I decided to put up this short write-up following the dust that has been raised in some quarters, calling for the taxing of churches and/or mosques. Apparently, the relevant tax here is direct tax, because I know the church [or mosque] pays tax indirectly when they make purchases, and pay for utility bills. So, the call is for churches and mosques to pay tax on the resources and money they receive from people - direct tax.

The call for the religious institutions to be taxed is not unconnected with the unbridled "opulence and extravagance" being displayed by some religious leaders, which have found expression in acquisition of ostentatious goods such as private jets, exotic cars, houses, businesses and other goods. For example, I have seen Falana's position that churches and mosques should be made to pay tax.

Whether or not a religious institution should be taxed, I think, depends on what they use the donations they receive from people for, not how much they receive. I will show more on this in a subsequent paragraph.

I think it would be in order to have some keywords that will often be used in this piece defined: the keywords are religious institution, income, property, transferred earning and tax.

Religious institution[s]: Church or Mosque.

Income: Money or resources you receive as payment for contributing towards the production of goods or service, usually taken daily, monthly or annually.

Property: Any asset that yields income to you.

Transferred earning: This is money or resources you receive, NOT attributable to your participation in the production of goods or service, but on the basis that the giver wants to show affection, respect, or other generous motivation with no consideration of payback. Simply put, transferred earning is gift.

Tax: A fee charged by a government on property, income, or activity. Failure to pay is punishable by law. Taxes are imposed on income and property, not transferred earning.

Understand the difference between income and transferred earning. If, for example, you are a banker, you receive salaries, allowance from your employer; if you are a book seller, you get proceeds when you sale a book. These receipts constitute income to you as a banker or a book seller, because you get them BECAUSE of the banking services or the books sold. But, if instance, you received some sum of money from a friend or a relative, the receipt would be transferred earning, a gift, NOT income. However, if your brother paid for the books he bought from your shop, the receipt would be income, not transferred earning.

Why Religious Institutions Shouldn't Pay Tax

Religious institutions are set up as charitable organisations; hence, the Constitution mandates a tax exemption for them.

Religious institutions shouldn't pay tax, because they receive transferred earning, not income. They receive gifts and donations. It could be argued that money received by the places of worship is from people who have already been taxed. In effect, it implies double taxation, contrary to the doctrine of tax fairness.

I think an example is in order: If tax rate is 5% and your salary is N100,000 per month. You pay a tax of N5,000, having a disposable balance of N95,000. Out of this N95,000, you offer N10,000 to the church. This N10,000 received by the church shouldn't be taxed because it's a gift, so to say. You are not paying the church for anything.

Note: if the N10,000 was given to, say, a carpenter for his carpentry services, then he should pay tax on the money because he received it as payment for his work.

Why Income Is Taxed, But Not Transferred Earning

Income is taxed because it represents an increase in the production of goods and/or services. If a contractor builds a house, you pay him for the house built; there has been an increase which reflects in the construction of the house. The house is the "increase." In transferred earning, there is no increase. If you give a person a gift of money, the person does nothing in return; there is no increase in production.

A gift is usually given out of affection, respect, or other generous motivation with no consideration of payback in the form of past or future work, promotional activity, or other benefit is not taxable income to the recipient.

Churches and Mosques Should Pay Tax If....

A religious institution should pay tax if they invest their gift money into taxable concerns. For example, if a church is involved in the production of table water, they should pay tax on the profits of the business. Not taxing a commercial venture owned by a religious institution is not fair because commercial concerns owned by a non-religious body or person are taxed. Religious institutions that run taxable businesses should give something back to the government.

The Law waives the burden of tax for religious institution because they are considered non-profit organisations which engage in charity like feeding the poor, running orphanages, propagating spiritual Message, and so on. If every religious institution had to justify their tax exempt status by showing proof of charitable activities they are engaged in, how many of them would pass the test?

Yes they should pay Taxes!