More taxing for charities?

by: Leong Sze Hian/

I refer to the article “When a charity’s business does too well …“ (ST, Aug 1).

It states that “Charity organisation The Helping Hand’s business, which includes selling teak furniture made by residents at its halfway house, did so well it now has to charge customers goods and services tax. About 100 charities are already GST-registered“.

In developed countries like the United Kingdom, I understand that charities and religious organizations are generally exempt from taxation.

I would like to suggest that the tax regime for charities in Singapore be reviewed, with a view to reducing or exempting them from taxation.

Taxing charities

The 7 per cent Goods and Services Tax (GST) and 18 per cent corporate tax rate, if waived for charities, may go a long way towards enabling them to do  more for their beneficiaries.

This may particularly be of greater significance and impact to the smaller charities.

Whilst the 2.5 times tax deduction for donations to charities that have Institution of Public Character (IPC) status encourage individuals and corporations to donate to charities, reducing or waiving taxation on charities may encourage more people to set up and run charities.

As to “Among the guidelines is one that states that the income of a charity’s business subsidiary is subject to income tax, and that profits have to be ploughed back to the charity as dividends, not donations”, I would like to suggest that this be reviewed, as it may discourage charities to set up subsidiary social enterprises, as in effect, the subsidary paying dividends is less favourable than any other entity paying the same amount to get a charitable tax deduction.

Taxes vs Help payouts

What is the total GST and income taxes paid by the charity sector in a year?

In contrast, how much does the Ministry of Community Development, Youth and Sports (MCYS) spend on helping needy Singaporeans in a year?

When GST was last raised from 5 to 7 per cent, the reason given was that it was to help needy Singaporeans.

Shouldn’t there be an accounting of how the estimated $2 billion GST increase has been utilised to help the poor?

With the Mayors of the Community Development Councils (CDCs) raising funds on their own to help residents who don’t get enough help from existing assistance schemes, the question is why, in spite of the GST increase revenue?

Moreover, arguably, the taxation of the charity sector may also have increased with the growth of the sector in recent years.

People generally feel good when they do something charitable.  Perhaps having no taxes may make them feel even better.


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