Understandability and Transparency of the Financial Statements of ...

The cry for accountability for tax foregone has been seen in New Zealand where
Gousmett (2010, p. 6) writing in a recent publication of the New Zealand Federation of
Voluntary Welfare Organisations said:
Why should charities be held accountable? Fiscal privileges – Charitable trusts
that have registered with the Charities Commission, then gain status as tax
charities. As well as being exempt from income tax, gifts and bequests are
exempt from gift duty and donations quality for tax credits.
To a certain extent this issue has been resolved by the Charities Commission monitoring
registered charities. However, there are issues with their monitoring which will be
discussed later in this chapter.
Most charities do not consider there is any need to justify tax forgone. They consider
that the income taxation exemption over donations and interest is a right with no
resulting need to justify that right. This was highlighted by Interviewee 12 who
comments:
When you next talk to a charity manager, ask him “Do you consider that you are
subsidised by the Government from two perspectives – firstly, the exemption
from income tax and secondly through the donation and rebate subsidy, the tax
credit”. And they will say no, of course we‟re not. But they should be required to
file a tax return with the Inland Revenue Department justifying your activity.
(Interviewee 12 MA)
This view was shown by one interviewee who discounted the exemption over donations
with:
Yes, the income tax exemption is not such a big drama, because if all your
income is donations anyway so what? (Interviewee 14 MA)
This feeling of justified taxation benefit is particularly seen in religious organisations
that were reluctant to provide information about their activities, as seen from
Interviewee 4 (BA), who was reluctant for their information to be on the register
“Because it‟s very sensitive information‟‟. The interviewee did not consider that their
religious organisation was accountable to the Government “because a group of
churches are accountable to a higher level [God]”. Also the interviewer was unable to
obtain or even sight the financial statements of most of the religious organisations she
interviewed and none had yet to file an Annual Return.
Blundell (2008, p. 3) muses as to why non-believers should pay more tax to help fund
the often secretive „charitable‟ work of religious organisations. She considers that “If
you‟re not paying tax that‟s a privilege and everyone should have transparent and
audited accounts.”
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