Religion and Government- To Tax or Not To Tax

[Ajita Kamal]

One of my fellow Admins on the Indian Atheists facebook page posted this quote by Sam Harris:

Quote:"How much money would be raised if religious institutions lost their tax-exempt status?"

Of course, the fact that religious institutions are tax exempt is outrageous in the extreme, but I've heard a counter argument that might be worth considering. In the West, particularly in the US, the sane have sort of reached a deal- a treacherous compromise if you will, with the religious crazies. Its this: You don't interfere in politics and government, and I won't tax your proselytism.

A strong case can be made that since despite this constitutional "wall of separation" religion does indeed influence public policy in the United States, letting religious institutions get off without being taxed is a disaster. They get to eat their cake and have it too. I agree strongly with this side of the argument, even though I can see how it could be infinitely worse than it is now. But what I don't quite see is truth in the claims about how the supposed compromise between the religious right and the policy makers was reached, even if the claim is that the compromise was reached over time through legislation. I think that the situation now can be interpreted to seem like it is a compromise, but we just happen to be at an in-between stage. I don't think that ending religious tax-exemptions is in any way a logical prelude to increased religious involvement in government.

There may be many similar issues involved in discussing religion and taxation. I hope this thread can help us share ideas on this subject.

[Sajit]

This is what Indian tax law says.


1. General Scheme
The Income Tax Act, 1961, which is a national all-India Act, governs tax exemption of not-for-profit entities. Organizations may qualify for tax-exempt status if the following conditions are met:

The organization must be organized for religious or charitable purposes;
The organization must spend 85% of its income in any financial year (April 1st to March 31st) on the objects of the organization. The organization has until 12 months following the end of the financial year to comply with this requirement. Surplus income may be accumulated for specific projects for a period ranging from 1 to 5 years;
The funds of the organization must be deposited as specified in section 11(5) of the Income Tax Act;
No part of the income or property of the organization may be used or applied directly or indirectly for the benefit of the founder, trustee, relatives of the founder or trustee or a person who has contributed in excess of Rs.50,000 to the organization in a financial year;
The organization must timely file its annual income return;
The organization's income must be applied or accumulated in India. However, trust income may be applied outside India to promote international causes in which India has an interest, without being subject to income tax; and
The organization must keep a basic record (name, address and telephone number) of all donors. According to section 115BBC, introduced with the Finance Act, 2006, all anonymous donations to charitable organizations are taxable at the maximum marginal rate of 30%. Finance (No.2) Act, 2009, however, carves out the following exception: anonymous donations aggregating up to 5% of the total income of the organization or a sum of Rs. 100,000, whichever is higher, will not be taxed. Additionally, religious organizations (temples, churches, mosques) are exempt from the provisions of this section.


I wonder of the RTI act allows a citizen to extract the audited financials of religious organizations in India ?

[siddharth]

What you say makes a lot of sense Ajita, and I will have to read about and contemplate the issue more before I either change my view or defend it. I am buried neck deep in work, and will get back to this later.

On the face of it, it seems plausible that if the state becomes dependent on religion for a part of its revenue, it might have a vested interest in seeing it spread its influence. At the same time, it just seems wrong that, say, while even a small shop keeper is taxed for earning his bread, these groups are tax exempt for selling "goods/claims/services" that don't even exist or will never materialise or are down right fraudulent. If the shopkeeper did it, he/she would likely be jailed by the state.

So yes, I will have to reason this out more. There is indeed a strong case for not taxing religion as you mentioned. Wrong as it (non-taxation) may be, taxation might be a poor way to deal with the issue. As I mentioned, I will get back to this thread later.