Sir, - It was interesting to note the range of articles that have appeared in The Irish Times recently regarding charities with their apparent favourable tax treatment and their apparent lack of accountability.
These articles were of course true, but they were hardly fair.
Before folk lose the run of themselves as to what the taxation exemption really means, it applies only to corporation and income tax. This means that charities pay employers' PRSI as if they were normal employers. All the services that are bought in by a charity are charged at the full rate of VAT, and this is not recoverable. So charities actually pay hard tax.
In a normal trade or corporation, it is the taxable profits that are liable to tax. Most expenses "wholly and exclusively" incurred are allowable. So, for a charity, this "profit" is applied to its various causes. It could be argued that this is in effect an expense of trade and should be allowed anyway.
Secondly this apparent lack of accountability may have taken most charities by surprise. A lot of charities are companies limited by guarantee. Incorporation facilitated placing the assets in the name of the charity and not individuals. By an amazing quirk, the legislative drafters of the 1986 Companies (Amendment) Act omitted to include companies limited by guarantee from the small and medium companies filing exemptions and so charities limited by guarantee file more detailed accounts than limited companies with turnover of £250,000. Filing requirements are quite onerous these days and are often relatively expensive for a small charity. There is also a statutory requirement to appoint auditors. Anybody can inspect the accounts at the Companies Office. It should also be pointed out that the days of having a voluntary auditor are gone. Most have to employ a firm of accountants as professional bodies have removed the authority from members not in practice to audit the accounts.
It is true to say that a charity does not have to be a company to qualify for tax exemption. It is also true to say that Government departments do not insist on dealing with charities which are limited by guarantee.
Two things should happen. One is that to gain exemption a charity should be limited by guarantee. Two Government departments should deal only with charities that are structured this way. Does this require a commission to solve?
All this, of course, obscures two very real facts. One is that the charity is taking the place of the Government in a whole range of supports and care for various causes - in effect, subsidising the taxpayer. The second thing is that apart from a number of high-profile charities, most of the people I know that are involved week in week out want to remain anonymous.
Articles which reflect solely the financial angle miss the point. - Yours, etc., Gregory D. Allen,
BBS, FCCA, Well Road, Douglas, Cork.