Written Answers - Charitable Organisations.
Trevor Sargent
Question:
252
Mr. Sargent
asked the
Minister for Finance
if he will report on the procedures employed to invigilate the substance of the ongoing activities of bodies afforded charitable status in tax law on the basis of the form contained in their documents of application; and if he will make a statement on the matter.
[23554/98]
John Gormley
Question:
253
Mr. Gormley
asked the
Minister for Finance
if the Office of the Comptroller and Auditor General has brought to his attention, at any time since the creation of the concept of charitable status in the Income Tax Act, 1967, the operation of charitable status as it applies to certain organisations approved by the Revenue Commissioners and involving consequential Exchequer costs by way of revenue foregone; and if he will make a statement on the matter.
[23555/98]
John Gormley
Question:
254
Mr. Gormley
asked the
Minister for Finance
if it is the practice of the charities section of the Revenue Commissioners, having examined applications for tax exempt status and ensured that the legislative and administrative provisions were compiled with at the time that tax exempt status was granted, to further monitor and review organisations with tax exempt status to establish that the exemption granted continues to be appropriate, income is applied for charitable purposes and not accumulated, income, profits or assets are not distributed to members, the terms of exemption are complied with on dissolution and DIRT is not abused either by live or in respect of dissolved organisations; and if he will make a statement on the matter.
[23558/98]
John Gormley
Question:
255
Mr. Gormley
asked the
Minister for Finance
if he has satisfied himself that the controlling and monitoring roles relating to charitable organisations are being adequately performed by the charities section of the Revenue Commissioners; and if he will make a statement on the matter.
[23559/98]
John Gormley
Question:
263
Mr. Gormley
asked the
Minister for Finance
if he has satisfied himself that the procedures operated by the Revenue Commissioners are adequate to control the grant of tax exempt status to charitable organisations and to monitor the organisations continued compliance with the terms of the grant; and if he will make a statement on the matter.
[23581/98]
John Gormley
Question:
264
Mr. Gormley
asked the
Minister for Finance
if he has satisfied himself that, on the basis of the review undertaken in 1991-2 of 173 cases enjoying tax exempt status, the extent of review activity undertaken by the Revenue Commissioners has been appropriate for all charities granted tax exemption; and if he will make a statement on the matter.
[23588/98]
John Gormley
Question:
265
Mr. Gormley
asked the
Minister for Finance
if he will report on the examination undertaken by the Revenue Commissioners of 173 organisations enjoying tax exempt status and which is referred to in the 1992 Annual Report of the Office of the Comptroller and Auditor General.
[23589/98]
John Gormley
Question:
266
Mr. Gormley
asked the
Minister for Finance
the categories of works of a charitable nature beneficial to the community which, by being incorporated as a primary objective of an organisation, may render that organisation eligible for the grant of tax exempt status; if this phrase has been interpreted by the Revenue Commissioners to include the management of funds on behalf of a registered political party at any time since the concept of charitable status was introduced in the Income Tax Act, 1967; and if he will make a statement on the matter.
[23590/98]
John Gormley
Question:
268
Mr. Gormley
asked the
Minister for Finance
if he has satisfied himself that no loss to the Exchequer has arisen from the exploitation of the loopholes for tax evasion in the operation by organisations, claiming to have charitable status, of DIRT free bank accounts identified by the Committee of Public Accounts in its 1992 second interim report in view of the potential for abuses in this area in the absence of a registrar or register of charities; and if he will make a statement on the matter.
[23606/98]
John Gormley
Question:
269
Mr. Gormley
asked the
Minister for Finance
the number and scale of charities operating.
[23613/98]
I propose to take Questions Nos. 252, 253, 254, 255, 263, 264, 265, 266, 268 and 269 together.
The role of the Revenue Commissioners in relation to charities is confined to consideration of applications from bodies of persons or trusts claiming exemption from certain taxes on the basis that they are established for charitable purposes only and to operating controls and monitoring, commensurate with the risk to the Exchequer, to ensure that the exemption is not abused.
In their approach to controls, the Revenue Commissioners have informed me that first, they recognise the important contribution which voluntary organisations make to Irish society and that monitoring controls should not unduly hinder the efforts of those involved, and second, the perceived Exchequer risk from entities granted tax exemption is generally low. The records maintained by the Revenue Commissioners indicate that the majority of these entities are small, many of them being local organisations operating on a voluntary basis. The Costello report found that 75 per cent of charities had an annual income of less than £50,000. The Revenue Commissioners have informed me that their records indicate that this is still the general picture.
In his 1992 Annual Report, the Comptroller and Auditor General reported on a project audit he had conducted on the treatment of charities by various State agencies. In relation to the Revenue Commissioners, the Comptroller noted that cost benefit considerations were relevant in deciding on the appropriate level of control and monitoring of bodies granted exemption from tax. He also identified deficiencies in the approach at that time to monitoring exempt bodies which needed to be addressed. In his report, the Comptroller accepted, in relation to monitoring the activities of charities, that in order to ensure that the resources to be applied matched the perceived risk, a final decision by the Revenue Commissioners on the extent of review of existing cases should await the results of the examination of a sample of 173 cases selected by them for detailed scrutiny. Deputy Gormley has asked about the results of the review of these cases. I am happy to inform the Deputy that the Revenue Commissioners have reported that nothing unusual was uncovered in this review and indeed that compliance with the terms of the exemption was to a high standard. In seven cases, the review found that the entity granted exemption was no longer active and the exemption in those cases was therefore withdrawn.
As regards the grant of exemption to an entity from income tax on the grounds that it is established for charitable purposes only, there is a comprehensive application process which must be gone through and stringent conditions apply where exemptions are granted. The considerations taken into account in deciding cases and the requirements to be fulfilled by applicants are set out in Information Booklet CHY1 entitled "Applying for Relief from Tax on the Income and Property of Charities", a copy of which has been placed in the Oireachtas Library. I should mention that in his 1992 report, the Comptroller and Auditor General noted that the Charities Section of the Revenue Commissioners examined applications for tax exempt status and ensured that the legislative and administrative procedures were complied with before exemption was granted.
The activities of each entity granted exemption must be the subject of a Governing Instrument covering the non-distribution of income, assets or profits to members; the keeping of comprehensive records of activities undertaken and of annual audited accounts which must be made available to Revenue on request; a prohibition on the payment of fees and-or salaries, other than out-of-pocket expenses to officers or Directors; where the entity is wound up, the transfer of assets to another charitable body, and prior approval of Revenue for any amendment to the Instrument.
The Revenue Commissioners have advised me that they operate controls and monitoring on entities granted exemption, which take account of the concerns expressed by the Comptroller and Auditor General in his 1992 Annual Report as well as the concerns of the Committee of Public Accounts.
In its second interim report on the 1992 appropriation accounts, that committee acknowledged that the majority of charities are small but found that there was a need for follow-up to ensure that tax exempt status continued to be justified where the level of funds involved were significant.
The Revenue Commissioners require each entity granted tax exemption as a charity to provide them with a copy of its first year's financial accounts as well as details of activities actually carried out, within 18 months of the grant of exemption. Bodies with income in excess of £20,000 per annum must submit audited accounts. Unless these requirements are met, exemption is liable to be withdrawn.
A long-term monitoring procedure has also been operated by Revenue since 1988 under which entities granted exemption are selected for review on a risk analysis basis. In these reviews, Revenue addresses issues such as accumulated income and, where a charity is dissolved, the distribution of its assets. Where DIRT-free accounts are operated, the entity holding exemption is obliged by law to furnish a prescribed declaration form to the relevant financial institution confirming its tax-exempt status. The maintenance of such bank accounts, including details of accumulated income are subject to examination by Revenue in the course of the review. Over the past three years, Revenue have completed more than 500 long-term reviews of entities granted exemption and they advise me that the reviews disclosed a high standard of compliance with the terms of the exemption. No cases of serious abuse or of Exchequer losses emerged from the reviews.
The current number of entities on the Revenue records as holding tax exemption as charities is 6,380. Many of the charities which are granted exemptions are small voluntary organisations and some of them lapse over time. Where, over the years, Revenue become aware that an entity granted exemption had ceased activity, it withdrew the exemption. Early this year Revenue commenced a special project to identify all those charities granted exemption which are no longer in existence. This project is still ongoing and so far it has identified more than 1,000 defunct charities. The number of active tax exempt charities is believed by Revenue to be less than 5,000.
I am sure Deputies will be pleased to learn that the Revenue Commissioners intend to make public a list of charitable exempt bodies shortly.
An entity whose primary objective is works of a charitable nature beneficial to the community may qualify for exemption under the tax code as a body of persons or a trust established for charitable purposes only. The kind of activities typically qualifying for exemption under this heading are improvements to a town or local area, protection of the environment, neighbourhood watch schemes and so on. Political parties or bodies fund-raising for political purposes would not qualify for exemption under this heading or for charitable exemption generally.
It is possible that there may be some confusion between the provisions in the tax code for the grant of exemption to charitable entities and the wholly separate provision in the Capital Acquisitions Tax Act, 1976, which provides in section 54 for exemption from Capital Acquisitions Tax for a gift or inheritance taken for public or charitable purposes, to the extent that the Revenue Commissioners are satisfied that it has been or will be applied for such purposes. A gift or inheritance taken by a political party would qualify for exemption from Capital Acquisitons Tax under that section on the grounds that it was applied for public purposes.
The Revenue Commissioners have informed me that they are not aware of any entity holding tax exemption as a charity which is engaged in political fund-raising. I would invite any Deputy who may have any information to the contrary to provide details to Revenue so that the matter may be inquired into. Having regard to the control and monitoring of tax exempt charities carried out by the Revenue Commissioners, which I have outlined, I am satisfied that the relevant exemption is administered in an appropriate and balanced way which meets the concerns expressed by the Comptroller and Auditor General in his 1992 annual report, as well as responding to the findings of the Public Accounts Committee in its second interim report on the 1992 Appropriation Accounts.
