Ninth Interim Report of the Commission of Inquiry into Certain Aspects of the Tax Structure of South Africa (Katz Commission): FISCAL ISSUES AFFECTING NON-PROFIT ORGANISATIONS

1.0 Introduction

1.1 The South African Council of Churches (SACC) is the facilitating body for a fellowship of 25 Christian churches, together with one observer-member and associated para-church organisations. Founded in 1968, the SACC includes among its members Protestant, Catholic, African Independent, and Pentecostal churches, representing the majority of Christians in South Africa. SACC members are committed to expressing jointly, through proclamation and programmes, the united witness of the church in South Africa, especially in matters of national debate.

2.0 Qualified support for Commission Recommendations

2.1 We applaud the work of the Commission and broadly support the proposals contained in section 6 of the report, especially those recommendations related to tax exemption for public benefit organisations and the deductibility of donations to such organisations.

2.2 At the same time, we would like to endorse the submissions on these matters made by the South African NGO Coalition/Non-Profit Partnership and the Southern African Catholic Bishops’ Conference (SACBC).

2.3 In particular, we support the suggestion, in both submissions, that the public-benefit activities eligible for tax exemption be listed in such a way that new categories of activities--or subcategories not specifically listed--can easily be designated as tax exempt, as appropriate.

2.4 We would also associate ourselves with the Non-Profit Partnership’s suggestion that a test be devised to distinguish between public-benefit organisations and membership-based organisations to avoid the extension of benefits to groups working to protect the interests of a narrow range of affluent individuals or companies. This would be especially important with respect to organisations engaged in advocacy activities. We do not believe that, for example, a group lobbying on behalf of a consortium of oil companies should be afforded the same concessions as, say, a human rights monitoring group that engages in advocacy as a component of its overall work.

2.5 We strongly support the Commission’s recommendation that donors be permitted to deduct contributions to a much broader range of public-benefit organisations. We appreciate that legitimate concerns might be raised regarding the impact that such a change might have on state revenues. The SACBC’s submission, however, helps to put such concerns in perspective. We agree with the Katz Commission that some mechanism must be established to monitor and quantify the impact on the fiscus so that this data can inform future policy decisions. In the interim, we believe that either a system of partial deductibility (as recommended by the SACBC) or a cap on total individual donations would ensure that there is not a substantial loss of public revenue.