Perspectives of the Associations Sector

Downloads

Perspectives of the associations sector from the Australian Senate, Senator Nick Xenophon, Independent Senator for South Australia

Presentation to Associations Forum National Conference, Brisbane Exhibition and Convention Centre, Wednesday 27 July, 2011

Thank you for inviting me to speak to you today.

At the outset, I'd like to say how pleased I am to be invited to talk today at the Associations Forum National Conference.

Being an Independent politician I'm not really used to the sorts of issues many of you would face.

I have my party room meetings with myself in the morning while I am shaving. Strangely, I don't always agree with me.

I once even cut myself. It was, in the language of political parties, literally a spill.

I have been asked to provide my perspectives on the Not for Profit sector.

Some of you may know that I have taken a keen interest in this area in the last few years and I have become convinced Australia has a desperate need for a Charities Commission and a public benefit test to be applied to all charities and religions.

I came to this issue by accident.

Three years ago, I was doing a fairly routine interview with 'Today Tonight' journalist Bryan Seymour - it was about poker machines.

At the end of the interview, I was chatting to Bryan about other issues. I mentioned how, while I was waiting to take my seat in the Senate, I did a talkback radio gig, and I had interviewed author David Marr about a piece he'd written on Scientology and their tax exempt status.

I said I had some concerns about how these tax exemptions were decided upon, and which groups were able to access them under current regulations in Australia.

A couple of weeks later, Bryan interviewed me on the issue, and a week or so after, the story went to air.

Almost instantly, I was flooded with emails from people who said their lives had been affected by - most notably - the Church of Scientology, as well as some other groups.

The stories were horrendous.

The letters received by me, which were written by former followers in Australia, contained extensive and serious allegations of abuses that are truly shocking - abuses against them and their families, and abuses they say they were coerced into committing.

There were allegations of false imprisonment, coerced abortions and embezzlement of church funds; of physical violence and intimidation, blackmail and the widespread and deliberate abuse of information obtained by the organisation.

These victims of Scientology claimed it was an abusive, manipulative organisation. It didn't sound like an organisation that should be receiving support from the Australian taxpayer in the form of tax exemptions because they claimed to be a religion.

It's hard to imagine any Government knowingly offering financial support to an organisation facing those kinds of allegations.

And 'knowingly' is where we hit a snag.

Because the fact is, we don't know.

We don't know where these tax breaks are going.

We don't know what they're being used for.

We don't even know how much we're effectively subsidising them through generous tax breaks.

Incredibly estimates range from one to eight billion dollars a year.

That's incredible, both because of the amounts involved, and the discrepancy in the estimated range.

I for one think we should be finding out.

And multiple past inquiries held by various organisations, from Parliamentary committees to the Productivity Commission and the Henry Tax Review, think so too.

But for a long, long time Governments refused to act.

It should be said there was push-back from more mainstream religions who complained about the cost of compliance.

Some questioned whether this was an attack on the 'Freedom of Religion.'

It wasn't, and isn't, but for many years those arguments were persuasive enough for successive Australian Governments.

Most recently, both the Henry Review and the Senate Economics Committee inquiry into my Private Senator's Bill for a public benefit test for charities and religions to obtain tax exempt status have both recommended the establishment of a dedicated commission to oversee the not for profit sector.

Internationally, the ideas for a public benefit test and a regulator for the sector are nothing new.

Similar tests already exist in the UK and New Zealand, where organisations are required to show that they are acting, on balance, in the public interest before receiving benefits as religions or charities.

Both countries also have regulators in place to oversee the sector and provide information to charities, religions and not for profits, as well as informing on Government policy.

In a foreword to a document explaining the test on the UK Charities Commission website, the Chief Executive and Chair write:

“Perhaps more than any other sector of society, charities can command public trust. Charities are fortunate to be in this position and we, as their regulator, have a responsibility to ensure that this trust is maintained and even, if possible, increased. It is important for civil society that this trust is not taken for granted, but is actively valued, earned and continually renewed.”

That is a pretty solid benchmark.

By offering tax exemptions on the part of the Government and on behalf of tax-payers we are effectively saying 'we acknowledge the work you do, and support you in your work'.

But the way things stand right now, we don't necessarily know exactly what that work is, other than what websites and glossy brochures tell us.

When you're looking at giving a personal donation to a charity, you can look at those websites and brochures, look at their annual reports and talk to people face to face before deciding to make a donation. And if something doesn't look quite right, you have the choice not to donate.

But when the Government is effectively making donations on our behalf through tax exemptions, we just have to take the organisation's word that they're working in the public good.

Now I am certainly not saying that all religions and charities out there are rorting the system. Far from it.

The overwhelming majority provide vitally important services to the community, often for little more than the satisfaction of doing a good deed.

Of course, the flip side of not having solid figures on the value of tax concessions to the sector is that we don't know how much charities and not for profits are worth to our economy.

Imagine if governments and businesses had to foot the bill for everything charities do.

Can you imagine how many public servants, Government committees, scoping studies and external reviews would be required to set up… a soup kitchen.

During the Economics Committee inquiry, there was a lot of discussion about how 'public benefit' would be defined, and how it would be weighed against any detriment or harm.

The jurisdictions I mentioned earlier - England and Wales, Scotland, New Zealand - each deal with this in slightly different ways.

Essentially, each definition takes away the common law assumption that charitable and religious organisations are benefitting the public until proven otherwise, and instead requires organisations to weigh the benefits they provide against any possible harms or detriment.

So how do we define 'public good'?

And, more importantly, how do we define 'harm'?

To define charitable purposes, and therefore a 'benefit', we need to go back to England's Charitable Purposes Act 1601 - no one loves a good, solid precedent like lawyers, especially if it comes with cobwebs.

This four hundred year old Act defines the following purposes as charitable:

“The relief of the aged, impotent and poor people; the maintenance of sick and maimed soldiers and mariners, schools of learning, free schools and scholars in universities, the repair of bridges, ports, havens, causeways, churches, sea-banks and highways; the education and preferment of orphans; the relief, stock or maintenance of houses of correction; the marriages of poor maids, the supportation, aid and help of young tradesmen, handicraftsmen and persons decayed; the relief or redemption of prisoners or captives; and the aid or ease of nay poor inhabitants concerning payment of fifteens, setting out of soldiers and other taxes.”

Give or take a few poor maids and bridge repairs, we use many of the same criteria today.

(And not even Google could tell me what “payment of fifteens” were.)

So how does 'charitable purpose' fit in with 'public benefit'?

In the UK, where a statutory, codified public benefit test has been in place since 2006, the Charities Commission outlines two principles of public benefit:

There must be an identifiable benefit or benefits and
The benefit must also be to the public, or a section of the public.

The Commission then breaks these down into three sub-principles:

Firstly, it must be clear what the benefits are.
Secondly, the benefits must be related to the aims.
And thirdly, benefits must be balanced against any detriment or harm.

So, an organisation must have a charitable purpose, and in pursuing that purpose, must provide a benefit to the public that outweighs any harm it may cause.

One example the Commission uses is that of an organisation that provides transport for people with disabilities.

While the vehicles used by this organisation might add to traffic congestion and pollution, the clear benefit to their clients obviously outweighs the impact of a few extra vehicles on the road.

But what happens when we start to look at serious types of harm?
Let's return to the example of Scientology.

Scientology leaders say that their organisation provides benefits through spiritual support to its members, as well as through charitable works in the community.

Setting aside the fact that we have little or no proof of such 'charitable works', how do we deal with the fact that there are so many allegations of abuse against the group and its members, and that it appears to be systemic?

Does the harm caused to these people outweigh any benefits Scientology provides?

At the very least, a public benefit test would mean that these allegations and Scientology itself would be carefully examined before any tax exemptions were approved.

In the UK, the Charities Commission has refused Scientology charitable status because its main activities - providing 'auditing' sessions using an e-meter, a crude form of lie detector - were 'private in nature and in the benefit they provided'.

But this is where things get interesting, because the Church of Scientology does millions of pounds of business every year in the UK.

And even though it is not recognised as a Church that obtains tax exempt status in the UK, nor as a charity, and even though it is engaged in commercial activities, it doesn't pay a penny of corporations tax to the UK Government.

Why?

Well, believe it or not, the Church tells UK authorities it doesn't have to pay corporations tax in the UK because it is a charity 16,000 kilometres away in my home state of South Australia."

COSRECI stands for the Church of Scientology Religious Education College Incorporated, and according to the Church, this entity is a charity in SA.

So I did some digging, only to discover that COSRECI is not registered as a charity in South Australia for the purpose of collecting donations. Nor is it endorsed by the Australian Taxation Office to enable it to access charitable tax concessions in Australia.

So the church has fudged the truth a bit when it said it was a “South Australian charity”. And that is costing the UK Treasury millions and millions of pounds every year.

But when I dug a little further, things got even more interesting.

It is an entity, according to its 2009 financial information, with an annual income of over twelve million pounds.

You see, the South Australian Office of Consumer and Business Affairs should be monitoring COSRECI's financial returns, to monitor where the tens of millions of dollars that flow through the organisation go.

That money is not allowed to be used to benefit members according to Section 55 of the Associations Incorporation Act of SA.

And it is certainly not allowed to send that money to the United States Church's bank accounts, for example.

So how has OCBA performed over the last three decades?

The short answer? Pathetically.

For starters, the South Australian Office of Consumer and Business Affairs didn't even know until we contacted them that COSRECI had not filed an annual return for more than 30 years.

The so-called watchdog has been fast asleep.

In fact, you could call it the Rip Van Winkle of watchdogs.

Dig a little more and you will find that COSRECI has never traded in South Australia, doesn't have an ABN and it certainly is not entitled to any tax concessions in Australia.

So if it's not a registered charity, what exactly is it?

Well after some prompting OCBA finally requested the last three years of audited financial records from COSRECI.

The returns were woeful, full of third party payments, and vague on details regarding the flow of tens of millions of pounds.

And COSRECI was given special permission by SA authorities to use a UK auditor because virtually all of its economic activity was occurring in the UK.

Unlike Australian auditors, this auditor was not legally required to report any irregularities to Australian authorities.

But more broadly speaking, if the activity is in the UK, why isn't COSRECI also based in the UK?

Finally, late last week the Office of Consumer and Business Affairs wrote to me to say, despite all of this, it has decided that COSRECI is now compliant with its obligations as an organisation.

My response to that is quite simply - rubbish. Who do they think they're kidding?

They didn't file a return for thirty years, and when they did file returns for the last three years they contained holes big enough for Tom Cruise's ego to fit through.

The sad fact is OCBA does not have the investigative capacity to deal with complex corporate structures and financial matters.

So it seems they waved the issue through. Or perhaps, even more sadly, they don't even realise they're out of their depth.

The end result is that this cult has been able to flourish overseas because South Australian authorities haven't done their jobs.

South Australian bureaucrats are one reason this cult has been able to continue to victimise so many of its followers.

And ultimately the Minister for Consumer Affairs, Gail Gago is responsible.

I am happy to accept that until now, these matters may not have been brought to her attention.

But as of today, ignorance can no longer be used by anyone in South Australia as an excuse.

COSRECI needs to be properly investigated in conjunction with UK authorities.

South Australia should not be used as a cover to legitimise this cult's activities globally.

I will not be taking no for an answer until the true nature and purpose of this particular association is exposed.

And it isn't just a matter of exposing the nature of this association.

It is also about protecting legitimate not for profit entities.

If we're not adequately scrutinising groups that are claiming tax exempt status, we are sending a clear signal that it's easy to get away with unlawful or unethical behaviour - as long as you're a so-called religion or charity.

And that, in turn, reflects badly on genuine organisations.

We have freedom of religion in Australia - but that freedom does not include the right to use religion as a cover for unethical or even unlawful behaviour.

In the Federal sphere, the Economics Committee's second recommendation was that the Federal Attorney-General's department provide a report on the operation of overseas agencies tasked with monitoring and controlling the activities of cult-like organisations, making specific reference to the Miviludes agency (in English, the Interministerial Mission for Monitoring and Combatting Cultic Deviances) in France.

Miviludes is a specialised organisation operating under the direct supervision of the French Prime Minister, whose aims include the monitoring and control of cult activity to protect French citizens from harm.

The Government rejected this recommendation, saying that the establishment of an agency like Miviludes would restrict religious freedom in Australia, which I find incomprehensible.

In my opinion, 'cart before the horse' does not even begin to describe this reasoning. This is not about beliefs, it's about behaviour.

Firstly, the Committee called for a report to be undertaken, not necessarily for the exact replication of Miviludes in Australia.

You'd assume that the purpose of that report would be to look objectively into the pros and cons of the establishment of an anti-cult watchdog in Australia.

Secondly, the Government stated that there is already protection and compensation for victims of crime through state-based funds.

When you think about it, this is incredibly illogical.

That would be like saying we should stop trying to reduce the road toll through speed limits and drink driving laws, because there's a fund that will compensate someone if they get injured or a family member gets killed.

And of course, many of the activities of these groups are not necessarily prevented by law.

For example, cases can't be made against cult-like organisations for stalking ex-members, because under the law, stalking can only be committed by an individual. So instead, a cult sends different people each day to spy on ex-members, to sit outside their houses, to follow them as they take their kids to school.

Equally, as I'm sure many of you are aware, many states do not include 'psychological harm' in their criminal code. This is despite the fact that the Model Criminal Code advocates for its inclusion.

By contrast, in France there is an offence of 'mental manipulation', in force since 2001, which targets the 'fraudulent abuse… of a person in a state of psychological or physical dependency resulting from serious or repeated pressure or from techniques used to affect his judgement'.

And thirdly, I'd like the Federal Government to prove how the following actions are religious beliefs:

Stalking.
Physical and mental abuse.
The withholding of medical treatment and care.
Coerced abortions.
False imprisonment.

Because all of these, and more, are performed by cults hiding behind the protection of religious status.

There is no denying that there's a fine line to tread between respecting religious beliefs and preventing harm, but it is not an impossible one.

In addition, I agree with leading competition and consumer law expert Associate Professor Frank Zumbo, from the University of New South Wales, who says that the ACCC needs to conduct a wide ranging investigation into the commercial activities of cults.

These organisations offer books, courses, seminars and other so-called educational programs, often at enormous cost, with questionable value or benefits.

I've known former cult followers who have lost over a million dollars purchasing these so-called goods and services.

It is a fundamental consumer protection issue that the ACCC must tackle.

So where do we stand now?

Well, in the last Federal budget, the Treasurer announced that there would be a Charities Commission created that would apply a similar test to those applied in New Zealand and the UK. It is estimated that it will be up and running by 1 July 2012.

It's great news, but of course, the devil is in the detail - pun intended.

This Federal Government does not have a strong track record when it comes to implementing policy.

It's one thing to have good ideas but if you can't implement them, then good intentions count for nothing.

Australia's Charities Commission must have teeth.

It must be proactive.

And it must ultimately sort the wheat from the chaff - the legitimate charities from those who do not meet the standards tax-payers would expect.

If organisations such as Scientology are truly acting in the public good, then they should have nothing to fear from a national regulator or a public benefit test.

Because if we do not act now to set up a framework that protects and improves standards in the not for profit sector, the risk is that the questionable actions of a few will taint that unquestionable benefits of many.