sklingel@icnl.org
davidjrobinson@xtra.co.nz
(202)
452-8600 (64)
4 4759275
Report
on Laws Affecting Civil Society in
Amelia Fasi Pasikala
Faasau
1.
INTRODUCTION
Geography
The Legal
System
·
Constitution of
·
Acts of Parliament of Vanuatu;- the legislation
·
Joint
Regulations in existence on 30 July 1980 from the laws made by the French and British
that applied to all residents in Vanuatu prior to independence- which continue in force until repealed by the
Vanuatu Parliament ( s. 95(1) Constitution );
·
British
and French laws in existence on 30 July 1980 - including Acts of Parliament, subsidiary legislation and English
common law and equity, which continue in force until repealed by the Vanuatu
Parliament ( s.95(2) Constitution );
·
Customary
laws of
These are the laws that affect the
existence of NGOs in
2.
PROVISIONS OF THE GENERAL LAWS
A. Consistency and Clarity of Laws
The various laws
relating to the establishments and dissolution of non government associations
are simple and easy to follow. This is not only true of legislation generally open for registration of NGOs but
also of special laws for religious bodies, trade unions or professional
membership bodies. The fact that the various laws also rarely regulate the
establishment, operations and governance of the NGOs, but rather leave this to
the hands of the NGOs to make their own rules or regulate their internal
procedures as embodied in a constitution or memorandum of association,
contributes to the simplicity of the legislations.
In considering the
pieces of relevant legislation as a whole and their workability for the
advantages of NGOs, the laws are quite limited in its effectiveness in this
area. The legislation affecting the operations of NGOs is fragmented in the way
they deal with the rights and
entitlements of NGOs. This impedes the efficient administration of NGOs not
only by the statutory enacted administrative bodies but also for the NGO
governing bodies. The fact that each legislation operates independent of each
other leaves room for inconsistencies in the decision making and treatment of
NGOs as well as doubles the work for the administrative body in both the
Government and the NGO sector.
However, under the
current legislative framework, it is still reasonable to assume that NGOs can
still operate independent of government at least in relation to its day to day
operation, thus achieving the objectives of existence.
B.
Constitution
The Constitution of Vanuatu (“the
Constitution”) being the supreme law guarantees the fundamental rights and freedoms
of individuals including the right to freedom of assembly and association. It
is from this freedom that the right to found associations is based.
Article 5 (1) of the Constitution
states:
“The Republic of Vanuatu recognises that subject to any restrictions
imposed by law on non-citizens, all persons are entitled to the following
fundamental rights and freedoms of the individual without discrimination on the
ground of race, place of origin, religious or traditional beliefs, political
opinions, language or sex but subject to respect for the rights and freedoms of
others and to the legitimate public interest in defence, safety, public order,
welfare and health ….
(g) freedom of assembly and association.
As is stated above the freedom of
association may be only restricted for reasons of rights and freedoms of
others, legitimate public interest in defence, safety, public order, welfare
and health.
An example of a restriction
imposed by law on the freedom of assembly and association is stipulated in the
Public Order Act [Cap 84] (“the Public Order Act”). The Public Order Act
defines an organisation as “includes an
association or combination or persons.”[1]
The Public Order Act states that the President, on the advice of the Prime Minister,
has the power to declare by proclamation, an organisation unlawful if he is
satisfied that a substantial number of its members have been involved in the
commission or instigation of offences under the Public Order Act or have
incited others to commit the same. Any member who continues to act on behalf of
the association shall be guilty of an offence.[2]
(C)
Types of Organisation
There are a variety of NGO
organisations in
The following are the types of
NGOs that are found in
1. Unincorporated association:
Most of these organisations are community based and are commonly formed in the
villages by groups of men, women and youth either for sports, agriculture or
religious purposes etc. An unincorporated society is not a legal entity and its
creation rests on an agreement, written or oral between its members; usually
its governing instrument is its constitution or rules. It has no legal
personality and therefore no capacity, independent of its members to enter into
legal relations with other bodies.
Political parties in
2. Charitable Association:
Most of the registered NGOs in
3. A company limited by guarantee:
A NGO can be formed as a Guarantee Company pursuant to the Vanuatu Companies
Act [Cap 191] (“the Companies Act”) , whose governing instruments are the
memorandum and articles of association. A guarantee company becomes a legal
entity once it is registered. It is therefore able to enter into contracts, to
institute and defend suits and other legal proceedings and to do all things
necessary to achieve its objectives.
There are also special laws on
churches and religious bodies, trade unions and professional associations.
4. Other organisations:
a) Religious Bodies
Religious Bodies have the choice
to be either registered as a Charitable Association or as a Religious Body
under the Religious Bodies Registration Act No. 9 of
1995. A religious body attains legal status upon registration and therefore has
the capacity to enter into contract, to institute and defend proceedings.
b) Unions
Trade Unions in
c) Foreign Organisations
Although the laws of
d) Establishments
These are the educational
institutions, sports faculties, health care establishment which are private
establishments whose founders are private groups such as schools formed by
Church organisations. All of which are public persons upon registration
pursuant to their relevant legislation. For example non government educational
institutions are registered under the Education Act 2001 and thereafter become
legal entities.
e) Membership Organisations
The membership organisation of
professional bodies such as medical practitioners and legal practitioners exist
solely for the benefit of their members. They are statutory bodies whose
activities are governed and regulated by the enacting statutes.
The laws of
D.
Purposes
The underlying rule for
any NGO’s purpose is that it is not for financial profit. Its general purpose may
fall under one of the following purposes which include objects
of a religious, educational, cultural, scientific or sporting nature or for
general social welfare and any other object - the main purpose of which is not
for financial profit.
E. Registration or Incorporation
Requirements
Registration
is not mandatory for all NGOs, activities are allowed before the registration
is complete. NGOs acquire the status of legal entity on the date of
registration.
Charitable Associations
Pursuant
to the Charitable Associations (Incorporation) Act [Cap 140], (“the Charitable
Act”) an organisation shall become a body corporate upon registration with the
Registrar of the Vanuatu Financial Services Commission.[5]
The
minimum number required to register a charitable association is at least six
committee members.[6]
The application for registration must be made by not less than half of the
committee members of the organisation.[7]
An
application must be in the prescribed form as stipulated under Schedule 1 of
the Charitable Act which requires information on the name of the association,
the registered office, the names and addresses of members, the objects of the
association as well as a statement of assets and liabilities of the association
although there is no certain amount of base capital required to form an NGO.[8]
This
application must be lodged with the Registrar of Companies whom the Minister of
Finance has to be the Registrar of Charitable Association. The application
documents must be accompanied by a copy of the Articles of Association as well
as other documents setting up the association such as a constitution.
An
obvious reason for rejection of an application for registration has been and
would be the failure to comply with the registration requirements under the
Charitable Act. Once any non-compliance is rectified then the application is
again lodged with the Registrar accompanied by a total fee of VT10, 000.[9]
An appeal from the refusal of grant of
incorporation by the Registrar lies to the Minister of Finance. The decision of
the Minister in considering the appeal is final, whether it is a refusal of the
appeal or an Order for the Registrar to grant a Certificate of Incorporation.
The Minster may impose conditions where she/he deems fit if she/he decides to grant
the Certificate of Incorporation.
Company Limited by Guarantee [10]
Pursuant to the Vanuatu Companies
Act, the requisite number of founding members for a company limited by
guarantee is at least seven.[11]
A company limited by guarantee is not to create issue or be registered with any
shares[12].
Founding members can either be ni-Vanuatu or foreigners and there no provisions
in the Companies Act against non-natural legal persons being founding members.
An application for a permit for incorporation must be lodged with the Minister
of Finance who has the power to grant or refuse a permit without giving any
reason for his decision.[13]
The most obvious reason for a rejection of a permit application would be
failure to comply with the statutory requirements regarding registration.
However, if the Minister rejects any permit, the decision is not subjected to
be questioned in any court proceedings whatsoever. [14]
The general procedure for
registration of a company limited by guarantee is as follows: An application
for a permit for incorporation is lodged with the Minister of Finance using the
prescribed form in the Act; Preparation and execution of the memorandum and
article association in accordance to the requirements of the Act; Lodgement of
an endorsed permit from the Minister of Finance together with the memorandum
and articles of association with the Registrar of Companies.[15]
There is then the registration and issuing of the Certificate of Registration
by the Registrar of Companies. Upon the granting of the certificate of
registration, a Guarantee Company achieves the status of legal entity and is
able to enter in to contracts under its own name as well as sue and sued just
like any other legal entity.[16]
The documents lodged with the Registrar are available for viewing by the public
for the payment of a prescribed fee.
The
Companies Act in section 29 makes special provisions for companies limited by
guarantee that are “formed for promoting
commerce, art, science, religion, charity or any other useful object, and
intends to apply its profits, if any, or other income in promoting its objects,
and to prohibit the payment of any dividend to its members”[17]
These guarantee companies are granted with a licence to exempt them from adding
the word “limited” to its name.
This licence can be repealed by the Minister of Finance after granting an
opportunity to the company to oppose any decision to revoke this particular
exemption licence.
Trade Unions
The
minimum number of membership of a Trade Union before they can be registered in
pursuant to the Trade Union Act is twenty. The application is done by the
committee of management and the application must be signed by at least 7
members. The general registration procedures are as follows: An application is lodged with the Registrar
who will determine whether or not the forms and rules of the trade union comply
with the provisions of the Trade Union Act and also that the name is not
identical to any registered Trade Union. Upon satisfaction of the statutory
requirements, the Registrar can register the Trade Union. A refusal by the
Registrar to register a trade union can be appealed to the Supreme Court of
Vanuatu within 1 month of the date of the refusal. In hearing such an appeal
the Supreme Court has all the powers as it has in hearing a civil suit.[18]
The fee for registration is VT5, 000.[19]
NGO umbrella organisations are
permitted. There are no special provisions for umbrella organisations under
law. They are to be registered just like other NGO organisations. There are a
few umbrella organisations in
F. NGO Register
There
is a no designated NGO register which registers all NGOs in
The
only register that records incorporated NGO’s that do not belong to any
specific legal framework is the Vanuatu Financial Services Commission (“VFSC”)
register. This is a registry for all NGOs that are registered as Charitable
Associations under the Charitable Association Act. The Associations under this
Act must be for charitable purposes.
The
VFSC register displays only the names of the associations as entered into the
registry. Information on this register as well as all of the association’s
documents are available for viewing by any member of the public upon the
payment of the prescribed inspection fee of VT500.[20]
The
statutory rules for Charitable Associations’ operations under the Charitable
Act seldom being enforced, thus there is rarely any a disciplinary action taken
against a charitable association. Defunct associations are purged from the
register once the Registrar is informed by letter by the Charitable Association
that it has ceased to exist. There is no formal list kept by VFSC of the
defunct companies, although the computer program for registration can generate
a list of the Charitable Associations that have been purged from the records of
currently existing Charitable Associations.
G. General Powers
Incorporated
organisations are entitled to exercise the general rights and powers of
juridical entities such as the right to sue and the right to be sued, owning
properties and entering into contracts. The only limit for an incorporated
organisation would be operating within the ambit of their organisations’
objectives.
Unincorporated
NGOs have those powers that are provided in its governing instrument but only
in their members individually. Proceedings can be brought by any member of the
organisation in both incorporated and unincorporated organisations.
In
the case of unincorporated organisations, it has been demonstrated in the case
of Vohor v Adeng [1996] VUSC 14;
Civil Case No 075 of 1996 (
This is not
the first time that the Vanuatu Courts have dealt with disputes between
individual members of unincorporated associations, such as Political Partie. Certainly the cases
of Mataskelekele -v- Abbil (1991): Kalpokas -v- Lini Civil Case
127 of 1991; Korman & Jimmy -v- Mensul Civil Case No 106 of 1995
indicate that Courts in Vanuatu are willing to assist in resolving disputes
with such organisations in which members have deliberately adopted formal rules
to govern their relations.
It is apparent
that beneficiaries of NGO’s have the right to go to Court to seek action
against an NGO. Following the Court’s approach in the above cases, one can
expect that the Court would only be more vigilant in cases of registered NGOs
whose governing instruments are registered pursuant to law.
H. Membership Organisations
Membership
organisations like professional bodies of lawyers and the health practitioners
are established by enacting legislation, respectively, the Legal Practitioners
Act [Cap 119] (“the Legal Practitioner’s Act”) and the Health Practitioner’s
Act [Cap 164] (“the Health {Practitioner’s Act”). The legislation regulates the
standards of practice of its members.
Each
of these professional bodies has its own disciplinary body responsible for the
discipline, exclusion or removal of any member of their profession. The
Disciplinary Body of the Legal Practitioners has the same power as the Supreme
Court. The disciplinary proceedings of the Disciplinary Body for legal
practitioners are set out in much detail in the subsidiary legislation – Legal
Practitioner’s Regulation [Cap 119]. An appeal from the decision of either the
Legal Practitioner’s Disciplinary Body or the Health Practitioner’s
Disciplinary Body lies to the Supreme Court of Vanuatu.
III. GOVERNANCE
Unincorporated
NGOs will naturally be governed by the rules found in their individual
governing instruments. The governing instrument specifies how members are
elected/ appointed, rules of voting, duties and responsibilities. The members remain
responsible for all debts and liabilities of the organisation.
NGOs
that are registered as incorporated bodies are governed by the rules set out in
their constitution regarding the issue of governance. These rules can be
enforced at the suit of a member of the incorporated body. The governing body
is the Committee (or Board depending on the name specified in the governing
instrument) whom the assets of the organisation is vested and has the power to
enter into contracts. Like unincorporated organisations the rules on voting
powers, duties, and responsibilities of the Committee are stipulated in the
governing instrument, the constitution.
In
respect of companies limited by guarantee, both the provisions of the Companies
Act as well as the articles of association govern the operation of the NGO. It
has a separate legal identity from its members. The Companies Act sets out in
much detail the responsibilities and duties of the directors as well as the
quorum and voting powers and the extent of the directors’ personal liability. A
director’s liabilities are outlined in the Companies Act [Cap 191]. A director
is also liable at common law for breach of fiduciary duties as well as breach
of due skill and care.
It
is the duty of the director of a Company to disclose, at a director’s meeting,
any interest he has on any Company contracts, intended contracts or contracts
which the director later become interested. Failure to declare such interest
results in the director being fined for not more than VT50, 000.
The
director (and anyone in the Company) may also be liable for fraudulent dealings
such as actions with the intention to defraud creditors of the company. The
company or any person in the company is also personally liable for reckless
dealings such as making false or inaccurate information regarding the company’s
shares and debentures. Such a person is fined for no more than VT100, 000 or a
term of imprisonment for no more than 6 months.
IV. DISSOLUTION, WINDING UP AND
LIQUIDATION OF ASSETS
The
Act under which an NGO subscribes to determines how its dissolution may be
conducted, unless the NGO in unincorporated.
Unincorporated organisations
Unincorporated
organisations are governed by the governing instruments whether it be the
constitution or memorandum of agreement entered into by the members of the
organisation. If the dissolution is not dealt with in the governing instrument
then usually the members may meet and orally agree to dissolve their
association.
The
Courts of Vanuatu is case laws such as Vohor
v Adeng [1996] VUSC 14; Civil Case No 075 of 1996 (27th August, 1996) and Kalpokas v Vohor [1998] VUSC 55;
Civil Case No 122 of 1997 (14th September, 1998), have demonstrated the
willingness of the Courts to intervene and enforce principles of equity in the
affairs of the unincorporated associations where it is warranted. In this case,
it is anticipated that an involuntary dissolution may be implemented by members
lodging petitions of the majority to dissolve the unincorporated society.
Charitable Associations
The
non-profit organisations that are registered under the Charitable Associations
Act are dissolved by the cancellation of the certificate of incorporations by
the Registrar. The grounds upon which such cancellations can take place are
stipulated in section 10 (1) of the Charitable Act as follows:
(a)
an incorporation was obtained by fraud, misrepresentation
or mistake;
(b)
any unlawful objects of an association or committee;
(c)
a committee discriminates against any persons, group of
persons or class of persons;
(d)
an association or committee is being used for an unlawful
purpose;
(e)
a committee or association is not functioning or has
become dissolved;
(f)
failed to comply with the provisions of the Charitable
Associations (Incorporations) Act. [21]
Procedure for cancellation
The
Registrar may require members of the Committee by notice in writing to show
cause within 30 days as to why its incorporation should not be cancelled.[22]
If the Committee fails to respond satisfactorily then the Registrar may cancel
the incorporation by notice published in the newspapers. A cancellation will
then take effect 42 days from the date of publication of the cancellation
notice.[23] The Certificate of Registration must be
returned to the Registrar. Failure to do so will result in imprisonment or a
fine up to VT20, 000.[24]
Appeals
against any cancellation can be made to the Supreme Court within 42 days of the
cancellation. The Court may confirm, set aside or vary the order of
cancellation or make such order as it may consider just.[25]
Upon
dissolution of an NGO under the Charitable Act, the assets which are not
disposed of adequately in the governing instrument of the Association will be
subjected to the discretion of the Minster of Finance who will make such order as
he shall consider proper.[26]
Company Limited by Guarantee
The
statutory provisions for winding up of unlimited companies also apply to
guarantee companies. A company may be wound up voluntarily or by the court by
the application of the members as contributories, the company Creditors; the
official receivers or by the company itself. The property of a company that is
winded up by the court is vested in the Liquidator upon a Court order. The
Creditors’ interests in the company in a case of insolvency are well
represented from the time of any Creditor lodging a petition to wind up a
company, to making a decision whether or not to appoint a committee of
inspections during the process of winding up, to the Creditor’s proving of
their debts, to the inspection by Creditor’s of a Company’s books in the
possession of the Liquidator. The decisions of the Supreme Court of Vanuatu to
wind up a company involuntarily can be challenged in both the Supreme Court and
the Court of Appeal of
Other bodies
a.
Religious Bodies
They
may be dissolved by cancellation of their registration on the ground of:
i)
Registration obtained by fraud;
ii)
Any of the objects of a religious body have become unlawful
iii)
A religious body is being used for an unlawful purpose; and
iv)
Failure to comply with the provisions of the Religious Bodies Act.
The
religious body is given 30 days to satisfy the Registrar that the licence
should not be cancelled. If the Registrar is not satisfied then the licence may
be cancelled. Within 30 days of cancellation the religious body must return to
the Registrar the certificate of registration. Failure to do so attracts a fine
of VT 20, 000 upon conviction.
b.
Other Membership Organisations
Other
organisations which exist for the benefit of its members such as trade unions
and professional bodies are dissolved according to the provisions stated in
their relevant enacting Act.
V. REGULATION
As
has previously indicated, there is no centralised regulatory system. It is only
when an NGO subscribes to a particular structure then it will be obliged to
comply with the regulatory requirements specific to that type.
(i)
Registrar of Charitable Associations and of Companies
In
the case of registered incorporated organisations, the Registrar must be
satisfied that the Associations meet all the requirements in the Charitable Act
[Cap 140]. The Associations are required
to register the changes to the associations registered office, the
resignations, removals and appointment of committee members; changes to the
articles, rules or constitution of the association. These are public documents
which can be viewed for the payment of a prescribed fee. Failure to comply may
ultimately result in the cancellation and return of the Certificate of
Registration by and to the Registrar of Associations. Failure to return the
certificate attracts a fine of VT 20,000. There has been no incident of an
involuntary cancellation of an organisation’s certificate by the Registrar of
Charitable Associations.
For
Companies Limited by Guarantee, the Registrar ensures that the Guarantee
Company complies with the requirements under the Companies Act [Cap 191].
Following registration a company must submit annual return at least once a year
within 42 days (or more upon the Registrar’s approval) of the annual general
meeting for the year. The return shows information of address of the registered
office of the company; in a case in which the register of members are kept elsewhere than at
that office, the address of the place where it is kept; in a case in which any
register of holders of debentures of the company or any duplicate of any such
register or part of any such register is, under the provisions of this Act,
kept elsewhere than at the registered office of the company, the address of the
place where it is kept; details of the directors and secretary of the company.
Failure to file the annual returns within the stipulated time period subjects
the company and every person responsible for a default fine not exceeding VT
1,000.
The Director of Inland Revenue and Customs
The
Director of Inland Revenue and Customs has some general regulatory function
such as assessing whether or not tax relief is granted to Not-for-Profit
organisations as well as assessing the activities of the Not-For-Profit
organisations. Where there are NGOs who are involved in taxable activities that
are more than 4 million vatu, the only report is a VAT Return form which is
filed monthly. Failure to submit the VAT Return form results in an additional
imposition of 10% and a 2% added for each month during which the failure
continues. The VAT Return form of any organisation is not publicly available
information.
Enforcement Agencies -The Courts and the Police
The
Courts have demonstrated (see Compliance section above) their willingness to
get involved in the affairs of the NGO to ensure that members adhere to the
governing instruments to which they have bound themselves to. The Police
interfere only when members/organisation commit public order offences or
allegation or commission of criminal activities such as theft, fraud and
misappropriation.
VI. FOREIGN ORGANISATIONS
A. Registration
There
are many foreign organisations carrying out activities in
Where
there is a bilateral or multilateral agreement which exists between the
organisation’s home government or its head organisation, like New Zealand High
Commission or UNESCAP, with the Government of Vanuatu, an NGO can operate
immediately under this Bilateral/Multilateral Agreement, until they receive
their own MOU with the Vanuatu Government. The mandate, activities and
entitlements such as tax exemptions of these foreign organisations are set out
in the MOU.
There
are no special rules for the registration, regulation or dissolution.
Any
foreign organisation which does not come under an existing
bilateral/multilateral agreement may choose to either register under the
Charitable Act or the law which their organisation’s activity fall under.
B. Foreign Grants
Foreign
grants that are received by NGOs from a source outside Vanuatu are not
subjected to any special rules by the Government of Vanuatu.
To
apply for foreign grants is a long process full of bureaucratic discretion as
well as it is time consuming. The government procedures and policies imposed on
grants from foreign organisation depend on the amount sought by an NGO. The
maximum amount applied for dictates whether or not the Ministries are involved
and the maximum amount varies amongst donor agencies.
If
the amount sought is at the minimum level then the NGO directly deals with the
bilateral/multilateral donor agency from the initial application to the receipt
of the funds if successful. Once it exceeds a certain amount, then it must go
through the Government of Vanuatu. This procedure is set out below.
The
NGO must obtain the endorsement of the relevant Ministry whose objectives are
analogous to the activity of the NGO. For example, the Vanuatu National Council
of Women (an umbrella organisation for women organisations) needs the
endorsement of the Ministry of Women Affairs. For an NGO’ whose activities do
not fall under any specific Ministry, like the Vanuatu Non Government
Organisation (VANGO) which has general activities as an umbrella organisation,
the endorsement of the Chief Executive Officer of the Ministry of Internal
Affairs is required. The ministry of Internal Affairs is has the NGO portfolio.
Following
the endorsement of the relevant Ministry, the applications are submitted to the
Department of Economic and Sector Planning (DESP) which is part of the Ministry
of Finance. The DESP checks that the purpose for which the grant is sought is
in line with the national objectives for development for the year. For
unusually large amounts, a Committee comprising of the Cabinet Ministers decide
on the issue of compliance with national objective further. If the application
is approved then it is passed on to the Ministry of Foreign Affairs which is
the channel of communication with bilateral/multilateral donor agencies. Once a
donor is found, the funds are released from the donor to the Finance Sector of
the Ministry of Finance, which will in turn release the funds to the NGO.
Most
NGOS desire that this process be removed and that NGOs have direct access to
donor organisations avoiding the bureaucracy which can be time consuming.
VII. MISCELLANEOUS
a. Mergers and Split Ups
There
are no special laws governing mergers and split ups of NGOs in Vanuatu. Again
each NGO conducts merges and split ups according to the legal provisions of the
Act that is subscribes to.
The
Charitable Act requires that changes to the registered office; registration,
removals and appointments of committee members and the changes in the articles,
rules or constitution or association shall be lodged with the Registrar within
30 days from the date such changes took place. Similarly, changes resulting
from mergers and split ups such as changes to the governing body and the rules
must be registered with the Registrar of the Charitable Associations.
As
for Company Limited by Guarantee, the provisions of the Companies Act regulate
mergers and split ups. Likewise for any other organisation registered pursuant
to a particular Act, the provisions of the Act regulate mergers and split ups.
Of course with unincorporated bodies, it is the governing instrument which
dictates the mergers and split ups.
b. Dealings in Property
There
are no special rules for dealings in property by NGOs in Vanuatu. The general
law dealing with property (the Property Law Act) shall be followed in this
regard.
However
in relation to the vesting of assets and liabilities of the NGOs registered
under the Charitable Act, the Committee which is formed upon the registration
of the association is vested with all assets and liabilities belonging to the
association. Section 8 (1) & (2) of the Charitable Act provides that the
assets and liabilities held for the benefit of the Association named in the
certificate including any interest in land referred to in its application shall
vest in its Committee. The Committee is to register any interest in land by
lodging a copy of the certified application accompanied by a Certificate of
Incorporation with the Director of Lands.
c. Investment Abroad
As
there are no laws regulating the activities of an NGO organisation, there are
no restrictions preventing NGOs registered in Vanuatu from making investments
abroad.
d. May NGO’s engage in political or legislative activities?
There
is nothing to stop NGOs from engaging in legislative or public policy advocacy
or even in endorsing candidates for public office. In practice however, there
has not been any political activities by NGOs which directly lobby with respect
to the elections of a particular candidate or a party.
The
recent Memorandum of Understanding signed on 24 August 2004, between the
Government of Vanuatu and the Vanuatu NGOs is the first official step towards
the Vanuatu Government and NGOS making decisions acknowledging and involving the
participation of the NGOs in the development of Vanuatu.
VIII. TAX LAWS
Vanuatu
has no taxes on income, capital gains, inheritance or other forms of direct
taxation. Hence the only form of tax that is available in Vanuatu is indirect taxes
on consumption, such as the VAT, import and custom duties. These are the taxes
that therefore affect the NGOs in Vanuatu.
A. Value Added Tax (VAT)
There is no tax exemption for donors who contribute towards not
for profit organisations. Any donations of money, such as gifts of money, are
not subject to VAT [1], unless it is a grant of money. A donation is clearly
distinguished from a grant in that it carries no conditions and is not given in
return for good and services or rights for example, rights to membership of an
organisation. Donations include bequests and donated cash prizes.[27]
VAT
is also not imposed on goods which are listed in the Import Duties
(Consolidation) Act [CAP. 91], to be exempted from import duties. The list of
goods includes goods relating to charities. “Charity” however is not defined
under the VAT Act nor is it defined in the Import Duties (Consolidation) Act
[Cap 91]. (See below).
Zero Rating
The
Third Schedule of the Act also provides that the Director of Customs makes the
decision on zero rated supplies of goods and services.[28]
Zero rated means that VAT is charged at a rate of 0% on a sale.
The
most common category of goods which are zero rated are exports of goods, which is
an activity that Not-for- Profit organisations are rarely involved. However,
some NGOs may have overseas members for whom they will be providing goods and
services to such as news letters, clothes to such as missionaries etc. The
supply is zero rated, VAT is not charged. The member must not be resident in
Vanuatu at the time the services are performed.[29]
Imported Products and Customs Excises
The Imported Duties (Consolidation) Act [Cap 91] (the “Imported
Duties Act”) lists the goods that are exempted from Import Duties. These goods
are categorised under the heading “Charitable
Reliefs for Non-Profit Making Groups and Organisations”[30] and they are as follows:
charities, churches, privately funded schools (not wholly or mainly funded by
the government) as well as community groups.[31] Although there is no specific
definition in the Imported Duties Act of what “charitable” or “non-profit
organisation” mean, the underlying requirement in each of the listed
organisations suggest that an organisation for charitable relief or non-profit
organisation is one that is set up for the purpose of relief of poverty,
advancement of education or religion or any other matter beneficial to the
community.
The authority for determining exemption under the Imported Duties
Act is the Director of Inland Revenue and Taxation. The Minister responsible
for Social Development can also write a letter to the Director of Inland
Revenue and Taxation requesting that relief for a community group.
International
NGOs are also exempted from VAT and Import Duties if this is provided for in
the MOU signed between the Government and that particular organisation.
B. Donor/Donations
There is no tax exemption for donors who contribute towards not
for profit organisations. However donations are subjected to taxation such as
VAT. Donations of money are not subject to VAT[32] i.e. Gifts of money are
now subject to VAT. A donation is clearly distinguished from a grant in that it
carries no conditions and is not given in return for good and services or rights
for example, rights to membership of an organisation. Donations include
bequests and donated cash prizes.
Donated Goods and services
The supply of donated goods and services to a Not-for- Profit
organisation is exempted from VAT.[33] Donated goods and services
is defined under the Act as goods and services that are gifted
to a non-profit body and are intended for use in carrying on or carrying out of
the purposes of that non-profit body. VAT is also not charged on goods
imported for charities, although there is no definition of what charity or
charitable purposes is in the VAT Act.
The
sale of donated goods and services by a non-profit body is exempt from VAT. For
example book sale or cake stall are exempt from VAT if the goods sold are donated.
Similarly funds are not taxable if they are raised for example by a club
through washing cars or mowing lawns, where those services are performed by
volunteers.
A
grant made to an organisation by the government will generally be regarded as
payment for services performed by that organisation for its members, the
community or a particular interest group. Government grants will therefore also
be subject to VAT and registered recipients of grants will have to account to
1/9th of their value the VAT office.
C. Commercial/Business/Economic Activities
NGOs
can engage in commercial activities so long as these activities do not become
the main activities. An organisation may engage in profit making activities if
such activities are connected with and for the furtherance of the objectives of
the association.
The
most common commercial activities carried out by NGOs in Vanuatu are as
follows:
Rental Property
VAT
is not paid on rental properties used for residential accommodation. Rent tax
is also not paid where the amount received from such rental does not exceed the
amount of VT300, 000 per annum.
Market Stalls
Sales
in retail outlets of donated goods such as second hand clothing and household
items are exempt from VAT if the shops are run by non-profit bodies.
Fees charged by churches
Any
set fee charged for membership of a church for provisions of particular
services such as weddings, funerals, baptisms, access to reading rooms etc will
be subject to VAT if the church is registered.
Overall
in regards to taxes, an economic activity may not be the main activity of the
NGO but if it becomes predominant then the NGO must pay the required taxes or
is ordered to cease such activities or must become a business.
Reporting
The
only tax reporting required is the VAT Returns forms which are lodged at the
end of every taxable month with the VAT office of the Inland Revenue
Department. Cash contributions are not subjected to VAT or any form of
taxation; however contributions from the Government of Vanuatu to an NGO, 1/9th
must be accounted for with the VAT office.
It
is apparent that the determination of the tax exemption status of an NGO is not
dependent on the legal structure the organisation adopts; rather it is the
purposes of the organisation and the types of activities it pursues.
IX. COMPLIANCE
Generally,
the statutory rules applicable to NGOs are understood by most groups as they
are quite simple to follow in regards to the registration of NGOs. The
Registrar is able to discipline an association due to failure to comply with
their obligations under the relevant Act. The non-compliance that commonly
occurs and is rectified is the filing of returns within the specified time
limit. However, to date there is no known disciplinary action taken against any
NGO organisations by the Registrar. There have been no studies undertaken on
NGO compliance with the law.
Given
that there are no special tax exemptions on any donor’s contribution to an NGO as
well as tax exemption for NGO for membership benefit NGOs, there is no
perception that NGOs are used for tax avoidance. There is no evidence to
indicate that Politicians are involved in NGO for direct financial gains. What
is common however, are politicians funding the unincorporated NGOs activity
with the expectation that the members of the NGO will support the politician as
a candidate during election.
The Courts in
Vanuatu have held that where an organisation fails to comply with its own rules
or its constitution or has failed to observe the rules of natural justice then
a member can bring a court action against the association. Kalkot Mataskelekele -v-Iolu Abbil and Donald Kalpokas Civil Case 99
of 1991 and the corresponding Appeal as Civil Appeal Case No. 7 of 1991.
A
potential form of regulatory intervention with NGO activities are the tax
authorities who carry out random auditing of the NGOs registered for VAT and
even those that are not registered. Tax authorities randomly evaluate the
activities of NGOs for VAT purposes by random checks is to ascertain whether
the NGO’s activities correspond to the purposes or objectives of the
organisation as stipulated in their governing instruments. The NGOs however
rarely get audited by the VAT officers.
The
other form of regulatory intervention that generally all NGOs are likely to
encounter is the police investigating pursuant to a complaint to the police by
a person from the NGO organisation complaining of alleged criminal activity
(ies).
X. GOVERNMENT
FUNDING AND PROCUREMENT
There
are no laws to regulate the applications or entitlements of NGOs for government
funds, all types of NGOs whether for public or membership benefit may request
for government funding. There are government policies however, in place which
regulate the distribution of government funds and funds which come available
under bilateral or multilateral agreements between the Vanuatu Government and
other countries or organisations (see Overseas Organisation above)
There
are no government funds within the Government’s annual budget which are set
aside specifically for incorporated NGOs. What is provided for under
government’s budget is the Rural Economic Development Initiative Funds otherwise
known as the REDI funds which is open to all types of NGOs incorporated and
unincorporated, local and overseas NGOs. The REDI Funds is divided equally
amongst the 6 provinces in Vanuatu (Sanma, Malampa, Penama, Shefa, Tafea and
Tolba) with the current REDI fund amount being 2 million vatu per province
annually.
The
general procedure for application for funds is for an NGO to a lodge a
completed REDI Funds application form with the Department of Provincial
Affairs’ REDI Unit. The REDI Unit makes the decision on whether or not to grant
an application. The Department of Provincial Affairs is under the Ministry of
Internal Affairs. The REDI Unit works closely with the DESP of the Ministry of
Finance to ensure that NGOs do not receive double portions for any one project.
XI. PRIVATISATION
There
are no laws that say that NGOs cannot get shares in Government enterprises.
XII. CONCLUSION
What
is needed is a harmonisation of the different aspects of the laws that affect
NGOs into an independent piece of legislation specifically addressing the
setting up, management and entitlements of NGOs in Vanuatu. This legislation is needed to strengthen their structure and to have clear
machinery for the operation of NGOs.
Currently
there is no clear protection for NGOs operations and much is leave to chance –
the wide discretionary power of authorities (with capacity for arbitrariness)
and also the relaxed manner in enforcing statutory requirements on NGOs
obligation to file returns.
The
current laws affecting NGOs are fragmented in the sense that each piece of
legislation has its own criteria of what an NGO is. Having these separate
determinations with no reference to other relevant NGO legislation, means that
there is room for inconsistencies as well as inefficiency in the administration
of the NGOs.
The
NGO’s heavily rely on the donation or funds from donors for their operation.
Thus there is a need to make allowance for NGO’s to operate economic activities
to assist in financing its operations and even to the extent of
self-sufficiency. The separation of public benefit NGOs from membership NGOs
can be a differentiating point for NGOs who operate economic activities to
survive and those that carry out economic activities for profit making.
Currently, economic activities other than further of NGO activities, of public
benefit NGOs are subjected to taxation, which impedes the potential for raising
money for survival by NGOs. As stated earlier the tax benefits of NGOs are
awarded according to the function of the organisation rather than their status
as either public or membership benefit NGO. The independent piece of
legislation should ensure that public benefit NGOs should be fully exonerated
from any tax for the survival.
There
is a strong desire from NGOs to be freed of the bureaucracy in accessing funds
from bilateral and multilateral donors. To ensure the autonomy of NGOs and
their efficiencies, a removal of the governmental procedures would benefit the
NGOs. At the same time, legislation should put into place mechanisms to impose
statutory obligations on NGOs to account and audit any funds injected to any
NGO as well as ensure accountability and transparency in the NGO activities.
Where
there are obligations there should also be effective enforcement. Part of the
reasons for non-compliance by NGOs in keeping to their statutory obligations is
the lack of enforceability by the necessary authority. As such it is vital that
the legislation should establish a body responsible for determining the status
of NGOs, the enforcement of NGO’s statutory obligations and rights under law.
The legislation and any machinery it sets up for NGOs in Vanuatu, will have to give due consideration to the limited resources of NGOs from the drafting of the legislation to financing the implementation of the legislation. Any legislation that affects the interests of NGOs would have to be initiated and driven by the NGOs, if this is to become a reality. A further crucial consideration is the nature of the relationship between the NGOs and the Government of Vanuatu, which can determine the time for the legislation to come into force.