Law and Christian Witness: Why Must We
Pay Taxes?
John Amalraj K
Gandhiji
along with his followers on 6 April 1930 in the coastal town of Dandi picked up
a handful of salt on the shore to demonstrate and protest against the British empire’s
repressive policy of taxation on the production and sale of salt which was forcing
the poor people to suffer. The civil disobedience movement called as
Satyagraha, gathered momentum and took on the mighty empire[i].
When
Prophet Samuel became old, the people of Israel went to him and asked him ‘give us a king’. Samuel’s response to
them was a warning: A king will tax your harvests and vintage to support his
extensive bureaucracy; he will lay taxes on your flocks and you will end up as
slaves. But, the people of Israel did not listen to Samuel or to the Lord (I
Sam 8). Many kings have come and gone since then and the warning became a
reality and the people suffered.
Winston Churchill once said,
“There is no such thing as a good tax”. No
one in history has ever liked taxes as much as the government of the day or the
tax officials.
Several
years ago, a chartered accountant advised that we should handle financial
matters of our organisation and our personal finances in such a way that we do
not owe any tax. The principle was not to ‘evade’ tax but through tax planning,
prudent management and availing the facilities of ‘exemptions’ offered by law
we need to ‘avoid’ payment of tax. The issue becomes more complicated when
religious organizations doing charitable work in total dependence on free will
donations end up paying taxes. In the present context, there is very little for
us to do to avoid tax as the governments have become more creative in expanding
the ‘tax net’ in their endeavour to
bring in more people into the tax bracket and increase the revenue of the
government.
In
India, we not only have income tax but also ‘Goods and Services Tax’ (GST) which in fact makes every citizen
involved in buying and selling to pay tax. The task of collecting taxes once
only belonged to the tax officers – income tax officers or sales tax officers
but today every legal entity − a business, society, trust or institution is
made responsible to deduct taxes at source. The recent amendments has made even
an individual buying a property or paying rent or lease amount to a property
owner responsible for deducting tax at source and remitting it to the
government.
Origin of
Taxation
Let
me quote from an article in A Short History of Taxation on the
origin of taxation[ii].
“The word ‘tax’
first appeared in the English language only in the 14th century. It
derives from the Latin taxare which means ‘to assess’. Before that, the English
used the related word ‘task’, derived from old French. For a while, ‘task’ and
‘tax’ were both in common use, the first requiring labour, the second money.
‘Tax’ then developed its meaning to imply something wearisome or challenging.
So words like ‘duty’ were used to make it more appealing. Under the Egyptian
Pharaohs ‘scribes’ were charged with raising funds in any way practicable,
including a tax on household cooking oil. Regular audits were conducted to
ensure that oil was not recycled – perhaps the first historical record of
‘avoidance’. The Book of Genesis in the Bible suggests that a fifth of all
crops should be given to the Pharaoh. The city states of Ancient Greece imposed
eishpora to pay for wars, which were numerous; but once a war was over,
any surplus had to be refunded. Athens imposed a monthly poll tax on
foreigners. Imperial Rome used tribute extracted from colonised peoples to
multiply the bounty of the empire. Julius
Caesar imposed a one per-cent sales tax; Augustus instituted an inheritance tax
to provide retirement funds for the military. However, human bondage remained
the most lucrative form of tribute for both Greece and Rome.
The
author comments that “This is the eternal fate of taxation: to be the abused or
abusive means towards noble or ignoble ends, never quite able to escape its
association with extortion and war.”
Taxes and
Organisations
A few
years ago, one of the senior members of a church stood up during the general
body meeting and demanded the pastorate committee to ensure that they set aside
the funds in the various fixed deposits for payment of income tax. She rightly
pointed out that the church should not default on payment of taxes to the
government. Another member of the congregation suggested that the pastorate
committee should rather look at the exemptions allowed by the government by
which the church can claim exemption from payment of tax. His argument was that
we cannot pay taxes to the government from the sacred offerings given by the church members. It is an interesting
argument from a worldview that dichotomizes the sacred and secular. Somehow,
money in the offertory bags has become sacred and cannot be given to a secular government. Most people will
have no problem spending that money in building and maintenance of the church
property, its fixtures and furniture, payment of salaries, grand celebration of
festivals, anniversaries and special occasions.
The
government of the day assumes that religious organizations have a lot of income
and it is only right to tax them to increase the revenue of the government. The
income tax act of 1961 defines charitable
purposes as follows[iii]:
charitable
purpose includes relief of the poor,
education, yoga, medical relief, preservation of environment (including
watersheds, forests and wildlife) and preservation of monuments or places or
objects of artistic or historic interest, and the advancement of any other
object of general public utility:
Most
of our Christian establishments have been registered under the Societies Act or
under the Indian Public Trust Act for ‘religious and charitable purposes’.
Educational and health care institutions having the legal entity of a society
or trust and having their objectives either directly or indirectly refer to the
Christian faith as a motivation, serve people of all backgrounds and employs
people from other faith. Many ‘mission’ organisations having the entity of a
society or trust on the other hand, may be considered a ‘religious’ organization,
as their core activities may be described as religious than charitable. Since
activities of organising prayer meetings, worship services, spiritual enriching
conferences, camps, seminars, revival meetings, Bible study programmes, etc.
are religious in nature and not charitable. However activities that relate to literacy,
education, health care, care of orphans, sick, abused, elderly and destitute,
relief, rehabilitation, community development, etc. for people without any
discrimination of caste, religion or social status is what would help the
organization to claim its purposes as ‘charitable’.
The
income tax act goes on to exempt certain activities from the charitable purposes that is in the
nature of trade, commerce or business. Unfortunately, unless we are willing to
pay income taxes, income generation projects and any fees earned by providing
services like a seminar or training programme are liable to be taxed. The idealistic
goal of many CEOs to generate income through such activities and reduce our
burden on donors does not seem realistic as the surplus income may be
considered as profit and taxed.
Let
us also look at the definition of ‘income’ by the Income Tax Act related to
charitable or religious organizations.
(24) income includes—
(iia)
voluntary contributions received by a trust created wholly or partly for
charitable or religious purposes or by an institution established wholly or
partly for such purposes or by an association or institution referred to in
clause (21) or clause (23), or by a fund or trust or institution
referred to in sub-clause (iv) or sub-clause (v) or by any
university or other educational institution referred to in sub-clause (iiiad)
or sub-clause (vi) or by any hospital or other institution referred to
in sub-clause (iiiae) or sub-clause (via) of clause (23C)
of section 10 or by an electoral trust.
The
definition of income includes voluntary contributions – it can include all
donations, pledges, offerings that are given to churches and to Christian organizations
whether from an Indian or foreign source. The law challenges not just our
worldview of sacred and secular divide but also the flawed theological
dichotomy of social concerns vs evangelism. Even though through the Lausanne
movement discourses[iv],
the evangelical community has come to accept social concerns as part of its
‘wholistic’[v] mission – we still have a
long way to go to transform the worldview of Christians. Often we seem to have
initiated “charitable” activities into our organizations to avail tax
exemptions rather than out of our motivation arising from our calling or
understanding and practice of wholistic missions.
The
income tax does provide for exemptions from income taxes subject to various
conditions as per sections 11 and 12 for any trust or institution. One of the
important conditions is that the organisation must be registered as a legal
entity and must apply for such an exemption. The income tax authorities have also
been given the discretion to cancel such exemptions if they find later that the
activities of the organisation are no longer ‘charitable’ and do not fulfill
the conditions set forth in the relevant sections.
The
Income Tax Act has also certain provisions under section 80G which offer tax
benefits to the donors. Many organizations whose main activities are
‘charitable’ in nature are able to avail the advantage of these provisions to
attract potential donors and provide ‘tax deduction’ certificates. Again, this
privilege is subject to the organization’s continued focus on ‘charitable’
activities not necessarily religious activites.
The
recent Goods and Services Act[vi] (GST) has brought in a
new challenge to many of the Christian organizations. There was confusion
whether registered societies and trusts will have to come under the act.
However, this is based on whether the organisation is involved in the ‘supply’
of goods and services as defined by the act and provided the aggregate turnover
is beyond the prescribed ceiling. The act also defines ‘charitable activities’
with a narrow scope and any activity or service for which a fee is received
including earning a rental income from renting of precincts of a religious
place is brought under the GST.
The
tax laws seem to suggest that unless we are involved in ‘charitable’
activities, we cannot claim any exemptions from tax. Do we have to pay taxes to do our mission?
Jesus and Tax
Obligations
Fergus
Macdonald[vii] writing a devotional on
Jesus and the temple tax asks a question “Is Jesus a tax-dodger?” (Mt
17:24-27). He goes on to say that Matthew (a former tax collector) records this
incident as the conversation between Jesus and Peter because it had a mind-boggling
implication for the disciples. At issue was a half-shekel tax due to be paid
annually towards the upkeep of the temple by every Jew over 20 years old (see Ex 30:11-16). These temple tax
collectors represented the Jewish religious establishment in Jerusalem. They
were different from people like Matthew and Zacchaeus who gathered taxes for
the Roman empire.
Jesus
asked Peter a question if the sons of the emperor pay taxes to which Peter
replied no. The truth that Jesus communicated was that even though they were
exempted from the temple tax as children of God the father, they were willing
to pay the temple tax so as not to offend others. The miracle of the tax money
coming from the mouth of the fish (v 27) is a sign that God’s provision is not
just for ministry expenses but also for payment of taxes.
The
other incident related to Jesus and taxes was when there was an attempt to trap
him by a question by the Pharisees. Jesus said, Return to Ceasar the things that are Caesar’s... (Mk 12:17). David
Spriggs[viii] in his devotional
writing says “few people like paying taxes, least of all to a foreign power. The
question appeared to address the human reluctance to pay taxes, but it was more
about nationalism and the Jewish antagonism to being ruled by a foreign power.
Behind this challenge, Jesus saw the real issue – hypocrisy (v 15). In
colluding together the Pharisees and Herodians admitted that neither party was
that interested in Caesar’s rights. Rather, they were trying to defend
themselves against the claims of Jesus on their lives and their nation’s
destiny”. David Spriggs concludes by saying that we should not use ‘too
complex’ arguments as an excuse for denying Christ’s lordship in every area of
our life. He also makes a point that no government rules over us without the
permission of our sovereign God. Apostle Paul instructs the early churches that
if you owe taxes pay them. (Rom 13: 7) The scriptural exhortation is that we as
a church or a Christian organisation have an obligation to pay taxes to our
government.
Christian
Witness and Paying Taxes
It is
rather a sad testimony if and when Christians or Christian organisations are
found guilty of tax evasion or tax default. There are of course genuine errors
and ignorance that may have resulted in a non-payment of tax. However there are
provisions for correcting such errors and making amends. The very fact that
Jesus was popularly called as a ‘friend of tax-collectors and Pharisees’, in
other words a friend of sinners, is an important lesson for us. Jesus was able
to minister among some of the societies’ most hated – social outcasts like the
tax collectors. He even made some of them his disciples like Matthew. He was even
found to have dinner in the tax collector’s homes starting with Matthew. When
Jesus visited Zacchaeus’ home, he was able to help this tax collector to make a
life transforming announcement that probably brought the whole town of Jericho
a revival in terms of curbing corruption and extortion as well as genuine help
to the poor. (Lk 19:1-10)
A few
years ago an organisation headed by a friend was under the income tax scrutiny.
As the CEO, he was to attend the hearing accompanied by his chartered
accountant (CA). During the hearing, the income tax officer asked a number of
questions to which he gave satisfactory answers. And then the CA and the
officer began to speak in some coded language. The hearing ended and my friend
and the CA came out. The CA told my friend that the officer wanted some gift so
that he can write a favorable report. My friend politely told the CA that he or
his organisation does not resort to such practices. But the CA continued to
advise him saying that there are many other similar organizations who have
given gifts and received a favorable report and that he does not see any reason
why my friend was so reluctant. He further warned him that if his organization’s
income tax exemption is cancelled and blacklisted, he was not to be blamed. Yet
my friend stood his ground and refused to compromise. After several months, my
friend’s organisation received a favorable report without any compromise. In
the midst of extortion and corruption, our response is critical for Christian
witness.
If we
are confident that we have not committed any offence, we can stand our ground.
However if we or our staff have made an unknown accounting error which ended in
defaulting in the payment of tax, it will be right on our part to admit it and
ask for pardon or pay the penalty that is required.
If we
feel, we are being harassed by the officials, then appealing before the higher authority
against any tax claims that are imposed on us due to the wrong exercise of an
officer’s discretion or an error in judging the facts of our particular case is
a fundamental right that can be used by us. There are many charitable organizations
that were made to pay capital gains tax or even income tax with penalty even
though under the law they were exempted. They had to spend time and money to
appeal before appellate tribunals and eventually before the high court and won
their cases to recover the penalty tax with interest. There are professional
tax consultants, lawyers and advisers who can guide organizations during such
crisis.
Recently,
when the GST came into force, many organizations and institutions were debating
how to avoid registering under the act. There were several discussions in
multiple forums. There were suggestions to find alternate structures that can
help in avoiding the GST tax regime. Some of the organizations took a stand
that finding alternate structures should not be determined by the issue of
taxation. There are other factors focused on ministry that should define a structure.
They moved forward and complied with the GST. This is probably the right way
for us in the present context of a hostile environment for those who are
committed to following Christ.
Conclusion
It is
wrong to end up having to pay taxes, merely out of ignorance or negligence.
However as Jesus gave us an example, we should comply with taxation laws as
applicable to us. I started this article with an illustration of Gandhi’s
protest against an unjust tax regime. This is just one example and there are
many such stories of protest and expression of dissent by refusing to pay taxes
in history. However those protestors and demonstrators paid the price of
imprisonment and other punishments for larger good of their society or country.
Demonstration, protest and dissent are very valid actions and should not be
resorted to lightly unless we have a specific purpose for such a course of
action.
As long as we are citizens of a country and
have formal structures, it is imperative on us to comply with the legal
requirements however burdensome it may seem. As I wrote in my earlier article,
a careless attitude to compliance has landed many organizations and churches
into difficulties that have tarnished their Christian witness. Therefore, the
question remains do we really need a formal vehicle for ministry? Benjamin
Franklin[ix] writes “...but in this world nothing can be said to be certain, except death
and taxes”. The whole issue of taxation compliance and the debate
around it raises the issue of the test of our faith in the sovereignty of God, in
his provisions and the wholistic understanding of mission that includes worship,
proclamation, service and fellowship that intentionally bears witness to the whole
character and works of God. Are you paying your taxes like Jesus did?
Published in Christian Manager, Chennai June -July 2018, Vol 18, Issue 1
[i] www.britannica.com/event/Salt-March
[ii] A Short
History of Taxation, October 2008, New Internationalist,
newint.org/features/2008/10/01/tax-history/
[iv] www.lausanne.org/networks/issues/poverty-and-wealth
[v] Interserve has adopted the unusual spelling of
wholistic with a ‘w’, since the term holism / integral is now applied to so
many contexts that it has virtually lost its meaning. We emphasize the nature
of mission being from the whole of God, to the whole world, with the whole
gospel.
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