Hospital's tax-exempt status criticised

17:00, May 03 2013
St George's Hospital
St George's Hospital in Merivale, Christchurch.

Christchurch's St George's Hospital, which is run as a charity, made millions of dollars last year but gave back less than $100,000 to the community - an amount slammed by critics as "tokenism".

The hospital, which has charitable status and is therefore exempt from income tax, gave 1.5 per cent of a $6.5 million surplus to charitable causes.

But the $91,463 that St George's Hospital (SGH) gave to philanthropic causes in the 11 months covered by its 2011/12 financial report has been branded as lip service by a charity specialist.

"The concept of charity is to help mankind and giving 1.5 per cent of a $6.5m surplus is not charity - that is tokenism," Dr Michael Gousmett, who is a member of the Australian Charity Law Association, said.

New Zealand charities are not required by law to give a percentage of their surplus to the public benefit.

The Department of Internal Affairs told The Press: "There is no legal requirement to donate a minimum amount to charity, provided that income is not accumulated for more than 80 years."


SGH tax-exempt status saved the hospital $1.8m in income tax last year and Gousmett believed it would be reasonable to expect it to spend 50 per cent of what it saved subsidising patient care - which equates to $900,000, 10 times what it currently contributes.

The Christchurch researcher has also come out swinging against the fee-charging, private hospital's "nice fat director's fees".

The 10 SGH directors each receive about $24,000 annually each - almost on par with the $29,000 pay cheque Canterbury District Health Board (CDHB) members receive, despite the CDHB overseeing 13 hospitals.

SGH, which advertises itself online as "one of the best-equipped private hospitals in Australasia" has a steady cashflow from charging fees and as of March 2012, the charity hospital had $116m cash sitting in the bank. Gousmett likened the charity to a "first-class hotel" that only takes in wealthy guests with medical insurance.

"Is not a fee-charging charity hospital a contradiction in terms? If I needed surgery tomorrow to remove a tumour I couldn't go to SGH - it would be too expensive for me," he said.

Gousmett said there was no indication that SGH provided discount fees "so where is the distinction between what they do and what a full profit hospital does?"

The Press made numerous approaches to SGH over the past 10 days, but it declined to comment on the matter. A week after the first inquiry was sent to SGH, the executive assistant for chief executive Greg Brooks, said he was too busy to answer any questions.

The criticism of SGH comes as Gousmett calls for tighter regulation surrounding New Zealand charities and legislation changes to hold charities accountable to their fiscal privilege of income tax-exemption.

"We have no idea what charities are doing with their own money or what they do that actually makes a difference.

"It could be anybody's guess as there is no accountability."

New Zealand charities have been exempt from income tax since 1892, but ever since there has been no legislation directing charities to donate a certain percentage of their surplus to charitable causes.

Nor is there any law stating charities must show what they do to justify their tax exemption.

"In New Zealand there is a public expectation that if it is a charity it will be charitable but there is no accountability or regulation. It is not good enough. We need to raise the standards as we are way behind," Gousmett said.

In the United Kingdom in 2006, a legislation change introduced the Trustee Report whereby charities are required to report on public benefit and recent reforms in North America can see a hospitals' tax-exempt status being revoked if they fail to meet a threshold of charity care.

Other countries' legislation changes demonstrate "how incompetently the New Zealand Parliament has treated the charity sector".

Community and Voluntary Sector Minister Jo Goodhew would not comment on SGH but welcomed a public debate on the "activities and accountabilities of charities".

"I believe it is vitally important for the public to have trust and confidence in the charity and not-for-profit sector that the money they donate is used as far as possible for charitable purposes."

Registered charities account publicly for their income by making their financial information available on the charities register, Goodhew said.

The Press