asked the Minister for Finance if he will consider introducing legislation to permit to voluntary organisations the benefit of obtaining donations under deeds of covenant with tax exemptions.
Ceisteanna—Questions. Oral Answers. - Donation Tax Exemptions.
21.
Under the provisions of section 439 of the Income Tax Act, 1967, annual payments under covenant are recognised for the purposes of income tax if the payments are, inter alia, made to:
(a) universities and colleges in the State to enable them to carry on research or to teach approved subjects, including industrial relations and marketing; or
(b) to universities, colleges and schools in the State to assist them in the teaching of the natural sciences, or to a fund devoted to that purpose.
Under the provisions of section 15 of the Finance Act, 1973, similar treatment is extended to bodies devoted to the promotion of observance of the Universal Declaration of Human Rights or the implementation of the European Convention for the Protection of Human Rights and Fundamental Freedoms.
In each case the covenanted payments must be payable for a period of three years or longer. Income tax is deductible from annual payments, under section 433 of the Income Tax Act, 1967, with the consequence that institutions in receipt of covenanted subscriptions for the purposes stated are entitled, if they are charitable bodies exempt from income tax under sections 333 or 334, to a refund of the income tax deducted from those subscriptions.
I do not propose to introduce legislation to extend these provisions under the income tax code but the Select Committee on the Corporation Tax Bill have given approval to an amendment, in my name, to the Bill which will ensure similar provisions in respect of corporation tax.
The Minister's answer is very elaborate and rather technical. Does it mean that an ordinary bona fide charity could benefit by the tax exemption? Will it mean that the person who gave money to a charity will be allowed to deduct it for income tax purposes?
The difficulty is to provide a simple definition of a charity. The only charities that are entitled to relief are those that promote research, teach subjects, who assist in the teaching of the natural sciences or who are engaged in the promotion of observance of human rights under the United Nations declaration and the Council of Europe declaration.
Most of the EEC countries give this concession. Why do we not follow their good example?
Ireland gave this relief until 1940 but the then Minister for Finance, the late Mr. Seán T. O'Kelly, withdrew it in his budget. He said:
I shall move a resolution to bring to an end a considerable loss of revenue arising from a device arranged by certain charitable bodies for their subscribers, as a result of which the charity obtains in effect a subsidy from the State and the subscriber secures a deduction in the computation of his income for surtax purposes.
Since then this matter has arisen from time to time. In 1967 the then Minister for Finance, Deputy Haughey, also resisted applications for extension. The reason the facility was withdrawn in 1940 was, unfortunately, because it was being abused. It has not been found possible since to devise any method that would ensure that such abuses would not occur.
There are a number of bodies including, for instance, a hospital in the city, who have a system of covenants, and some other charitable organisations which are engaged in medical research have covenanted schemes. All of these receive benefit but it would not be possible to say that all forms of charities could receive it because there would be argument about whether it was a charity within the definitions that exist.