Church taxes shelved, NGO registration deadline looms

Government's intentions to tax non-profit entities - including churches - have been placed on ice, while non-governmental organisations (NGOs) have until Friday to fully comply with strict financial reporting measures set by the Financial Intelligence Centre (FIC).

Plans to tax non-profit entities were halted largely as a consequence of the Covid-19 pandemic, the finance ministry told Namibian Sun.

During the tabling of the 2018/19 budget, former finance minister Calle Schlettwein said plans were in place to tax the commercial activities of welfare organisations and that they should register as taxpaying entities.

Providing an update yesterday, ministry spokesperson Wilson Shikoto said the ministry was considering the introduction of taxation of income earned by not-for-profit organisations.

“We consulted widely with regard to this reform at the time with the relevant stakeholders. However, due to the onset of Covid-19, we had to reassess the tax measures that were proposed at the time."

Civilly disobedient

But while non-profits can breathe a sigh of relief from the taxman, they only have until this Friday, 29 September, to ensure they are registered and comply with strict financial reporting measures.

To this, Joris Komen, founder of the non-profit organisation Netday Namibia, said: "The time has come to be civilly disobedient”.

His comment comes amid heavy criticism of the measures, which – according to the FIC – are being implemented to determine whether an organisation is at risk of financing terrorist activities or being used for money laundering.

At a meeting held last week at the Hilton Hotel in Windhoek, Kristian Hamutenya, the FIC's deputy director of compliance, said nothing can be done to change this Friday’s deadline.

"Unfortunately, not now," he responded to questions about extending the deadline or easing the requirements.

Pushback

Hamutenya said in terms of registration and compliance, the focus is particularly on churches, faith-based organisations and welfare organisations involved in areas such as housing, health and education.

In addition, non-profit organisations must comply with the Financial Intelligence Amendment Act.

Representatives from various organisations, including the Namibian Heart Foundation, the Orange Babies Foundation, the Side by Side Centre, the Namibia Life Change Centres Foundation, the African Methodist Episcopal Church, Youth with a Mission, the Rural People's Institute for Social Empowerment, the Institute for Public Policy Research (IPPR), the Hans Seidel Foundation, Huis Maerua Children's Home and the Namibian National Teachers' Union (Nantu) attended the meeting.

The National Welfare Council has 521 registered organisations under its purview, and there are currently 3 580 non-profits with active bank accounts in Namibia.

Punitive measures

One representative asked: "Why should we be punished, wasting our time? Donors are already losing interest because we make it difficult for them [to contribute to their causes]".

Another commentator said government's recent legislation has created punitive laws for civil organisations.

"You're turning community workers into criminals," they said.

According to the new legislation, non-compliance can result in the FIC imposing a fine of up to N$10 million, or the courts can impose prison sentences of up to 10 years for the "guilty parties", with fines of N$50 000 for each day the requirements are not met after conviction.

A Council of Churches representative said they requested an exemption and were informed that they must comply with the requirements, or face the consequences.

The Cancer Association of Namibia (CAN) warned that they cannot force donors to share audit information or provide police clearance.

"They would rather walk away."

Reportedly, a number of non-profits have already been notified that they do not meet the requirements.

Compliance necessary

Hamutenya explained that the strict measures must be applied because the United Nations' Financial Action Task Force (FATF) insists on them.

Without compliance, Namibia would be placed on an international grey list, which South Africa is already on.

The purpose of the amendment is reportedly to regulate civil organisations, he said, adding that he understands why the sector feels targeted.

However, the legislation gives the FIC the mandate to assist in watchdog roles, given that the national framework is inadequate, he said.

Eben de Klerk of the Namibian Association for Economic Policy Research (EPRA) said government's approach will certainly diminish civil organisations in Namibia.

EPRA will not expose its donors, he added, saying the organisation will write to the 35 democratic member countries of the FATF about the consequences of its requirements.