Should Churches Pay Tax?
South Africa has to face a difficult reality. The cupboard is bare. The delinquent children and their friends have eaten the provisions, then eaten the pantry, the house, the electricity and then the whole block.
They have then gone to live in sealed homesteads or foreign tax havens—or even claimed Shabirshaikitis, that mysterious disease found surprisingly in KwaZulu-Natal where you can be at death’s door every time a court issue arises and play golf or take another wife at all other times.
But back to the empty public purse. The Church fits into a very interesting space in terms of taxes. In terms of the law, we are primarily a Public Benefit Organisation, a PBO.
The South African Revenue Service (SARS) has rather benevolently turned a blind eye to this sector, allowing churches and their activities to register as PBOs. All SARS basically wants to have is financials once a year, and then we are left alone.
Two problems arise from this.
Firstly the Church is essentially not tax exempted, but tax condoned. SARS, facing the growing pressure of a horrifically managed system with a black hole of deficit, has warned that the ancient regime will soon be coming to an end.
This will leave the Church with her pants down. Many dioceses and parishes—depending on the structures chosen years ago—are nowhere near SARS compliant.
Either they have not registered as PBOs or haven’t kept to their part of the bargain by submitting their returns.
Of course, this exposes another massive hole: that very often the Church lives from a hand-to-mouth state that is a reminder of the “struggle accounting” of the period before 2000.
Our books and oversight are tragically deficient. What risk is this to us? Huge!
If you don’t bother to register and you don’t “render unto Caesar” even a simple return, then SARS can quite legitimately consider the Church as a business, liable for all the things of a business: business tax rates, skills development levies, and—worst of all—the removal of rates exemptions.
Our fat flabby bums are exposed and the smack we will receive is massive. And the Constitutional Court will allow this punishment…
The second issue is that the Church cannot be Section 18a-exempted. Somehow in the drafting of the tax legislation, churches and other faith- or community-based organisations were specifically excluded from being tax exempt.
The Section 18a exemption allows the designated organisations to accept donations for specific purposes in return for a tax certificate which can be submitted when (or if) tax returns are submitted. This is a deal sweetener in so many cases.
The twofold nature of this issue needs robust engagement with the civil authorities and with SARS in particular.
Using a “when-we” approach allows us to be lulled into complacency, like so many South Africans are. We don’t like paying tax, but the due fines and penalties could float another power station (or a firepool-equipped rural homestead).
Morally we must be in the position to claim tax avoidance, rather than tax evasion.
The SACBC’s finance committee and legal advisory group once again need to prioritise this compliance, possibly by starting to use a few well-qualified accountants (perhaps retired; or better yet, retired SARS officials) to engage to make this process simpler.
The archdiocese of Johannesburg has in place a very competent team of people who assist both the archbishop and his curia and parishes to practise sound, transparent and accountable policies.
Sadly, many of our other dioceses do not, for lack of skill and lack of will and that enormous taxpayer problem: inertia.
With the state potentially reading the Church and her many arms as one body, we also cannot exclude sodalities and groups. Many of these groups suffer from the same inertia and avoidance—possibly evasion—as many dioceses and parishes.
There is also a need to get serious with the minister of finance, the treasury and SARS about the position of churches and other faith-based organisations.
We mustn’t wait until the summons and fines start arriving. Rather, let’s take the proactive step of looking at how churches and others report, and how they can be supported in that with the extension of something like Section 18A exemption.
There are more than enough Catholics engaged in all levels of government, the treasury and SARS to make this a fruitful dialogue. I know quite a few of them. Use their expertise.
The benevolence of government will soon end and the requirements of justice are soon going to hit us hard.
Let’s take the first steps: register, submit, and push for greater compliance.