IS IT TIME TO TAX YOUR TITHES AND OFFERINGS?

Once upon a very long time ago, ecclesiastical bodies highly influenced the terms of government.

Now however, the question of how much goodwill they should enjoy from the government is an issue and this question is extremely significant in Nigeria because (and there’s no easy way to put this) …”enu gbe!” ­ We don’t have money!

Take a look around at churches today, you’ll likely come to one simple conclusion: religion has never sold this good! We’re now in an era where churches, and their leaders, are rich and powerful enough to do and undo almost anything, including owning massive stakes in various business ventures, real property, the educational sector, among others.

Relate the above with the fact that churches in the US are reported to own more than 500 whooping billion dollars in untaxed property and that New York City alone loses more than $627 million in property tax revenue, annually.

And don’t think this is an America thing alone. In Forbes’ recent list of the top 10 richest pastors in the world, 4 Nigerian pastors sat prominent on the list in positions 1, 3, 5 and 9, with a combined net worth of $249 million. Yes, seriously.

So, what do you think? Is it time to divert some of your tithes and offerings? Before you answer that, let’s take a real look at the situation. Do churches really get a total hall pass when it comes to paying taxes?

Are Churches in Nigeria really Exempt from Paying Taxes?

Yes, in a way. The first thing we need to get straight is that there is a bucket load of payable taxes in Nigeria. Under the Taxes and Levies (Approved List for Collection) Act alone, there are up to 35 different rates, levies and taxes collectible by the taxing authorities. So, are churches exempt from paying the whole lot or just a bare few?

The truth is a bit more complicated than most understand. The principal income tax statutes in Nigeria ­ the Personal Income Tax Act and the Companies Income Tax Act, both exempt the income of “ecclesiastical, charitable or educational institutions” from tax under their respective provisions. This means that churches, covered within the term “ecclesiastical” in those provisions, are exempt from Personal Income Tax and Companies’ Income Tax.

They are also exempted from paying Land Use Charge under most state Land Use Laws, such as the Lagos State Land Use Charge Law, 2018 which exempts massive tracts of property in choice locations owned and occupied by religious bodies and used exclusively as a place of worship or religious education from Land Use Charge.

However, they don’t enjoy any such exemption from Value Added Tax, Capital Gains Tax, Stamp Duties or any other tax for that matter. Apart from this, the exemption that churches enjoy on PIT and CIT only applies so long as their income is not realized from any economic activity they are involved in for the purpose of making profit.

So, yes, churches are exempt from paying some taxes. While it may seem that they only enjoy exemptions in a few taxes out of a truckload of Nigerian taxes, it seems, dear brethren, that they enjoy exemption from the taxes that matter most. And that seems to be the problem.

A Lifestyle of Glamour, Glitz and an Eternal Tax Break?

In the opinion of many, the tax exemption granted churches has basically given them a license to amass unholy sums of wealth. And it’s hard to argue against this, especially seeing the lavish lifestyles that many pastors in Nigeria live.

Would you believe that at least 7 Nigerian pastors own private jets? As if that is not enough, some of them own not just 1, or 2, or 3, but 4 private jets! Yes, it may be argued that some of these pastors actually have vibrant personal businesses that create this large wealth for them but is that the same in all cases? And the important thing to note is that the ones in the media are just those that have attracted the public glare. There are thousands other churches that may not have pastors with multi-million dollar personal estates, but definitely have turnover in the hundreds of millions of Naira.

The ostentatious display of wealth from many of these pastors has led many to question the wisdom of letting all that wealth slip by tax free. After all, these pastors are all but guaranteed their place in “glorious eternity”, must we give them an eternal tax break as well?

More troubling is the realization that, although these churches enjoy exemption on a specific category of taxes, in practice, the exemption is carried far beyond what the law prescribes. Where churches hire employees, they are expected to deduct personal income tax (PAYE) on their salaries, even that of the pastor. When they dispose of or acquire property, they are expected to pay capital gains tax on the transaction. Their documents should be assessed to stamp duty when they have a qualifying transaction. But how many churches actually remit these taxes?

Where is the Rhapsody in this Reality?

Many argue, on the opposite side, that churches and entities exempted under the earlier mentioned provision, are given that status because of the good they do in society. They point to such philanthropic acts and the constant giveaways that churches and their pastors regularly indulge in.

There is definitely a lot of merit to this, as ecclesiastical bodies, educational institutions and NGOs actually do carry out a lot of charitable work in society. The tax exempt status granted these bodies is meant to reward them for their charitable works and also to ensure that they are not impeded in the conduct of their activities by having to pay taxes on the donations they receive.

But, is this really the case, especially as it concerns Nigerian churches?

Many of these churches establish educational institutions, ostensibly as a way of “giving back to the society”. But in reality, their universities and secondary schools are exclusive institutions that even the majority of the churches’ own members cannot afford to send their kids to. With pastors turning out in the best suits, chic clothes and permed hair, while their members serially wait on God for the next big breakthrough, many rightly ask: Where exactly is the rhapsody in this reality?

Is it Time to Have a Rethink?

The simple truth is the drafters of the tax laws never intended the provisions of the law to serve as a hall pass that grants churches phenomenal wealth and no tax responsibility. The position, at present, is unarguably far from what was envisaged.

It is inescapable that churches, these days, have the potential to amass great wealth that, if taxed, will contribute a solid percentage to Nigeria’s tax revenue. This is especially considering the fact that the “religion industry” is now considered to be worth roughly 2.5% of Nigeria’s GDP. Coming on the back of the recent recession and current wobbly status of the economy, a focus on taxing church wealth may open up a very useful stream of revenue.

So what’s the way forward? On the one hand, there is a very good case for the argument that revenue collection agencies must do more in monitoring the activities of churches. On the other hand, it may be time to start levying taxes on churches that exceed a particular revenue and asset threshold. This way, more attention can be paid on those churches that are really pulling in massive streams of income.

Have your Say

So, do you think it is time to start taxing churches in Nigeria? Where should the taxing start from? How should we go about it? Is there a place for mosques on this table?

Have your say in the comments section below!

Chidiebere is a final year Law student of the University of Lagos with interest in Environmental Law, Medical law, International human rights law, Taxation law and Commercial awareness. He believes in the actualization of the SDGs which begins with Environmental protection and is an Integral part of Sustainable development. He currently serves in the Operations team of Taxville, and is interested in exploring the untapped areas of the law for the benefit of the society at large. In his leisure, he enjoys music, art and creating impact. He lives by the saying that “ Fortune favours the bold”.