An evaluation of the possibility to abuse the PBO tax exemptions by religious organisations in South Africa

Abstract

South Africa has seen an increase of prophets who have who have commercialised the gospel of Christ for power and monetary gains and those who have resorted to risky healing practices such as snake-eating, petrol-drinking and spraying congregants with insecticides, placing the lives of congregants, desperate for a miracle, in danger. These rising incidents of abuse of human rights by religious organisations as reported by the media in recent years, as well as the inquiry and findings of the Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities have shone the spotlight on possible abuse of the public benefit organisations' tax exemption status by religious organisations in South Africa. Following the investigation into the "commercialisation of religion and abuse of people's belief systems", there is an interest to look into the tax compliance of religious organisations. The purpose of the research was to evaluate the possibility to abuse the tax exemption provisions of Section 10(1)(cN) read with Section 30(1) of the Income Tax Act (58 of 1962) by religious organisations, churches in particular, evading the payment of taxes under the guise of being public benefit organisations carrying out a public benefit activity. To assist with the research, a literature review was done. The documentary study comprised of South African legislation, legislation of other jurisdictions as well as other writings. It included a detailed content analysis of the prior literature on the rationale behind the tax exemption status granted to public benefit organisations with specific emphasis on churches. It was found that there is cause for concern regarding the extensive non-compliance in the public benefit organisation sector in general, and religious organisations to be specific, especially the charismatic churches. Religious organisations have failed to comply with the requirements for continued tax exemption, and evidence points to the abuse and misuse of the tax exemption provisions of Section 10(1)(cN) read with Section 30 of the Income Tax Act (58 of 1962).