We mentioned the legal loophole by which some businesses avoid paying tax on their profits simply by registering themselves as a charity in an earlier post.

We wanted to know how widespread this is, and asked for the details stated of the Charities Services of the Internal Affairs Dept.

This is required by the Charities Act to investigate “Serious Wrongdoing” as defined. A business that registers simply to avoid paying tax is not in this definition, however, the entity needs to declare that one of its objectives is one of those stated in Section 5 — and by implication it actually needs to make good on that objective, to some extent anyway.

We intend to refer the failure of the Charities Services Manager to go into these matters in the reply to the Ombudsman, although it is obvious that just from only having investigated 96 out of nearly 28,000 registered charities, it is seriously under-resourced.

While the present government has substantially reduced the number of public servants to save state expenditure and we concur with that generally, when it comes to tax avoidance it is false economy as the government should be rejecting these sham registrations and collecting tax from the businesses concerned.

Like a lot of legislation, the Act clearly needs toughening, too.