Picture: ISTOCK
Picture: ISTOCK

About 35-million South Africans over the age of 18 donate a total of R22bn a year to a wide range of recipients from faith-based organisations, schools to charities and individuals, the Davis Tax Committee has established.

"It would appear that the size of the high net-worth South African market constitutes approximately 300,000 individuals, who have donated approximately R8bn in cash, R5.1bn in goods and services and 7.9-million hours of their time over the course of a year," the committee said in its report on the taxation of public benefit organisations.

Its report examined whether the tax dispensation was appropriate to the needs of the country given this significant scale of philanthropy. It estimated the value of the non-profit organisation (NPO) sector at about R60bn.

A further study conducted of 21 of the largest charitable foundations in the country revealed that their collective 2015 "grant-making spend" was R763.8m and on average these foundations paid out of between 4% and 5% of their capital each year. Annual grant-making spending ranged from R300,000 to R125m with key focus areas including education, health, social justice, welfare, entrepreneurship, the arts and the environment.

The major problem raised by public benefit organisations was the complex system of registration with multiple authorities such as the South African Revenue Service (SARS) and the Department of Social Development.

"There is a clear misalignment or limited alignment within the regulatory system and between governing acts across the different types of regulation," the report said. "Legislation governing legal form, governance and taxation is not harmonised and congruent with each other. As a result, NPOs have to register multiple times with different regulators submitting the same information more than once. Manifestly, this is an area that requires a specific and coherent response," the committee said in its report.

The hierarchy of public benefit organisations in the Income Tax Act to determine which could benefit from tax relief had also caused problems and the committee recommended that adjustments be made to expand the list of priority organisations. However, while it was sympathetic to the proposition that there should be a single composite listing of all public benefit organisations, it was concerned "that in the present constrained economic circumstances, and in the absence of statistical information as to the probable costs to the fiscus of any such change, it was not in a position, at this stage, to support such a radical proposal."

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