Wednesday, July 20, 2011

A charitable can of worms exposed

Should charities take advantage of tax havens to avoid tax? Is this a case of following best practice (the so-called 'tax efficiency' argument), or does it show a disconnect between what normal society would regard as ethically acceptable and current routine practices among some non-governmental organisations?

We ask these questions because U.S. Senator Charles E. Grassley has just tabled legislation to call a halt to federal funding to charities that use offshore structures to avoid tax. This proposal apparently arises from the senior Republican's investigations while on the Senate Finance Committee, during which he discovered that Boys and Girls Clubs held in excess of $50 million worth of equities and other assets in the Cayman, British Virgin Islands and Bermuda.

Boys and Girls Clubs are reported to have responded saying their actions are: “completely legal, routine, and widely implemented by large nonprofit organizations.”

Are they just? Hmm.

TJN has great working relations with many charitable organisations. While not being a charity ourselves (we are registered as an International Not For Profit Organisation), we recognise the important work some charities undertake. But we challenge the idea that charitable work is compatible with tax dodging.

This looks like a huge can of worms for the charity sector.


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