Tax exemptions ‘leave charities open to abuse’

CHARITIES are wide open to abuse by individuals seeking to evade tax, it was warned yesterday.

Fresh figures show there has been a dramatic increase in the number of charities successfully obtaining tax exemption from the Revenue Commissioners.

There are at least 5,000 charities exempt from a range of taxes, mostly small local organisations operating on a voluntary basis.

But Labour's finance spokesperson Joan Burton yesterday called for a review of tax relief schemes offered to charities following evidence that loose regulation of the sector was being exploited.

Charities benefit from a benevolent tax regime which means they are not obliged to publish accounts and can recover tax on donations they receive from individuals.

The Exchequer, for example, has lost around €9m as a result of nuns and brothers donating their State salaries to their orders, which were able to claim them as charitable donations and reclaim the full tax paid.

"This is about public accountability. Charities are a very big industry and if we want to retain public confidence in the sector, it needs to be properly regulated. Not onerously regulated, but regulated," Ms Burton said.

"The most significant users of the tax-reclaim relief have been members of religious orders.

"By contrast, a parent devoted to caring for handicapped child has no such capacity to recover tax paid under this clause. Not for the first time there appears to be one law for the religious and another for everyone else," she said.

The loophole used by members of religious orders was closed off in the Finance Bill by Finance Minister Charlie McCreevy last month.

However, there is effectively no regulation of charities in Ireland as they are not obliged to join a register or be inspected.

The Government, in its five-year Programme for Government, says it will reform the law to ensure accountability and protect against abuse of charitable status.

Minister of State Noel Ahern is about to launch a consultation process, expected to last a year, before drawing up new laws for the area.

Successive Governments have failed to regulate charities, having ignored a report by Justice Declan Costello almost 15 years ago, while the Rainbow Government never enacted planned laws drawn up by Ms Burton then a Minister of State to provide basic regulation of the sector.