Should charitable organisations be allowed to compete with businesses?

Written by Gavin Chait

Charities and development organisations frequently like to supplement their incomes from donors by selling items.  Some organisations have become major brands in their own right (such as Oxfam or Greenpeace).  Should these organisations continue to be treated as non-profits, and not subject to taxation, if part of their operations generate profits?

It is a difficult question.  The organisations can point to the way in which they use their funds.  But businesses can point out that they are being disadvantaged.  Since development organisations don’t have to pay tax, and many of their inputs are sponsored, their goods can be sold much more cheaply.

Consider the not-too-far-fetched example of a development organisation specialising in sewing training selling its students stock against past graduates of its school.  But at much lower prices, since the fabric, sewing machines and infrastructure are sponsored and the profits aren’t taxed.  They would be working against their own beneficiaries.  Textiles workers are in an especially vulnerable industry and so don't need unfair competition.

While the South African Institute of Chartered Accountants (SAICA) may disagree, the South African Revenue Service has made the correct decision in deciding to tax these profits.  In order that business be a level playing field and development doesn’t become a protected industry.

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