Oh Pickles: Scientology Could Face Loss of Tax Exemptions in England

English communities secretary, Eric Pickles, has proposed that the government may want to withdraw tax breaks for the Church of Scientology — noting controversies over the Church’s activities and alluding to the general view in England that it is more of a cult than a religion.

Scientology is not treated as a religion in England but still receives financial benefits as a charity. In 1984, the organization was described as a cult by a high court judge.

Yet, the City of London Corporation has asked Scientology to pay only one-fifth of the tax rates for its London headquarters near St Paul’s cathedral.

Pickles questioned whether Scientology can be described as beneficial for society to justify the saving of millions in tax payments: “The Church of Scientology is not a registered charity, since the Charity Commission has ruled that it does not provide a public benefit. Nor are its premises a recognised place of worship.”

Indeed, in 1999, the Charity Commission ruled that the church did not pass the “public benefit” test required for advancing religion as a charitable purpose. He also cited the negative views of Scientology by a majority of English citizens.

I am not familiar with English law on the subject but such a basis for rescinding tax exemption would be rejected in the United States – particularly the unpopularity of the Church with the majority of citizens. Such a test would invite a dangerous level of subjectivity and majoritarian control in the denial of benefits.

Source: Guardian

211 thoughts on “Oh Pickles: Scientology Could Face Loss of Tax Exemptions in England”

  1. Tony C. I do believe we see eye to eye on this. Your last post was food for thought and certainly a viable way to deal with the situation IMHO.

  2. @Dean: It is difficult to police, I know, but I don’t see why 100% isn’t the line. Charities may want reserves, that is fine: I think it is fair that if revenue is stashed in a bank account, we won’t tax it as “income” until it has been there for, say, three years. Plenty of time to get it spent on the poor; and we will treat it like FIFO (First In, First Out) inventory, the fairest method. However the money gets spent, it counts as a business expense and is therefore tax exempt, like everybody’s business expenses.

    Employee salaries, benefits and other expenses are already legitimate business expenses for any commercial enterprise; just like rent, property and equipment purchases, the cost of supplies, advertising and marketing costs and all of that. Income is computed by subtracting business expenses from revenue.

    Just like any other employee of any other company, the employees would be taxed on *their* paycheck from the organization.

    This tax approach would end up with no tax on any legitimate charity that, in a reasonable time frame, expended its money on legitimate expenses (including helping those it is intended to serve). But we would end up taxing the scam charities there for self-enrichment and wealth accumulation.

    In other words no special dispensations need be made, one minor tax change and the benefit will police itself. The “untaxed reserves” idea could be a good one for commercial businesses as well.

  3. @Tony C: “My point there is that if the charity is truly a charity that gives out everything it takes in, then it will have no income to report and therefore no income tax. If it is a real charity, it will *effectively* be tax exempt.”

    In an ideal world this would be true. All charities have legitimate expenses. Large charity organisations can have legitimate employees. I believe however that a significant proportion of what they take in should actually result in a tangible benefit to the subject of the charity, a charity should certainly be none profit. It’s difficult to draw a line and say 95% or what ever because each case is different but one hopes the state will have sufficient sense to know when an organisation is taking the piss and be able to do something about it.

    The charities commission does audit books but I confess I don’t know to what degree, hopefully one that checks that running costs are reasonable and the money doesn’t just vanish in to various expenditure sink holes.

    We recently found a loop hole in the UK where foreign charities could register via Her Majesty’s Revenue & Customs for tax free status and not be audited in the UK; there was a presumption of regulation in the country of origin but no actual verification.

    It was the church of scientology that brought our attention to this loop hole because they’d claimed they had a charity status in Australia which they didn’t really have although Australia has a much more lax regime; a regime that thanks to the church of scientology is soon to be tightened. Effectively the organisation could shift money around internationally with impunity and no one was doing anything by way of auditing while they claimed tax free status from HMRC and without the need of registering with the charities commission since they’d failed on a previous attempt.

    The church of scientology takes in money from its hapless subscribers to spend on church of scientology consumables such a books, dvds, pamphlets or buying and renovating buildings. Pretty much all the consumables are produced in house at minimal cost because the labour is all “religious worker” (less than minimum wage where such applies) but the cost to their hapless donors is surprisingly comparable to the retail cost of comparable top end products. Even a lot of building décor, fittings and furnishings for their “Ideal Org” drives are produced by the organisation or an off shoot of it.

    Take for example their on going campaign to put a set of “Basics” scientology books in every library in the world. This is a set of around 18 books priced at between $25 and $40, the complete set to send to a library is $450. After announcing they had completed Australia it was found by way of that country’s national libraries database that remarkably few of the libraries listed the books, hardly any. To be fair they had probably been sent out but many libraries do not accept unsolicited books and they were either returned, pulped or given away. The church of scientology didn’t really care though because the main objective of this exercise was (still is) the same as all the other drives and campaigns they have, to extract money from their donors and make it vanish in to a myriad of expenses.

  4. @Dean Fox: That’s very well said.

    I think the government giving subsidies or income tax breaks to anybody is wrong, charity or not.

    On subsidies, for example: If growing corn is truly good for society (perhaps for the ethanol), but the people growing corn cannot earn a profit on it because the market price of corn is too low, I do not think the answer is to make growing corn artificially profitable for our citizens. I think the answer is for the government to buy the corn fields and hire the citizens that want to grow corn, as low-level civil servants. The government can offset some of the costs by selling the corn on the open market auction for whatever it can get.

    If the current corn growers do not want to sell the family farm they will have to use it for something else, or face the economic reality that they are wasting the resource of their time on a product with insufficient market value to support them. By analogy, there are people out there that think of themselves as poets, painters, or musicians at heart but hold jobs because they realize they can’t earn a living doing what they want.

    As far as charities go, I think we can see them like any other entity that brings in revenue and expends it on salaries, materials, supplies, services, marketing and rents or loan payments.

    If a charity brings in a million dollars, and spends $900K on expenses and services for the poor, their “income” is $100K. Now they may just not have had time to expend that last $100K, but ensuring they do not pay taxes on that last $100K **IF** they spend it on the poor is easily dealt with in the tax code already.

    My point there is that if the charity is truly a charity that gives out everything it takes in, then it will have no income to report and therefore no income tax. If it is a real charity, it will *effectively* be tax exempt.

    As for their leaders and employees, they should be taxed like anybody else. If they are earning around minimum wage, they won’t be taxed at all. If leading a charity or church earns somebody $250K a year or more, then let me paraphrase Armstrong: That “charity” looks to me like it is for the benefit of a man, not for the benefit of mankind.

  5. The only entities which deserve subsidy from society in the form of tax breaks are those that provide a tangible charitable benefit to society. Charity should be giving without the expectation of receiving anything in return. Further more it should be giving to something which is widely recognised by society as a worthy cause.

    In the UK the Charities Commission has been set up to determine this and over the years the laws have changed. It use to be that religions were granted a presumption of benefit however (and the church of scientology case was taken in to consideration when this was formalised in to law) this is no longer the case; the advancement of religion is still part of the equation but this in as of itself is no longer sufficient to pass the test.

    Another reason the presumption of benefit was removed is that there is no definitive legal definition of religion in the UK, it is something the law shies away from defining and according to the Human Rights act religion can be practically anything.

    IMO a person should have the right to believe what they want but their practices should not impinge on others, they are not exempt from the law. People should also have the right to form like minded groups which could be considered religions but that does not automatically grant them special status.

    The USA has it wrong and this is down to a “faulty” translation of their constitution; the idea was that people had the right to religion and no religion could be singled out by the Government for either positive or negative action (no religious oppression nor state approved religion). The idea was simply that all religions be treated equally. The idea was not to grant all groups that claimed to be religious extra special protection from the state (like immunity to labor laws, health and safety checks, child safety laws and the like) and exemptions from the burden of paying their way in society.

    Unfortunately the religious fundimentalists got their way in the 1950s when they started getting political and added “In God We Trust” to the coinage and “one nation under God” to the pledge of allegiance.

    Now anything the state would do to an ordinary organisation is framed as an “attack” on the constitution when applied to a religious organisation unless it benefits them. It was never meant to be this way, the Founding Fathers are turning in their graves.

  6. To Tony S and some others, you make the same mistakes as QC Crow did in his advice to City of London council, in the decision making process prior to the granting of the business rates tax relief granting (obtain under FOI on public interest grounds), where he also claimed that the City would risk opening themselves up to litigation possibly through the high court (which would fail) but then ultimately though the ECHR.

    However what you fail to appreciate, just as where QC Crow failed, was that the game was rigged. QC Crow worked with the information that he was given, assuming it to be undisputed fact. He like you didn’t have the full facts. One fact missing is that The church” of scientology in the UK is run by an offshore trust called COSRECI (Church of Scientology Religious Education College Inc.) which claims to be operating as a charity in south Australia but turns out it isn’t a charity there. It is based in Alediade South Australia where it is serves zero function other than as a shell for the UK trading operations and property portfolio. In Australia it is not trading in any way, charitable or otherwise, it has filled no accounts there, it is not and ever has been a registered charity there. These points were raised on and investigation by journalist Bryan Seymour for Channel 7 in Australia and was taken up by Senator Xenophon who took steps to have the UK government fully informed. After that programme aired the scientology church ANZO (Australia, New Zealand and Oceana) panicked into issuing a statement to where they admitted that COSRECI was not and has never been a registered charity there (citing official goverment sources). This admission may have cushioned the blow to some Australian viewers but will make it worse for COSRECI in the UK where it confirms what we already knew but which UK government was not taking much action on.

    As an aside it even turned out that one of the documented premises associated with the COSRECI trust was actually a suburban house where the bewildered owner (who runs a small market garden there too, and is not a scientologist) knew absoloute nothing about this.

    The point is that for an ECHR ruling to be even remotely sucessful for the scientology then COSRECI would need to be a charity somewhere. It is not good enough that you hold an office in a country where your sister organisation the Church of Scientology ANZO is a tax exmept organisation there but the shell organisation COSRECI that runs the UK arm isn’t. It’s not good enough that you put “Established for charitable purposes” in your “Articles of Incorporation” if it has no actual purpose, of any kind, in its country of incorporation.

    I’ll take this next comment on advisement from those more versed in the ECHR: It is not even clear, even if COSRECI were a registered charity and fully operating as such in South Australia (of course, NOT a European country), whether it could even use the ECHR to rule in its favour. I’ve read till eyes bled and cannot find a single precdent for that precise situation, but I’ll listen if someone can explain, rather than people just bandying the term “ECHR” around. One thing that backs my comment up is COSRECI’s own actions (or rather, inaction) in a prior decision by a different local council (Mid Sussex) when they rejected COSRECI’s application for business rates tax relief in 1999 for their HQ premises at St.Hill Manor, East Grinstead. No high court or ECHR litigaton ever came of that rejection in all this time. Scientology has a huge war chest for such things and has a history of fighting tooth and nail for more recognition even if the tax exemtion gain is relatively small. Since that failed application in 1999, going by the rateable values of their property at St.Hill manor, in the 11 years since, they would have stood to have saved approximately £1,000,000 so far. So, why haven’t they taken it to court? It could just be because they have actually looked into it and a) they know they’d fail and b) other undesrirable things about scientology’s previous abusive and criminal practices would come out into the open.
    In fact, from FOI requests made recently, it has been discovered from minutes of a meeting between City of London council and scientology’s staff and Solicitor that they told the council, when asked, that they had never applied for rates relief for their HQ at St.Hill Manor yet, as mentioned above, Mid Sussex council reveals that they did make application there around five years earlier, in 1999, when the Solicitor (and a scientologist) was still doing work for them. That application in mid sussex for St.Hill Manor failed and it is beginning to look more like they lied in the meeting order to prevent City of London from examining the Mid Sussex council decision and learning a few truths and a method of standing up to scientology. By the way, Mid Sussex council has quite some experience and it’s history with scientology at St.Hill Manor is long and sour, and also resulted in a precedent set where scientology can never gain “Registered Place of Worship” for any of therir properies ever. See R v Registrar General ex parte Segerdal. [1970] 2 QB 697)

    You can find much of the FOI info on the FOI tracking website “whatdotheyknow.com” (search the work of William Thackeray on this subject).

    City of London has been incompetent in the decision making process, fed incomplete facts to a barristers to get legal advice which gave them and excuse to make a purely cost analysis
    decision based on the likelyhood of future imaginary litigation. The other three councils where relief has been granted are just as bad or worse (one even backdating the relief 4 years). In some ways who can blame them when the way that business rates works is that they are collected buy local authorities from businesses in their area and the revenue sent to central government who then doles it back out from a pool to each local council region on a needs basis. Thus, City of London had no cost incentive to act with a great amount of due diligence when granting applications for mandatory charitable relief for business rates, other than the cost to itself for shakey litigation fears.

    It is hoped that scientology’s VAT exemption (sales tax) will also be cancelled at some point too. That’s a different story.

    By the way, I fully expect the US State Department, in its annual Nosey Parker report on how other countries treat religions, pseudo-religions and abusive criminal cults bobbing up and down from the legal radar, to fully chastise the UK for all this bashing of its favourite Hollywood alien moontbat cult/business export (which indidentally was resonsible for the largest ever infiltration of US government offices – google Operation Snow White).

    As Senator Nick Xenophon said when calling for an inquiry into the abuses of scientology in his country, “[In Austrlaia] there are no limits on what you can believe but there are limits on how you can behave. It’s called the law, and no one is above it.”
    It is a pity that too many countries, especially those that claim seperation of church and state, give churches of religions the kind of default bubble of protection which they don’t deserve.

    [Moderator: If this comment is too long, please feel free to cut it down to the most relevant areas of interest]

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    on Nov 3rd.

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