Chartered Tax Practitioners call for NGOs tax audit

Inter-Class Associates of Chartered Tax Practitioners (CTP), has called on Commissioner – General, Ghana Revenue Authority, for an immediate tax audit of all Non-Governmental Organizations (NGOs) in the country.

According to the tax practitioners, though NGOs are registered as companies limited by guarantee, and therefore deemed as non-profit/ tax exempt organizations under Ghana’s tax laws, specifically section 97(4) of the Income Tax Act, 2015 (Act 896), it has realized that most NGOs are involved in profit-making ventures but are evading taxes.

CTP is also of the assertion that most NGOs receive funding from foreign sources which are not transparently disclosed, and others receive financial support from state organizations and these are often described as “donations.”

Notwithstanding, the tax laws are clear and explicit on which kind of donations are tax exempt, as provided for under section 100 of Act 896.

In a statement signed on behalf of the association by Mike Kofi Afflu, Former President of the Chartered Institute of Taxation Ghana and Former President of the West African Union of Tax Institutes (WAUTI), they indicated that tax laws provide that Income accruing in, derived from, brought into or received in Ghana is taxable in Ghana, therefore, every income earned in Ghana is taxable in Ghana, unless specifically exempted from tax.

“The little research conducted by Inter-Class Associates, coupled with our practice experience in dealing with NGOs in Ghana, has revealed that more than 70% of NGOs registered in this country are involved in profit-making ventures and activities which are taxable, as provided for under section 97(5) of Act 896.

For example, there are NGOs involved in Trading activities, micro finance, illegal mining, transfer of funds, oil and gas, trading in foreign currencies, money laundering, etc. all these activities are taxable, as indicated above,” he stated.

He further stressed that most NGOs have created the wrong impression that so far as they are classified as non-profit making organizations then it means that they are not to pay any kind of taxes. “They evade the payment of taxes on the income of their employees – pay-as-you-earn (PAYE), that is for their staff salaries and allowances.

They fail to withhold tax on payments they make for goods and services above the threshold of GH¢2,000.00 as provided by the Law. Rent payments are not subjected to withholding tax etc. all in breach of sections 114 to 120 of Act 896,” he mentioned.

Some NGOs are said to also receive inflows which are “kicks-backs” or rewards to such NGOs for using their political connections to lobby the government and government organizations to win contracts and other favours for mostly foreign nationals and foreign investors. These are incomes subject to tax as provided for under section 5(2)(vi) and (vii) of Act 896.

Need for Tax Audit

With all the aforementioned reasons, the CTP, is arguing that the nation is therefore losing huge revenue as a result of the nefarious activities of such NGOs operating in the country, hence the need for an audit.

Since the Ghana Revenue authority may not have the required number of staff to undertake this exercise within a short period of time, I recommend that the Commissioner –General of the Ghana Revenue Authority may seek the assistance of Tax Experts under Section 4 of the Revenue Administration Act, 2016 (Act 915); to compliment the efforts of the GRA to undertake this all-important national exercise.

“I am very certain that such an exercise (if not given political colour) will help this nation to crack down on these nation wreckers and rake in the much-needed revenue for development,” he concluded.