DRAFT LIST OF PUBLIC BENEFIT ACTIVITIES

[Note: This submission responds to the lists of public benefit activities, published in draft form by the South African Revenue Service on 17 January, in terms of the Income Tax Act, 1962, as amended by the Taxation Laws Amendment Act, 2000.]

1. Item 4 (Religion) of Annexure A (Income Tax Exemption)

This item would limit religious activities eligible for income tax exemption on public benefit grounds to:

"The promotion and/or practice of religion which encompasses acts of worship, witness and community service based on a belief in a deity or recognised creed."

We submit that this definition is too narrow in two respects. The list of specific activities, while apparently intended to be comprehensive, could be construed to omit significant categories of activities commonly associated with religious practice. In particular, the phrase "worship, witness and community service" does not obviously include activities associated with development of clergy and lay leadership--such as theological training, retreats, and other types of spiritual formation. The requirement that religion must be based on belief in a(single) deity excludes faiths which recognise multiple deities or no deity at all. A related concern is that the phrase "recognised creed" is too vague. Recognised by whom?

As an alternative, we would propose the following formulation:

"The promotion and/or practice of religion which encompasses acts of worship, witness, spiritual development and community service based on a belief in one or more supernatural beings or principles and acceptance of canons of conduct that give effect to that belief."

2. Omission of dedicated trusts, funds and foundations

Current law confers exempt status on the receipts and accruals of funds established solely for the financial support of certain exempt organisations. Section 10(1)(fA) of the Income Tax Act, 1962, for example, extends the exemption for religious, charitable, and educational institutions to such dedicated funds. This and other similar provisions will be deleted from the Act when the Taxation Laws Amendment Act, 2000, comes into effect.

Neither Annexure A nor Annexure B recognise the financing of the public benefit activities of other organisations as a beneficial activity in its own right. The loss of this exemption would have grave consequences for many religious institutions and other public benefit organisations.

Consequently, we propose that a new item 9 (Promotion of Public Benefit Activities) be added to Annexure A to recognise:

"The promotion of one or more public benefit activities by providing land, buildings, or other financial or material support dedicated exclusively to such activity or activities."

A parallel provision should also be added to Annexure B (Deductibility of Donations) to cover organisations dedicated exclusively to the financial support of activities that appear on that list.