NGOs AND TAX EVASION
By Onike Rahaman
October 22nd, 2014
The recent pronouncement by the Federal Inland Revenue service (FIRS)
that the Non-governmental organisations in Nigeria are required by law
to discharge tax obligations to the government came as a surprise to
many NGO operators. It means many of the NGOs have never been paying
tax. People evade tax with impunity in Nigeria despite the numerous
extant tax regulations in operation. Indeed, payment of tax is a fiscal
responsibility of the Non-governmental organisations and its evasion
remains condemnable. As an emerging economy, Nigeria quest for
sustainable development is largely hung on attitude of the citizens to
The recent Sensitisation Parley organised by FIRS for the leadership of
the civil society groups is essential for better understanding of tax
obligations of the NGOs. The performance of government depends on tax
payment by the citizens and corporate organisations. Any government that
does not encourage citizens to pay tax promptly will lack the financial
wherewithal to achieve greatness. Over the years, there had been clarion
calls for the Non-governmental organisations to be paying tax. These
calls, no matter how loud and far-reaching, cannot yield results, if
deliberate and practical measures are not taken to address obvious tax
evasion by the NGOs in Nigeria.
There is no denying the fact that the Nigeria tax system allows for
compromises. In my view, legislation alone may not solve the problem of
tax evasion by NGOs. We also need attitudinal change as a people.
Tax evasion and avoidance practices, in a way, constitute acts of
corruption. The evasion is however made possible by sharp practices and
collusion between the tax officials and the operators of the NGOs.Obviously, tax evasion and avoidance practices are two major fiscal
challenges that must be addressed with all sense of duty by the
government. There is no ambiguity in Nigeria tax regulations, and its
enforcement procedures are equally not contentious. Yet, Nigerians have
ways of circumventing the laws of the land.
It is on record that the issue of dependence on oil money was a major
cause of failure of government to maximally explore taxation for
national development. Of course, if Nigeria is moving from resource
dependence and trying to focus more on sustainable sources of revenue
especially taxation, government cannot afford to leave behind any
tax-payer segment except where exception is clearly permitted by law.
Despite the rationale established by the Federal Inland Revenue Service
(FIRS) to make NGOs pay tax, the operators are still insisting on
exception claiming that the activities of the non-governmental
organisations are basically not-for-profit.
Incontrovertibly, there are civil society groups that venture into
businesses with a lot of investment portfolios. Many of the NGOs in the
category are still not willing to discharge their tax obligations to the
government. Without doubts, many Non-governmental organizations do
conceal information to public on their financial profile. In terms of
buoyancy, some are better poisoned to pay tax than even corporate
In my view, NGOs should be made to pay certain types of tax particularly
where it engages in profit-oriented activities like any other profit
making entity. Where an NGO procures and provides goods and services,
payment of tax becomes compulsory requirement for the organisation.
Aside value added tax on goods and services, the Nigerian tax law
provides that the NGOs deduct and pay personal income tax from salaries
and allowances of their employees.
The volume of monthly wage bill and the number of employees in the
payrolls of some NGOs justify the need to pay tax on salaries and
allowances of their staff as applicable to workers in public and private
sectors of the nationís economy.
It is true the Non-governmental organisations play intervention roles on
national emergencies and equally perform social responsibilities.
Notwithstanding, contributions of NGOs to national development does not
in any way justify continuous tax evasion by some of the NGOs. The
volume of external grants/aid to many of the NGOs has made them loose
the right to complain of incapacity to pay tax.
Given the negative attitude of most operators of NGOs to taxation, the
need to ensure strict enforcement of tax laws by the government becomes
imperative. The officers of Federal Inland Revenue Service (FIRS) also
need to monitor the tax defaulters and put machinery in motion to
prosecute the culpable NGOs.
While supporting the call that the NGOs should be paying tax, it worths
noting the argument that their income variables are not properly
accommodated in the national income accounting system. In essence, the
externalities which the activities of the NGOs attract have made them
liable for the payment of tax. The loopholes in the nationís tax
framework equally require necessary review to reduce rates of tax
evasion and avoidance practices by the NGOs.
Looking at the current performance of the tax authorities in Nigeria, it
seems the Agency lacks reliable and comprehensive data base of finances
and operations of the NGOs to be able to capture all the taxable incomes
of the civil society groups in the country.
However, the task of orientating the civil populate of social
significance of taxation should not be left in the hands of government
alone. If should be seen as responsibility of all of us.In the final analysis, I wish to re-echo that the NGOs be charged or pay
tax as a duty to the government and evaders be made liable for criminal
prosecution in the court of law.