The tax on charities

Charitable institutions hand over 16 cents from every dollar they raise to gov't – the same gov't that refuses to pay for dental care for elderly and welfare-to-work programs.

homeless religious man 311 (photo credit: Marc Israel Sellem)
homeless religious man 311
(photo credit: Marc Israel Sellem)
As a businessman who made aliya in 1997, I share Israel’s shame at a further set of statistics on poverty and wealth inequality which show our state falling way behind the rest of the civilized world. While the country is applauded for hi-tech expertise, military inventions and scientific advances, our inability to take care of our poor and vulnerable citizens takes the shine off the trophies.
As someone who spends every waking hour fund-raising for the poor, I am shamed by the government’s unwillingness to do anything for our charities. The state relies on the “third sector” to fill the gaps in its welfare services, and depends on Jews in the Diaspora to fund schools, hospitals, cultural institutions and soup kitchens. Surely the government is setting a bad example by encouraging the same culture of dependency that it claims to oppose?
I travel around the world, visiting various communities and begging them to help us feed the disadvantaged children of immigrant families who cannot afford bread, the elderly Holocaust survivors whose government pension scarcely covers the cost of their medications, let alone food, and the unemployed men and women who cannot scrape together the thousands of shekels required for employment training. I am ashamed to tell them in the Diaspora how bad things are for some immigrants here – even for Anglo immigrants who are reliant on soup kitchens like ours, as highlighted in Ruth Eglash’s recent disturbing article (“Feeding the ‘Anglo’ poor,” September 22).
BUT WHAT infuriates me is that 16 cents from every dollar I raise is handed over to the government.
Because charities still pay 16 percent VAT, we are being taxed on our fundraising efforts. I see VAT as a punitive tax on charities like Hazon Yeshaya, which pay tax on the products we need to buy but receive no sales tax rebate because we give everything away. A business recoups the VAT it pays out on raw materials when it sells its products to customers, but a charity loses the money.
Charities like ours are already struggling with rising food and fuel prices, falling donations and the weaker dollar.
Hazon Yeshaya pays VAT on practically all of the food products that we buy to prepare meals, and on the fuel we use to deliver those meals to poor schoolchildren and elderly people. We struggle to keep our staff costs and other overheads down to 3% of our budget, but we hand over 16% of everything we spend to the taxman.
However fast I run to raise the budget we need to meet the increasing demands for our assistance, I feel that I am running to keep still, so that the state can profit from my efforts. From every $6 million that I beg from my donors, $1 million disappears into the Treasury – the same Treasury that refuses to pay the cost of dental care for the elderly, school meals for children, welfare-to-work programs, or any other poverty-beating plan that you might care to recommend.
Unfortunately the third sector lacks the political clout to fight this punitive tax. VAT rebates for registered charities would be so easy to administer, and would release much needed charity funds to help Israel’s poorest citizens. I’m not asking Prime Minister Binyamin Netanyahu to dip into government funds or to allocate any money, just to stop taking ours.
The writer is founder and director of the Hazon Yeshaya Humanitarian Network.