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    Xerox. The OriginalXerox. The Original
    21 December 2007


    RELIGIOUS INSTITUTIONS - TAX

    Guarding the guardians



    By Larry Claasen


    "You cannot question God's anointed." That was the curt response when members of a small house church in the south of Johannesburg questioned their pastor over his management of the church and the way he dealt with its money.

    The pastor founded the church, but his community had a problem with the way he was treating the church's assets, as if he personally owned them.

    Strictly speaking, the pastor did have a point. There may be a moral obligation for a religious organisation to tell its members how it spends their money, but as a prerequisite to remaining tax-exempt, it is not legally obliged to do so.

    "Our tax law does not compel churches to disclose financial information to members," says Mark Kingon, GM for operational support at the SA Revenue Service (Sars).

    Nevertheless, as income-generating bodies, faith-based groups are required by law to register as a public benefit organisation with Sars, either as a section 21 company, a trust or as an "association of persons established in terms of a constitution" that states activities are carried out in a nonprofit manner and with altruistic intent.

    They have to submit financial statements and any changes to their constitution to Sars annually to retain their tax-exempt status.

    Changes to the Income Tax Act making these kinds of stipulations were legislated in 2002 and enforced in 2004. Previously, religious organisations had a tax-exempt status and there were no governance requirements.

    Now it's a little different. Under the amended Income Tax Act, the pastor and his wife are not allowed to handle the church's money on their own. Sars now requires that at least three unconnected people - not related to one another - accept financial responsibility.

    The introduction of these new governance structures is a big challenge for some religious organisations. Kingon has some sympathy for the smaller churches. He says Sars has a light touch when it comes to religious organisations, as it knows they will take time to come to grips with the new legislation.

    But government is not blind to religious leaders who may be using the church's coffers to pay themselves a fat salary. The amended Income Tax Act prohibits the payment of remuneration that is "excessive" when compared with other salaries among public benefit organisation employees.

    What constitutes an "excessive" salary is still a matter of debate, admits Kingon. Sars is looking at compiling a database to compare salaries.

    But Sars does not look at religious organisations as particularly high risks for tax fraud. Kingon points out that the vast majority of organisations scrape by. "There are people out there getting nothing for doing this work."

    Tax laws are not the only legislation governing religious organisations. The 1997 Non profit Organisations Act allows faith-based bodies to voluntarily register at the department of social development.

    Once a year, nonprofit organisations (NPOs) registered at the department have to submit financial statements and any changes to their constitution and office-bearers. The act is meant to bring "accountability and good governance" to the NP O sector, with only light government intervention. The act allows financial records submitted to the department to be made available for public scrutiny.

    Government allows for voluntary compliance, as forcing faith-based organisations to register could end up contravening the right to freedom of religion enshrined in the constitution.

    In the end it's not the law of the land, but rather the boldness of members of a faith-based organisation that will hold leaders to account.




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    Religion and the law

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