Wednesday, April 22, 2009

On tax-free charities

A Cayman news organisation, bridling at the attack on offshore financial centres, recently said this:

"Pope Benedict XVI and certain charities, (all of them enjoying tax-free/exempt status) have joined the throng, accusing OFCs of causing poverty by assisting in the looting of third-world countries by corrupt officials."

The charity dig is, presumably, aimed at groups like TJN. What do we make of this?

Charities are only 'tax free' when they make a surplus. It's not the job of charity to run a surplus. They are, by definition, not profit-making. This looks like an exercise in sophistry - dressing up bogus arguments in a false veneer of legitimacy - from a professional who should know better.

The tax free status of gifts to charity is the consequence of their undertaking approved activity e.g. in the relief of poverty in lieu of the state. Without that work the tax burden may well be higher."

It's an interesting area.

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