Ngāi Tahu is exempt from income tax because the sole shareholder for all its businesses is a registered charity.

Many New Zealanders may be unaware the maker of their favourite breakfast cereal is owned by a church.



The breakfast staple Weetbix is owned and made by Sanitarium Health and Wellbeing Company, which was established by the Seventh-day Adventist Church in 1898 to promote and produce plant-based health foods.



On its website the company said this was based on the church's belief that plant-based diets are designated by God for the health of the human race.



But because it is a church, Sanitarium have never paid income tax.

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Under New Zealand law, churches are exempt from income tax because they have a charitable purpose – they promote religion.

DAVID UNWIN/STUFF ACT party leader David Seymour wants to close the charitable trust tax loophole.

While Sanitarium is a commercial business, it's sole shareholder is The New Zealand Conference Association, which is a registered charitable trust.

A Sanitarium spokesman said: "If a review of this area were to occur it should cover both the non-profit sector and charitable sector, for example Māori trusts, unions, lobby groups, environmental groups, sporting clubs."

Britain amended this charitable tax loophole in the 1920s and ACT party leader David Seymour wants New Zealand to catch up and do the same.

STACY SQUIRES/STUFF Dr Michael Gousmett has been researching New Zealand charitable trusts for more than a decade and is calling for legislation changes in the sector.

"I don’t know what their [Sanitarium's] purpose is. They would argue they do charitable stuff to the same value as what they would have paid in tax," Seymour said.

Ngāi Tahu is another commercial operator that doesn't pay income tax because the sole shareholder for all its charitable operations is Ngāi Tahu Charitable Trust.

In the year to 30 June 2016, Ngāi Tahu Holdings Corporation Limited made a net profit of $210 million, but only distributed $44m to the trust.

A Ngāi Tahu spokeswoman said the remaining profit was reinvested into Ngāi Tahu Holdings Corporation.

"Our distribution model is similar to many of the larger community trusts in New Zealand and internationally renowned Yale and Harvard Endowment Funds, so we compare well with nationally and internationally recognised intergenerational funds," she said.

Seymour said the charitable tax loophole gives Ngāi Tahu's Go Bus business a competitive advantage to bid for the Auckland Transport bus contract.

"People should be able to get a tax exemption for donating to charity, but when you’ve got those companies that are kind of like charity, kind of like a business, then it would make sense to split them," Seymour said.

The commercial side of the charity can then donate to its charitable side, he said, and claim the tax credit of 33.33 per cent that applies to all charitable donations of at least $5.

"If it’s really true that they give all their profits to their charitable side then they won’t pay any tax. But if some people suspect they are getting away without paying tax and not putting as much into charity as they should, that will level the playing field for that other competitors."

University of Canterbury charities researcher Dr Michael Gousmett has been researching New Zealand charitable trusts for more than a decade and said although many charitable businesses had been hugely successful, there was an issue when a company working the for-profit sector has to compete with a similar businesses that pays no income tax.

"Then you clearly have a fiscal advantage," he said.

New laws were introduced in 2014 to crack down on the number of companies trying to achieve charitable status through the Internal Affairs' Charities Service.

Since 2014, 527 groups have been rejected including national sports administrators such as New Zealand Cricket and Table Tennis NZ, a medieval re-enactment group and dozens of religious groups.

"But the point is no government has ever gone to the point of laying this on the table and going through a select committee process so that interested parties on both sides of the issue can have a democratic debate about whether it's fair charities are able to run businesses and not pay income tax."

"I think the time for that debate is long overdue."