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Campaign Donations: The Urgent Need For Inec And Firs To Issue Circular Mandatin by OpatolaEsq: 4:29am On Sep 05, 2022 |
CAMPAIGN DONATIONS: THE URGENT NEED FOR INEC AND FIRS TO ISSUE CIRCULAR MANDATING THE REPORT OF DONATIONS RECEIVED BY POLITICAL CANDIDATES. Opatola Victor Esq. Adeopatola@gmail.com Big money is pervading the Nigeria Electoral system at an unprecedented pace. Dark money is fighting for the soul of our Electoral system in a bid to influence the will of the people and hijack this democracy, the dangers are innumerable. This article argues the following five points: 1. There is no regulation mandating Candidates to disclose funds or assets donated to them and the sources. INEC (Independent National Electoral Commission) has the power to direct Candidates and their campaign organizations to disclose information on amount donated to them and the sources. INEC SHOULD ISSUE A CIRCULAR DIRECTIVE TO THIS EFFECT, pursuant to provision of section 87(1) of the Electoral Act. 2. Funds donated for campaign, but which are diverted for personal use must be reported as gifts under the Personal Income Tax Act. FIRS SHOULD ISSUE CIRCULAR TO THIS EFFECT, pursuant to section 3(1)(f) of the Personal Income Tax Act. 3. In a bid to regulate illicit campaign funds, when INEC and FIRS(Federal Inland Revenue Service) issues the above circular, candidates no longer have wriggle room to not make information about campaign donations and its sources reported to INEC or FIRS. 4. Foreign donations for campaign purposes are not banned. The Constitution only provided that any fund or assets donated to a political party from outside of Nigeria must be remitted to INEC by such political party, within twenty one days. It is of note that the Constitution only mentioned political parties, and not candidates, must remit such foreign donations to INEC. Pursuant to section 87(1), INEC needs to issue a regulation on the regulation and disclosure of foreign donations received by Candidates. 5. The Electoral Act needs to be amended to place a compulsion on candidates to remit or disclose (or both) all foreign donations received by them for the purpose of campaign and disclose such sources, just as it mandated Political Parties to remit all foreign donations and disclose the source of such foreign or any other information required by INEC. Money is a necessary part of political campaign, but it has also created the problem of corruption, vote buying, illicit flow of funds and undue influence from foreign interest pursing state capture. These have necessitated the urgent need to regulate election campaign funds, for the purpose of safe guarding our Democracy, transparency and disclosure, accountability and taxation of such campaign funds in Nigeria. The powers of INEC to demand campaign donations information and source from Candidates. Section 85-90 of the Electoral Act, 2022, provides for the power of INEC to regulate Election funding, source and amount of such donation. Section 87(1) of the Electoral Act 2022 provides that: “The Commission shall have power to place limitation on the amount of money or other assets which an individual can contribute to a political party or candidate and demand such information on the amount donated and the source of the funds. “ While section 86 and 89 provides that political parties must submit annual details and analysis of its source of funding and other asset, and also allow INEC access to all its record for the purpose of audit. Furthermore, all Political parties must submit their audited election expenses to the Commission within six months after election. There is no provision that provides for such regulation or audit for funds donated to Individual candidates, which leaves a wide lacuna in campaign funding and regulation in Nigeria. Section 87(1) empowers INEC to demand any information on amounts donated and the source of such funds or other assets donated to a candidate. This means INEC can issue a regulation to this effect, giving a direction on the mode through which candidates must report all campaign donations, the source and amount of such donations. Even where such donations were made to a candidate’s campaign organization, this regulation will apply to it as the provision of section 87(1) regulates campaign funding and the donated sum; and not the organization itself. The Law particularly used the word “money” and “other assets”. The Electoral act, 2022 did not define the meaning of an asset, but it is trite that assets can take more than one form, it can take the form of physical asset such as building, cars e.t.c or Digital assets such as crypto-currencies, NFTs e.t.c or even shares; whatever form as asset mutates into, it must be declared. Can FIRS classify campaign donations as gifts under the Personal Income Tax Act (PITA) The Personal Income Tax Act (PITA) provides for the taxation of individuals in Nigeria. The various tax Laws in Nigeria does not provide for a definition of “gift” or “donation” According to Black's Law Dictionary, a gift is a voluntary conveyance of land, or transfer of goods, from one person to another, made gratuitously, and not upon any consideration of blood or money. There is no particular mention or definition of “gift” in the Personal Income Tax Act. Section 3 of PITA provides that: “tax shall be payable for each year of assessment on the aggregate amounts each of which is the income of every taxable person, for the year, from a source inside or outside Nigeria, including, without restricting the generality of the forgoing - Section 3(1)(f) of the Act provides expressly that any profits, gains or other payment received by an individual are taxable. Furthermore, where the gift is from Nigeria to a person resident outside Nigeria, the gift is taxable. From the foregoing, gifts and donations can be categorized as gifts under “other payments received by an individual” which is taxable. Donations received, from within and outside of Nigeria, are taxable. FIRS can issue a circular to this effect. By such classification, any donation made directly to a candidate as gift, other than for the purpose of funding can be so taxed. Funds donated to Candidates personally, which was not classified for the use of such candidate’s campaign, can be taxed by FIRS. FIRS through this classification can demand for disclosure of the amount and the source of such amount. What happens when a campaign donation is classified as personal donations to the candidate in a bid to dodge INEC regulation? Such personal donation will be taxable as gift under the Personal income Tax Act. Campaign Donations cannot be properly classified as gifts under Personal Income Tax Act, this is because it is not a donation directly credited for the direct profit and individual use of the candidate. It is meant for campaign and campaign only and the moment it comes into the individual purse of a candidate it becomes taxable as “other payments received by an individual” under section 3(1) (f) of the Personal Income Tax Act. The distinction between personal donation made to the candidate for his personal purpose and the donations made for campaign purpose is that: Donations made to a candidate’s campaign, in the strict sense, are not meant to confer personal benefits, profit or income on him; he is not meant to use the fund for any personal endeavor apart from the sole or very strict incidental purpose of campaign. Any conversion of campaign money into personal use by the candidate should be declared to the FIRS as taxable. It is urgently important for FIRS to issue a circular in order to provide for uses of campaign fund that will or will not amount to personal use by the candidate for the purpose of taxation. For instance, where campaign money is used to by loads of expensive clothes for the candidates and his family, election night celebration party, food, security, lease or purchases, donations, fines and court settlements, where campaign money is used to pay for personal Attorney of the candidate ( in action to stop defamation, nuisance e.t.c), or attorney of the campaign or attorney prosecuting election petition, will such amount to personal use of campaign fund by the candidate; for the purpose of taxation. All these are what such circular or direction should discuss. In order not to tax every mundane thing or amount that falls under the drag net, the FIRS can set a threshold amount. Position of the Law on foreign financing of Election, Political Parties and Candidates Section 225 and 226 of the 1999 Constitution (as amended) provides for the regulation of campaign funds and finances of political parties in Nigeria. Both sections stipulates that all political parties must submit a detailed annual statement, expenditure and analysis of its source of fund and other assets to INEC. INEC can in-turn has the powers to investigate such statements and analysis submitted by the political parties after which it will give a report on the account of every political party to the National Assembly. Section 225(3) provides that: No political party shall – Hold or possess any funds or other assets outside Nigeria; or Be entitled to retain any funds or assets remitted or sent to it from outside Nigeria. Any funds or other assets remitted or sent to a political party outside of Nigeria shall be paid over or transferred to the Commission within twenty-one days of its receipt with such information as the Commission may require. ……. The above quoted section shows that foreign donations to political parties from outside of Nigeria must be sent to INEC within twenty one days by such Political parties. Section 85 of the Electoral Act, 2022, also criminalizes such infraction. This section explicitly stated that “any funds or other assets sent to a political party from outside of Nigeria”. This means that any money or assets, so far it is coming from outside of the territorial limits of Nigeria, either by a Nigerian or non-Nigerian, once received by the Political party must be sent to INEC within twenty one days. Amendments Nigeria has a Country needs to out-rightly ban foreign donations. The Constitution needs to be amended to this effect. The section 225 of the Constitution providing that such money donated to political parties should be remitted to INEC is not helpful as it leaves room for political parties to be tempted not to remit such funds to INEC, especially in a Country like ours where there are no strict compliance and enforcement of regulations. The Constitution and Electoral Act needs to be amended to expressly extend the stiff and rigorous regulation of political parties in regards to foreign donations and campaign finances to candidates in order to ensure transparency and accountability and also to ensure that our common patrimony is not hijacked by foreign interests. The Law needs to expressly define whether or not funds or assets sent by Nigeria citizens living abroad are classified as funds or assets sent from outside of Nigeria, since the aim is to curb foreign influence of Nigeria’s Electoral system. The Personal Income Tax should be amended to expressly include or exclude campaign donations for the purpose of taxation. Conclusion The will of the people through a free and fair election is pivotal to a functional democracy. A major threat to this “will of the people” is an unregulated campaign funding, lack of transparency and non-accountability of funds. An election influenced by illicit money against the will of the people can never be adjudged as free and fair. A major means of achieving a regulated campaign finance system in Nigeria are the powers bestowed on INEC (Independent Electoral Commission) and FIRS( Federal Inland Revenue Service) for the purpose of requiring sources and amount of campaign and election finance, donation and other information needed for the purpose of transparency, accountability and taxation. This paper has proffered necessary solutions and required amendments in combating incidences of unregulated financial donations and expenses in Nigeria. |
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