Ms PATTEN (Northern Metropolitan) (14:37:08) — I move:
That this house notes that —
(1) many for-profit businesses are avoiding certain Victorian taxes by claiming charitable status, despite not engaging in objectively charitable work;
(2) principally, the businesses engaged in this avoidance are owned by religious institutions and take advantage of the charitable head of ‘advancement of religion’ to receive charitable tax exemptions despite operating as for-profit businesses and not carrying out objectively charitable works;
(3) the definition of charity for the purposes of Victorian statute should be redefined to protect genuinely charitable organisations and ensure that for-profit businesses pay their fair share of Victorian taxes;
(4) none of the above refers to the genuine charitable works of religious-run organisations or the usual activities conducted at a place of public worship;
and calls on the government to adopt into Victorian law the exposure draft of the Charities Amendment (Charitable Purpose) Bill 2018 as a modern and fair solution to this issue.
I am very pleased to rise to speak to my motion, and this motion does come out of the bill that I second read into the chamber a few weeks ago, which was deemed to be not suitable to be debated in this chamber. While I accept the decision, I do not necessarily agree with it.
Last night the federal Treasurer in his federal budget speech stated that honest and fair businesses and taxpayers are being ripped off by those that think they are above paying tax. We know that one in five of Australia’s largest companies are not paying tax, and we have seen scenarios in recent years where 17 of the top 50 companies in Australia have paid no corporate tax. This type of tax avoidance costs the Australian budget something like $3.5 billion a year — an extraordinary sum that organisations like Oxfam are at pains to point out translates to lost services that actually cost people their lives.
My motion speaks to a different kind of tax avoidance, but I believe its consequences are the same. Right now many for-profit businesses are avoiding taxes by claiming charitable status despite not engaging objectively in charitable works. Principally the businesses engaged in this avoidance are owned by religious institutions and take advantage of the charitable head of ‘advancement of religion’ to receive charitable tax exemptions despite operating as businesses, not charities. You have to ask the question: why?
Of all registered charities in Australia, 37.4 per cent of them report advancement of religion as their charitable purpose, being by far the biggest single category, and this category is far less tangible than other charitable purposes. Relieving sickness and raising funds for disaster relief are much more concrete activities than the advancement of religion. As a consequence of this ambiguity this category is one of the most easily abused. As I mentioned in my second-reading speech for the Charities Amendment (Charitable Purpose) Bill 2018, Sanitarium, the religious-owned manufacturer of Australia’s iconic breakfast cereal, Weet-Bix, sells more than 1.4 billion Weet-Bix every year but as a consequence of its charitable status pays no company tax. Sanitarium’s owner, the Seventh-day Adventist Church, has acknowledged it has moved millions of dollars generated by this, as they call it, group 1 entity offshore, resulting in a scenario where they are not a genuine charity and the tax savings that they have received are not even kept in the country of manufacture. I do not think this represents the expectations of the community about what charity is today, and Sanitarium is an example I highlight. There are many more engaged in similar conduct utilising the same loophole. This is why in this motion I move to redefine the definition of charity to protect genuine charitable work and crack down on for-profit businesses taking advantage of tax exemptions that they do not deserve.
Let us be clear: we have businesses obviously, we have not-for-profit organisations that are afforded significant tax concessions and then we have that very privileged category of charity. I came across quite a nice definition of charity yesterday: only some types of organisations are recognised as charities; charities are a type of non-profit organisation; and not all non-profit organisations are charities, but all charities must be not for profit. That is not the case here or in Australia. Charities should be exactly that — charitable. This motion really simply seeks to ensure that businesses operate as businesses and charities operate as charities. It does not attack religious organisations or the fantastic work that so many of these organisations do for our community. It is designed to prevent tax avoidance by certain businesses.
Exactly how much tax has been avoided is very hard to quantify. I have asked the new Parliamentary Budget Office to cost out the proposals that I have raised in this motion, but that has not been completed yet, but a commonly cited estimate from 2009 suggests that religious tax exemptions cost Australia $31 billion in tax revenue per year. We know from the recent Victorian budget paper 5 that we forgo land tax revenue on land used by charitable institutions at an estimate of $245 million, and that is for the 2018–19 financial year. The further category titled ‘Assessment on a single holding basis for land owned by charities’ is assessed at $19 million.
Now, what pertains to legitimate charities and places of public worship I cannot say for certain yet, but I hope to be able to reveal that to the chamber when the budget office has finished with its investigation, but as Fairfax revealed recently when it published its investigative report into the wealth of the Catholic Church, it holds assets in Victoria valued at more than $9 billion. This makes it the largest non-government landholder in the state. As I have mentioned before, these landholdings reportedly include banks, superannuation funds, insurance companies, news services, telecommunications providers and commercial properties that include offices, residences, car parks, conference centres, tennis courts, mobile phone towers and a restaurant. So it is clear when considering this list that the state could be forgoing considerable revenue that should be properly collected.
I think it is also really unfortunate that, in granting these businesses charitable status on the grounds of advancement of religion, we also permit them to discriminate against employees, against customers and against anyone through the exceptions in Australia’s and Victoria’s anti-discrimination laws.
Again, I want to state categorically that what I am proposing does not apply to the genuine charitable works of religious-run organisations or the usual activities conducted at a place of worship.
I have had correspondence to my office that would indicate that some members of this house have been misinterpreting — to be generous — or misrepresenting the bill and my motion, so let us just get through that. Is this an attack on religious institutions? Absolutely not. This proposal is not an attack on religious organisations or, as I stated before, the great work they do. Instead it seeks to redefine what a charity is and to crack down on for-profit businesses taking advantage of tax exemptions — for-profit businesses that claim to be charities despite not engaging in any objectively charitable work like disaster relief or helping the needy.
Will places of worship have to pay land tax? No. My plan will not impose land tax on places of public worship. In fact they will be protected by a special exemption codified in my plan. Now, opponents of this bill again have misrepresented this widely. My second-reading speech for the bill made it very clear that protections were to be provided for places of worship. Buildings used exclusively as a place of worship would not have to pay land tax. To suggest that this means that land tax exemptions will not apply to other community activities at churches, temples, synagogues and mosques is to misunderstand the rules of the statutory interpretation. I use the word ‘exclusively’ to prevent people saying, ‘I’m tax exempt for my place of worship, which happens to be my home or which happens to be my office or which happens to be my holiday home’. The word ‘exclusively’ is to protect those places of worship. Categorically it is not the intention of this plan to impose land tax on the usual activities at places of worship, and I note that in making this statement it is the only way, if this legislation was successful, that it could be interpreted by a court.
Regarding payroll tax the thresholds of $650 000 per year that will be introduced in July this year will still protect local congregations. ‘Will churches be taxed for their community contributions?’, I have been asked. No. None of the amazing charitable work done by religious institutions will be affected. Genuine charitable work, including the charitable work performed by religious institutions, should be tax exempt and will remain tax exempt under this plan. Removing ‘advancement of religion’ as a charitable status does not prevent religious institutions from maintaining their ordinary charitable purposes. Let me reiterate that religious institutions and organisations engaged in advancing health; preventing and relieving sickness, disease or human suffering; advancing education; advancing social or public welfare; relieving the poverty, distress or disadvantage of individuals or families; caring for and supporting the aged; caring for and supporting individuals with disabilities; caring for, supporting and protecting children and young individuals; or assisting the rebuild after a disaster will all remain tax exempt under my proposal.
We need to modernise the sector to clarify and align the concept of charity in Victorian law with 21st century expectations. From my perspective this modernisation starts with increased transparency and accountability. The secretive nature of religious organisations was highlighted by Fairfax in their investigation into the wealth of the Catholic Church, just as it was highlighted in the royal commission and the Betrayal of Trust inquiry before it. Once an organisation is a registered charity in Australia, it has no obligation to provide annual reports and as a result is not publicly accountable for its activities.
I just want to have a look at the Australian Christian Lobby as an example. It was registered as a charity in 2012. There is no transparency around the operation of the organisation. They were registered as a charity under the ‘advancement of religion’ definition. There is no transparency around the operation of their organisation. They have always withheld their financial reports because they can. The annual information statement that they provided shows that they had a gross income of around $4 million, that they spent about $1.6 million on staff and that there was $2.147 million spent on other expenses. That is it. That is all the information we have received, and that is all that is publicly available. In the absence of these disclosure obligations, these so-called charities are free to act secretively.
When we consider what a charity is, a dictionary would tell us it is an organisation set up to provide help and raise money for those in need. A political lobbyist, which is what the Australian Christian Lobby is, does neither of these things. The fact is that it is a lobbyist, and that is clear. That is its name. On its ‘Who we are’ page it says:
The Australian Christian Lobby is a grassroots movement of over 100 000 people seeking to bring a Christian influence to politics.
We want to see Christian principles and ethics accepted and influencing the way we are governed, do business and relate as a society …
principles and ethics like we saw on Good Friday. Clearly this is not objectively charitable work. They are not feeding the poor. They are not raising money for disaster relief. They are political lobbyists by their own definition. Now, I have no problem with the Australian Christian Lobby operating as a lobby group or even operating as a not-for-profit lobby group, but I do not think that they are a charity.
We can be so much better as a state and as a nation. I think we should lift the secrecy around the financial reporting of charities. Let us ensure charities are actually charities. Let us have our businesses pay the taxes they do to directly assist the community. There is nothing stopping these businesses from donating their money to charities. My motion is one piece in this puzzle, but I think it is an important one, and I am pleased to start the dialogue on this. I hope it will be an important step to reform.
I do not think it is a radical proposal either. It reflects changes that have been made in places like the UK and Canada and many European countries. It is simply a proposal to clarify and align the concept of charity in Victorian law with 21st century expectations. I honestly look forward to hearing from others, and I commend this motion.