification.

We hope that these same religious groups who, in the past, have argued that their majority status should afford them special treatment, don’t now try to argue that their current minority status is also deserving of special treatment.

The NZARH would like to see all churches taxed the same as any other organisation or business, unless they can prove, like any non-religious charity, that they are genuinely providing a material benefit to the community. We are broadly in support of any updates to charity law that would bring about this change. As a charity ourselves, some of these changes may end up affecting our financial position, but we will happily accept this if the changes mean we end up with a more equitable system in Aotearoa New Zealand of offering tax breaks only to those organisations that are truly helping the communities around them.

We find ourselves in broad agreement with the recent words of Dr Michael Gousmett:

I do not think that for one minute the Government intends to tax the likes of foodbanks, second hand shops run by Vinnies, St John, the City Mission, Red Cross and the SPCA. That would be mean spirited to say the least.

But why should Christ’s College not pay tax on the three quarters of a million it earns in rents from its many properties in Christchurch? Why shouldn’t Mission Estate, New Zealand’s first winery, pay tax on its wine sales? And of course New Zealand Health Foods Limited, and its “Sanitarium” and many other brands, with its considerable revenues?

Our responses to the consultation questions, as an organisation wanting to end the unfair advantage of religious businesses, are below:

Question 1: What are the most compelling reasons to tax, or not to tax, charity business income?

1. We want to close the loophole that religious businesses exploit to gain an unfair tax advantage, particularly where the business is unrelated to any charitable activities.

2. There is a clear benefit to these businesses paying their fair share of tax, in that the Government will have more resources to distribute to genuinely charitable organisations that provide a public good to all New Zealanders.

Question 3: If the tax exemption is removed for charity business income that is unrelated to charitable purposes, what criteria should be used to define an unrelated business?

3. Religious organisations that derive any income from commercial activities should be considered as unrelated to their charitable purpose. For all charities, the only income that should be tax exempt is income from bequests, donations, and grants. However, there should be special consideration of charities that operate social enterprises like second-hand stores where the operation provides a tangible social good.

Question 4: If the tax exemption is removed for charity business income that is unrelated to charitable purposes, what would be an appropriate threshold to continue to provide an exemption for small-scale business activities?

4. Our focus is on religious organisations that run businesses. We believe that any business, regardless of its size or scale, that is run by a religious organisation registered under the charitable purpose of the advancement of religion should not be tax-exempt. All small businesses pay tax, and small charities earning an income from business activities unrelated to their charitable purpose should do the same.

5. We know that large religious organisations accumulate wealth. We do not believe it acceptable for these organisations to build up large amounts of wealth without paying tax, while benefiting from the contributions of other New Zealanders. As an example, many religious businesses benefited from the Government’s Covid-19 wage subsidy scheme.

The interest of the NZARH in the taxation and the not-for profit sector consultation as a Registered Charity and Incorporated Society

As well as our interest in ending the unfair advantage of religious organisations operating businesses, the NZARH has multiple interests in this consultation as both a Registered Charity and an Incorporated Society:

1. As an organisation that has charity business income that is unrelated to charitable purposes. Our organisation has, at times, received income from the rental of two floors of the building we own in central Auckland.
2. As a small, not-for-profit member association
3. As an employer exempt from Fringe Benefit Tax (FTB)
4. As an organisation that has an income from subscriptions, grants, bequests, and individual donations

Our responses to the consultation questions below relate to our interests as a Registered Charity and Incorporated Society.

Question 1: What are the most compelling reasons to tax, or not to tax, charity business income?

5. Our concern is to strike a balance between what is fair and what is practical. While some charity-owned businesses may exit the market if the tax exemption is removed and their operations become unsustainable as a result, we would expect that most would be able to meet their new tax obligations.

6. We would like clear information for social enterprises to ensure they are still able to operate and meet any tax obligations.

Question 3: If the tax exemption is removed for charity business income that is unrelated to charitable purposes, what criteria should be used to define an unrelated business?

7. Our organisation uses income we receive from renting out part of our building to pay for housing a library on the third floor. Our organisation would not consider ourselves to be property managers or to be operating a business. There is ambiguity about whether the rental income we receive is unrelated to our charitable purpose.

8. We recommend clear guidelines about commercial rental income, as well as income received from providing a venue or hosting events where the events are directly linked to the organisation’s charitable purpose.

Question 4: If the tax exemption is removed for charity business income that is unrelated to charitable purposes, what would be an appropriate threshold to continue to provide an exemption for small-scale business activities?

9.  We do not have a view on an appropriate threshold to continue to provide an exemption for small-scale business activities of charities. We refer back to our previous statement that small businesses not operated by charities must pay tax. We see value in all organisations making a contribution to New Zealand fairly and proportionately.