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NGOs AND TAX EVASION

By Onike Rahaman   Published 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 tax.

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 establishment.

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.
 


 
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