Change in the tax system...

Change in the tax system for religious bodies is self defeating

With the proposed change in the tax treatment of religious bodies, and if implemented can be a source of much discontent to the believers.

The changed regime would mean that all religious bodies would have do up their books properly and engage accountants, and tax professional  and more costs to comply with the annual tax return and pay the questioned tax to the national coffer.

These religious bodies irrespective of size had enjoyed “tax-free” status for decades because their sources of income would be largely donations, tithes and contributions from their members of taxed disposable income.   So if religious bodies are taxed again for such incomes, it is a double tax.

So there is an argument that religious bodies do make profits from business undertakings and rental of properties owned by such establishments.  So such sources of income or profit need to be taxed like other business enterprises.

One thing we must not be misplaced is that such income from some sort of business-like enterprises are derived from the utilisation of donations received from members and the supporters.  With the donations so received, certain investment projects like building and businesses like kindergarten and book stores are likely to be carried out.  There are chances that such enterprising activities are not really profitable if not for the donations or generous giving come from the believers and followers.  So is it fair to impose tax on such activities and development not really business orientated?  Without donation or funds specially raised for specific projects to benefit the society at large, such “enterprises” would never emerge.

Just to give some illustration of those activities pursued by religious bodies, say a kindergarten or pre-schoolers, such enterprises must charge fees etc to all attendees to keep them afloat.  Such enterprises are kept afloat by some subsidies from the religious bodies because once started it is difficult to close them down for community purposes.  Normally, such enterprises would utilise the premises of the religious bodies and so to justify usage, the religious bodies would charge a rental and should such rental so received by the religious bodies be subject to tax?  It is just shifting the revenue or expense within the same religious bodies in various divisions.  If the ‘enterprising’ activities do make money, such surplus would be retained within the religious bodies.  It is indeed disturbing that tax would be applied in such scenario.

Take another case like the religious bodies have over the decades accumulated much donation or fund raised for some building projects and such houses and office building have spare capacity and then rented out within the religious bodies to finance the operations thereof, and such rent if tax would present disillusion.  Some flats owned by religious bodies could be rented out for nominal rent to own employees like priests or pastors, and it is indeed a disservice to the religious bodies to be taxed.  When religious bodies cannot pay the tax for such internal arrangement of facilities as cash flows is always an issue, the donations would be sought to make those payment if tax is introduced now.

The relevant authorities should consider dropping the proposed tax regime and let status quo reign and peace prevails.   

Joshua Y C Kong   30/12/2016.