Revenue Minister Judith Collins says she has asked for advice on whether corporate charities should pay tax, after concerns were raised. But she says it’s not a top priority for her at the moment.
Collins says multinationals paying tax is a more important issue. In order to recoup that tax, Collins says we won’t follow Australia and the UK in setting up a diverted profits tax right now, because signing up to the OECD’s tax treaty will be more effective. But she says the tax hasn’t been entirely ruled out.
She also disputes Labour’s claim that it can get back $200 million a year in tax from multinationals.
Lisa Owen: Revenue Minister Judith Collins joins me now. Good morning.
Judith Collins: Good morning, Lisa.
Minister, why is it that corporate charities like Sanitarium, some Brethren charities, some iwis don’t pay tax on their income or profits?
Well, some businesses, you could say, charities running certain businesses, they have to comply with the Charities Act, which was set up in 2003, from memory. And their activities are audited as such by the Charities Services, which is part of the Department of Internal Affairs, which is not my area. But Revenue, certainly, does investigate any instances where they believe people should be paying tax because of either their activities or because they’re not actually really engaged in charitable purposes.Yeah. Do you think that it gives them an unfair advantage? Isn’t it anti-competitive that they’re not paying tax?
Yeah. Do you think that it gives them an unfair advantage? Isn’t it anti-competitive that they’re not paying tax?
I think it is significantly difficult for a lot of businesses if they’re dealing with any competitor who they believe isn’t paying their fair share of tax. And the problem with these questions is that Revenue doesn’t tell me about any individual cases, and you can imagine why; you wouldn’t really want the Minister of Revenue being involved in deciding who gets to pay tax and who doesn’t and knowing what’s– obviously because there are privacy provisions as well, under the law. But I think one of the issues is if anyone does believe that someone should be paying some tax and they’re not paying it and they’re rorting the system as such, they need to go to the charities.
I’m not talking about specific companies when I ask that. I’m talking more generally. But you do have, sort of, Brethren charities who own dairy and kiwifruit enterprises – huge, huge conglomerates – and they’re competing in a market against other businesses.
Well, it all depends on what the money’s going to. For instance, if profits are going into charitable purposes, which is often religion or education or helping the poor – those are all charitable purposes – then they will obviously be meeting charitable purposes. So it’s a different thing if it’s going into things that are not charitable purposes; then there’s a possible breach of the law, and that means that the Charities Services and the Department of Internal Affairs should be notified.
But do you believe that simply spreading your religion or your religious word is enough to warrant a tax break?
It’s not a matter of me believing it; it is the fact that that is the law.
It is the law, yeah.
It’s been the law since the first Queen Elizabeth.
But do you think it’s a good law? Should it be the law?
Well, let’s put it this way. I mean, I’ve often thought that there’s quite a lot of business that goes through charities, but that is the law. It has been there forever. That would mean that every church that’s involved in things like, for instance, some of the shops that people get– you know, obviously, they sell clothes and sell these other things – that they would then suddenly become subject to tax. We’ve got other things that we can do in tax, and actually, going after charities that are actually complying with the law and using their profits for charitable purposes, which is helping the poor, education, those sorts of things, that’s not the biggest priority I have right at the moment.
— Tim McCready 🇳🇿 (@Tim_McCready) July 21, 2017
But what if they’re not doing those things in any great numbers? Because there is no legal requirement for them to give a certain amount of what they make to charity. It’s left up to them, isn’t it?
Well, no, there’s the Charities Services part of the Department of Internal Affairs. And Inland Revenue tell me – and I believe them – that they are almost religious, actually, in their wish to get in every cent of tax dollars that they believe they should be getting in, and they work very closely with Charitable Services in Department of Internal Affairs to do that. So just because someone is operating a charity doesn’t mean to say every part of their business activities is tax-free because some of that money may be going for non-charitable purposes.
Right. But for example, I mean, there’s all sorts of ones that fall under the category of charities. Church of Scientology – their return for 2015, they brought in income of almost $2.5 million; grants paid out within New Zealand – zero. Another one – Salvation Army, by comparison, paid out $30 million in evangelical programmes, $57 million in community and training job programmes, $35 million in social and health programmes. You know, those are stark comparisons. And here we’ve got an iwi, Ngai Tahu – $533 million income; grants paid out in New Zealand – $12 million in the same year. So are all these charities created equal in terms of what they’re doing and the breaks that they’re eligible for?
Well, I think, quite clearly, that not all are doing exactly the same as each other. But the fact is that if there are concerns, then the right people to go to are Charitable Services, the Department of Internal Affairs, which is another minister’s portfolio.
So you’re fine with how the law stands at the moment?
No, I say that is the law, and at the moment, I’ve got other things that I’m doing.
But do you think it needs to be reviewed?
I think it’s something that is clearly in a lot of people’s radar at the moment, but right at the moment, my big issues are dealing with things like child support but also dealing with things like multinational companies. That’s where my focus is right at the moment.
OK. And I want to get on to international companies. Australia has changed its rules around charities in 2014, and only income directly related to charitable activities that are paid out, you know, you get a tax break on that. So why couldn’t we just do the same here?
Well, we don’t just do the same like that in New Zealand. We actually put out discussion documents and things.
But we like to be in line with our trading partners, don’t we?
Well, in some cases. We have a very open tax system, and ours is much more simple than many other countries’, including our trading partners. We have a lot of trading partners. But in terms of the charities thing, it is certainly something that Charitable Services and Revenue look at, and it’s certainly something that I’ve asked for some advice on as to what is actually happening, what are the rules, what’s happening on it. But that’s actually for another time because I’ve got other issues I deal with.
OK. So, the advice you asked for, what prompted that? What concerned you that you want to–?
Oh, because people like yourself– obviously not you personally in this one, but people like yourself who raised the issues. So I think it is important to know the extent of any issues.
So you are looking into it?
Well, no, I’ve asked for some advice on it, and that advice is that at the moment, they don’t believe that it’s such the issue that people might think it is, and that is because they’re working so closely with Charitable Services.
So after petrol and multinationals, you might get to it?
Well, we have to wait and see. I’d have to be back in the role, wouldn’t I, after an election?
This week Labour said it’s going to crack down on multinationals not paying their fair share of tax.
Oh, yeah. Bit late to the party, aren’t they?
But does anyone think that’s a bad idea?
Well, I think we’ve already been doing that. I mean, earlier this year, Steven Joyce and myself released discussion documents on exactly that. And it’s called ‘BEPS’ or base erosion profit-shifting, and that’s some of the stuff that some multinationals have been undertaking in New Zealand and elsewhere.
So why aren’t your numbers as good as Labour’s? You’re talking about getting back between $50 million and $100 million a year over a period of time. Their projections are $200 million a year.
Well, actually, it’s wrong, because the figure of $100 million was put in the budget for this budget year, and, of course, most of our measures that we’ve been consulting on and which I’ll be taking to– Steven and I will be taking to Cabinet in the next little while – we are looking for an announcement within the next month or so – those are obviously spread out over the next couple of years. So we will get to– we believe we will get to at least $300 million.
OK. So, diverted profits tax.
Why not have that? And I know you say we don’t like to follow all our trading partners.
No, we don’t.
But you have said that we do like to be in line with some of our trading partners. And Australia has introduced a tax like this. The UK’s got one. We’re out of step, aren’t we?
No, we’re actually in-step with the rest of the OECD. And in fact, recently I signed us up to a multilateral instrument, which is basically a massive treaty with 67 other countries – and I think now about 70; some more have added on to it now, over 70 – where we have actually signed up to a lot of the measures to actually deal with this very issues. Diverted profits tax is a very draconian measure. It basically says if we think you are doing anything to shift your tax liability, we’re just going to stick a 40% tax on what we think you should be paying. Now, that is a pretty harsh measure, which might sound great, but even Labour are saying they’re not expecting much of it. Australia are saying that they’re expecting–
So you’re ruling it out totally?
No, Australia are saying that they’re expecting $100 million. In their size of their economy, you know, five, six times our size, we believe we can do better with what we’re doing – following the OECD and working with other countries. Because this is all around things like–
So we’re definitely not going to do it.
No, no. What we’ve said is that we’re not ruling it out, but what we’re not doing is rushing into it. We believe we can get pretty much the same result or even better working with the OECD and working with all these other countries. Just imagine if Revenue decided that we were going to add this massive tax on to everything else that people have and then other countries…
You’re saying it will scare business away because other countries are not?
…did the same to our companies. We are an exporting nation; we need to be very careful how we do these things. And what we don’t want to do is end up with a situation where we’re considered to be a difficult and dangerous place for businesses to operate in.
So are you not holding them to account simply because you fear retaliation?
No. I’m holding them to account, but we think we can get a far better outcome working with the OECD, which, after all, when you’ve got 70-odd countries signed up to it all working together– And when you’re dealing with that, that’s a much stronger position, we believe, than simply adding on another tax, which we may never be able to collect.
OK. We talked earlier in the interview about being returned to government and what portfolio you might have.
Well, who knows?
So let’s imagine for a minute that National gets a fourth term.
That would be great.
What’s your dream portfolio?
Whatever I’m given, actually.
Oh, come on. You’re more ambitious than that, aren’t you, Mrs Collins?
I’ve actually always been very happy to be a minister in a National-led government. And every portfolio I’ve had, I’ve loved every one of them. And, you know, tax is something I just love, the Revenue area, I love the energy and resources, the ethnic communities – these are all really important. And as a former tax lawyer, I’m happy as anything in there.
So you don’t think you’ve got more to offer? There’s not more ambition? You’re number 15 in…
I’ll tell you what, number 15 in government is a lot better than number 3 or 4 in opposition. I can tell you that, Lisa.
— Tim McCready 🇳🇿 (@Tim_McCready) July 21, 2017
But is number 6, 7 and 8 in government better than number 15?
Oh, look, you just do the role.
Are you more ambitious than that, minister? I mean, you were tagged as a future prime minister.
By others. But my view is this – that just being in government and being able to actually do the best we can for New Zealanders is much better than saying where you’re ranked or whatever. I know some people get very excited about that. I’m not excited about that. I don’t get excited about that…
OK, so happy to stay where you are.
…because it doesn’t make any difference in terms of your ability to actually do what you have to do.
You heard it here – Judith Collins happy to stay where she is.
I’m always a happy person.