Possible tax non-compliance in religious sector

By Isabelle Coetzee

The South African Revenue Service (SARS) recently launched an investigation into possible tax non-compliance in the religious sector.

In a statement SARS explained that, “Certain religious organisations and leaders are enriching themselves at the expense of tax compliance, and their altruistic purpose.”

This follows a report released by the CRL Commission in July last year in which it unveiled that certain religious institutions were not abiding by the law.

“Some do not even disclose to SARS the amount of money they make per year and thus avoid paying tax,” the report read. “Most institutions are registered as NPOs, but their annual turnover is way beyond the NPO limit, and yet they do not declare this to SARS.”

According to SARS, religious institutions can apply for tax exemption from them, on condition they abide by the following criteria:

  1. Conducting activities in a non-profit manner with an altruistic or philanthropic intent;
  2. No such activity is intended to directly or indirectly promote economic self-interest of any person other than by way of reasonable remuneration paid for services rendered;
  3. Religious institutions are prohibited from directly or indirectly distributing funds to any person other than in performing their religious activity

Michael Swain, executive director for Freedom of Religion South Africa (FOR SA), commended the CRL Commission for exposing tbese illegal activities.  

He maintained that these problems can be solved by further enforcing existing laws, rather than creating new laws.  

“Freedom of religion cannot be used as an excuse or reason to disobey or evade the law of the land, including the tax laws,” said Swain.

“In principle, there should be no objection to SARS and other State agencies applying and enforcing existing law, and where there is resistance, that in itself may be a good reason for SARS to probe,” he stated.  

Swain also pointed out that, while some religious institutions attempt to take advantage of tax exemptions, others may simply misunderstand the proper legislation.

In light of this, SARS intends to reach out to the faith community to raise awareness about the relevant tax obligations of religious institutions.

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