Net to close in on jet-set, tax-dodging churches
The South African Council of Churches has no issues with normal application of standard tax laws to bona fide church organisations
Finance Minister Tito Mboweni has set his sights on religious organisations and leaders who are apparently dodging tax.
“I tweeted about the snake-eating churches. They feed people snakes and grass, and then walk on people and all kinds of crazy things in the name of God ... and then you see them displaying wealth, big cars ... and they are not paying tax ... some of them have private jets all in the name of God,” Mboweni said at a media briefing in parliament, ahead of his budget speech.
“There are churches mushrooming everywhere and our people make contributions ... and these fellows are not paying tax. They are not registered anywhere. That kind of lawlessness is going to bring this country down ... I know I will get into trouble for saying this,” the minister said.
A 2017 report on the commercialisation of churches in SA by the Commission for the Promotion and Protection of the Rights of Cultural‚ Religious and Linguistic Communities said that religion was big business in the country. It recommended that Sars, in partnership with the commission, conduct a thorough investigation into tax evasion by religious leaders.
The commission also recommended that religious leaders and organisations should be registered and pay tax. Mboweni explained that there is a particular tax treatment for public benefit organisations that includes churches, but many of the so-called charismatic churches were not complying with the rules.
Sars commissioner Edward Kieswetter said while churches were classified as public benefit organisations, thus exempt from paying income tax, they were obliged by law to register their employees, including the pastors for pay-as-you-earn (PAYE).
“Where the abuse takes place is that when they employ anyone, those employees are subject to pay as you earn (PAYE) on their income. They are not exempt from that ... If they are not exempted by Sars, the organisations have to pay VAT on goods and services that they get.”
Sars is also concerned that proper taxes on trading activities that are unrelated to religious activities as well as PAYE on remuneration and other benefits are not being paid in terms of legislation. Furthermore, said Kieswetter, the salary of the leader of the public benefit organisations, or the pastor, has to go through the normal tax processes, “and cannot, for example, have a car as a benefit that doesn't reflect as income or a big house or a plane that doesn’t reflect as an income.”
“To the extent that it is donated, it must have a donation’s tax certificate from the person who gives it, so you can’t get out of the tax loop,” the commissioner said.
“We have begun to raise quite a number of assessments through our audit work on [public benefit organisations] and we will step up that work,” Kieswetter said.
Sars has previously stated that religious institutions could apply to the tax authority to be exempted from income tax and other taxes under the Income Tax Act. Once tax exemption status was granted, there were a number of specific criteria that had to be met. These included, among other things, conducting activities in a non-profit manner with altruistic or philanthropic intent.
The South African Council of Churches (SACC) has previously stated that bona fide church organisations would have no issues with normal application of standard tax laws.