NRT: The rich rort us again

Written By: - Date published: 1:50 pm, May 23rd, 2014 - 28 comments
Categories: tax - Tags: , ,

no-right-turn-256No Right Turn on paying private schools and childcare as being charitable ‘donations’ and thereby the affluent trying to defraud taxpayers.

The rich are now using their private snob schools to cheat on their taxes:

Inland Revenue has issued a Revenue Alert regarding payments being made to a small number of private schools and private childcare centres. The payments are being re-characterised as donations to charitable trusts, enabling people to make false claims for donations tax credits.

This issue applies to a very small number of private schools and private early childhood care/education facilities, Inland Revenue Group Tax Counsel, Graham Tubb said today.

Sadly, IRD does not name the schools and childcare centres which are encouraging parents to do this. They should, so they can get the reputation they deserve.

28 comments on “NRT: The rich rort us again ”

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  1. Tigger 1
    23 May 2014 at 2:01 pm

    Assume National will be all over this – they hate people defrauding the system.

    Oh, silly me, they only hate beneficiaries defrauding the system…

    • karol 1.1
      23 May 2014 at 2:06 pm

      Yeah, but the Tax Payers Union will no doubt be all over it!

      • fender 1.1.1
        23 May 2014 at 2:51 pm

        I suspect Key & co. instruct the Tax Payers Union on what issues they should comment on!

    • weka 1.2
      23 May 2014 at 3:00 pm

      Oh, silly me, they only hate poor beneficiaries defrauding the system…

      fify

      • Draco T Bastard 1.2.1
        23 May 2014 at 3:16 pm

        +1

        • Colonial Viper 1.2.1.1
          23 May 2014 at 3:37 pm

          Also notice how JG has sought to completely derail the post topic into irrelevancies about private schools.

          This post is about well off people attempting to rort the tax system.

          JG doesn’t want us to discuss that aspect, clearly.

          • Tracey 1.2.1.1.1
            23 May 2014 at 3:50 pm

            before becoming the minister for dairies, judith collins was a tax lawyer. some of that work would include tge type of advice that leads to some private schools thinking they can give parents a 33% rebate courtesy of the rest of nz. you know the mantra… if its not illegal… it must be ok.

    • karol 2.1
      23 May 2014 at 3:19 pm

      The solution should surely be aimed at pre-distribution, rather than focused mainly on redistribution?

  3. TeWhareWhero 3
    23 May 2014 at 3:59 pm

    In the US corporations used to pay executives’ kids’ school fees as a hidden, tax-free perk. The IRS caught up with this and taxed it as a form of income. To maintain the all-important executive pay levels, the corporations had to compensate their technocrats through tax equalization payments – which cost the corporations money.

    That was not good so, enter the International Schools Foundation scholarships.

    The rort works like this : the private school sets up a charitable not for profit Foundation which is the main /sole shareholder in the School Ltd.

    “The Foundation works to assist the School in becoming financially self-sustaining, allowing it to continue successfully in perpetuity. The Foundation also strives to enhance the educational programmes and opportunities by providing grants arising from donations, endowment funds and similar charitable contributions, and by partnering with XXX School to create an environment that supports the missions of each, for the benefit of the students of today as well as tomorrow.”

    And other such bollocks.

    A corporation or individual makes donations to the Foundation which are tax deductible; the Foundation makes charitable grants to the school which effectively lowers school fees and the direct or indirect donors get expensive private education for a fraction of the real cost. School, corporation and technocrat all avoid tax.

    There is a huge and growing industry in International Schools all operating this system.

    The ones in NZ may be copying the idea without the requisite tax laws / arrangements being in place – yet. Watch this space if National get back in….

  4. Colonial Viper 4
    23 May 2014 at 4:12 pm

    Heh a whole lot of comments just disappeared into a cyberspace singularity 😈

    • lprent 4.1
      23 May 2014 at 4:17 pm

      The post wasn’t about private schools it was about donations to a “charity” being used to rort the tax system. JG Got banned for a spectacularly successful diversion troll. Comments got moved to open mike.

  5. Weepu's beard 5
    23 May 2014 at 4:28 pm

    Heard some IRD boffin on the wireless encouraging the parents to pay back the monies of their own volition (yeah, right). He then made the distinction between this activity, which he suggested was “aggressive tax planning” (as if it were an admirable thing!) and stopped short of calling it “fraud”.

    Not much of a line between the two – certainly no moral/ethical line anyway.

    Reminds me of Bill English managing his affairs when claiming the accommodation supplement that time.

    • infused 5.1
      24 May 2014 at 11:39 am

      Because it’s not breaking the law. That’s why you hire good accountants.

      • Colonial Viper 5.1.1
        24 May 2014 at 11:58 am

        Ahhhh, the privileged and well off working the levers of their societal privilege, paying very well other professionals of privilege, in order to gain the substantial financial fruits of that privilege

        Good one thanks for explaining that mate

  6. TB 6
    23 May 2014 at 4:43 pm

    I am awaiting with eager anticipation a press statement from the Taxpayers Union condemning this rort. No doubt Kiwiblog & Whaleoil will be all over this as well! Oh hang on its the wealthy rorting the system, not a beneficiary, move on there is nothing to see here.

  7. The Real Matthew 7
    23 May 2014 at 5:31 pm

    It’s not rorting the system at all. This is a complex area where the treatment of such payments is less than chrystal clear for tax purposes.

    As the statement says it affects a very small number of schools so it is hard to see how this is the “rich” rorting the system.

    Just another left wing blog site beatup.

    • Tigger 7.1
      24 May 2014 at 8:42 am

      The law on charitable giving is utterly clear. Nobody involved here is confused about tax – they are rotting the system.

  8. ghostwhowalksnz 8
    23 May 2014 at 5:51 pm

    Some Private schools all ready have a GST dodge.
    As the school fees have gst included but most of the school costs are wages which dont have a gst component, the school usually has a fair amount of gst payable and no much to claim back.

    To get around this, they would give the staff fuel cards which lower their wage bill and also make the gst part of fuel claimable against the gst on the school fees.

    The so called scholarship rort sounds like a new approach. Say your family trust ( like Bill Englishes trust, the kids are beneficiaries) makes a big tax free donation every year to the building fund and in return , surprise surprise your kid is eligible for a scholarship which covers all or most of the school fees.

    • the card 8.1
      24 May 2014 at 9:29 am

      “This issue applies to a very small number of private schools and private early childhood care/education facilities,”

      Nice try to smear all private schools however it’s about as valid as trying to smear all public schools on the back of the very small number of public schools that misspend their funds.

      • Tracey 8.1.1
        24 May 2014 at 4:55 pm

        or smearing all beneficiaries because of the number of staff who commit fraud at winz

  9. Philj 9
    23 May 2014 at 7:13 pm

    xox
    Ok, I pay my child’s private schools fees and the school accounts for the payment as a donation ! That’s fraud on both parties! I suppose the ird spokesperson’s send their kids to private ECE and Private schools. And getting the money back? This really sinks.

  10. Descendant Of Sssmith 10
    24 May 2014 at 2:34 pm

    From IRD. It’s quite clear you have to not receive anything in return.

    “How you can claim your tax credits for donations to donee organisations
    You can only claim tax credits for donations that are unconditional gifts.
    If the donation is an unconditional gift

    Example
    You belong to a charitable organisation and donate money towards a project the group is working on. If your donation doesn’t entitle you to receive anything in return, it’s an unconditional gift.
    Donations that are unconditional gifts can include:
    door-to-door appeals and street collections
    bequests
    voluntary school fees (but not school activity fees).”

    Which school payments you can claim tax credits on

    You can claim a donation tax credit on:

    school fees or
    state run kindergartens
    As long as they go to the general fund and you have a receipt with the word ‘donation’ written on it.

    You can’t claim a donation tax credit on:
    attendance due fees
    tuition fees, ie where a separate fee is charged for any course of tuition.
    university, polytech or other tertiary education fees.
    private kindergarten or other early childcare fees. But these can be claimed under the child care/housekeeper tax credit.

    The good news is that they have prosecuted someone in Porirua for rorting this. I look forward to the forthcoming private school examples.

    http://www.ird.govt.nz/aboutir/media-centre/media-releases/2010/media-release-2010-02-26.html

  11. felix 11
    24 May 2014 at 4:01 pm

    Is this any surprise?

    The Prime Minister publicly stated that when he raised $50,000 for the National Party by playing golf it was “charity”.

    See the thing about being a leader Mr Key is that it’s not just a fancy title to put on your cv. It means people follow you. These schools and parents have been sent a very clear message straight from the top that it’s ok to do this.

  12. Descendant Of Sssmith 12
    24 May 2014 at 7:48 pm

    Of course this model has been around for a while:

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10816412

    Down any New Zealand supermarket’s breakfast cereal aisle, there’s one company that dominates the shelves.

    Sanitarium – the maker of Kiwi staples Weet-Bix and Skippy Cornflakes – has evolved into a giant of the local food manufacturing sector over the last century.

    The Royal Oak-based firm says its share of the New Zealand cereal market sits at about 35 per cent, while Kellogg’s, its nearest rival, holds roughly 23 per cent.

    Sanitarium’s ownership structure, however, sets the company apart from its multi-national competitors such as Kellogg’s, Kraft and Nestle, which are publicly listed.

    Wholly owned by the Seventh-day Adventist Church, Sanitarium’s arms on both sides of the Tasman are exempt from paying company tax on their earnings because their profits help fund the church’s charitable and religious activities.

    http://tvnz.co.nz/content/837083

    One News has obtained documents revealing the extent of the Exclusive Brethren’s business interests in New Zealand and its links to a global network.

    The confidential directory obtained by One News shows the Exclusive Brethren is becoming increasingly self-sufficient with more than 600 businesses in New Zealand – mainly small firms in trade and agriculture.

  13. small thing 13
    25 May 2014 at 12:23 am

    tAX avoidance is theft especially if your poor and cant afford to pay any.To the rich its a business exercise to manage and avoid paying and convincing the rest of us that they are justified in doing so