sklingel@icnl.org
davidjrobinson@xtra.co.nz
(202)
452-8600 (64)
4 4759275
LAW AND CIVIL SOCIETY IN THE SOUTH PACIFIC
Non-Government Organisations in Solomon Islands
CONTENTS
INTRODUCTION
1.
LEGAL FRAMEWORK FOR THE CREATION
AND OPERATION OF NGOs
A.
Registration
(Incorporation), Organisation and Operation of NGOs
i.
Registration
ii.
Registration
Authorities
iii.
Registry
B.
Cancellation,
Dissolution and Liquidation
i.
Cancellation
ii.
Appeals
iii.
Liquidation
C.
Purposes
and Activities of NGOs
i.
Legislative
Approach towards Objects of Organisations
ii.
Determination
of Status
iii.
Media
Access
2.
GOVERNANCE
i.
Governing
Bodies
ii.
Powers
and Duties of Organisations and Governing Bodies
iii.
Supervisions
and Audit of Accounts
iv.
Conflicts
of Interest
v.
Distribution
of Profits and other Private Benefits
vi.
Umbrella
Organisations
3.
FINANCE AND ECONOMIC ACTIVITIES
A.
Fundraising
Activities
B.
Tax
Exemptions and Deductions
4.
CONCLUSION
Non-Government
Organisations in
REPORT
prepared by
David Lidimani
INTRODUCTION
Upon independence from
The history of Non-Government Organisations (NGOs)[3] in the
country predates its independence, with clear recognition from both the
colonial and post-colonial administrations as demonstrated in their initiatives
in creating environments more conducive to further expansion and development of
the NGO sector through legislation.
In contemporary
NGOs in
Legal developments pertaining to NGOs have been long overdue and
relatively stagnant if drawn against the backdrop of changing social and
economic circumstances, and the rather complicated modus operandi of newly emerging NGOs. The two most important pieces of legislation,
viz. the Cooperative Societies Act
and the Charitable Trust Act, were
adopted way back in 1953 and 1964 respectively, but none has undergone any major
overhauls since. Any major reviews to be
undertaken in the future will need to commence with these two statutes.
The laws regulating NGOs in the country are both general, and
organisation specific. In terms of general statutes addressing formation,
incorporation and regulation of such bodies, the following are of significance:
Charitable Trust Act[5],
Cooperative Societies Act[6],
and Credit Unions Act[7]. Special legislation focusing on specific
organisations include the Church of
Melanesia Trust Board (Incorporated) Act[8],
Church of the Province of Melanesia (Solomon Islands) Property Act[9],
Solomon Islands National Sports Council Act[10],
Solomon Islands Red Cross Society Act[11],
and the Winston Churchill Memorial
Trust Act[12]. Focusing on the financial aspects of the
operation of NGOs, the following statutes are applicable: Customs
& Excise Act,[13]
Goods Tax Act,[14]
Income Tax Act,[15]
Sales Tax,[16]
and Stamp Duties Act.[17]
Whilst the majority of NGOs are local or national organisations, there
is also a recorded number of international NGOs operating in the country. It is worth noting that the post-conflict
period witnessed an increase in international NGOs operating in the country
either through partnership arrangements or established local offices. This is a situation which is facilitated
arguably by a less rigorous establishment environment.
The focus of NGOs in
1.
Legal
Framework for the Creation and Operation of
NGOs
The supreme law of
Whilst
the Constitution provides protection of the fundamental freedoms, the rules for
the formation and organisation of NGOs are laid out in detail in various
statutes. These will be outlined below.
A. Registration (Incorporation), Organisation and Operation
of NGOs
(i) Registration
Registration
procedures and processes are governed by various statutes, thus, not
centralised under a single statute as may have been the case in some countries.
Provided the requirements are complied with, the process generally is easy,
inexpensive, and not rigorous. Specific statutes under which registration of an
NGO can be done are as follows:
a. Charitable Trusts
The
procedures and processes of the Charitable
Trusts Act purport to govern the incorporation of trust associations
established for religious, educational, literary, scientific, social or
charitable purposes. To begin the process, an application needs to be made to
the Registrar of Companies[19]
for a certificate of registration. [20] Having satisfied with the nature, extent,
objects and circumstances of the applicant association, the Registrar may then
issue such certificate.
It is also a requirement that the
application for incorporation must be made in writing to the registrar and
signed by the persons in accordance with the First Schedule. Where it is deemed
necessary, the registrar may require the furnishing of additional information
for purposes of verification of the statements and particulars as provided in
the said application. [21]
b. Cooperative
Societies
The Cooperative
Societies Act requires that for a society to be eligible for registration,
it must have as its object the promotion of the economic interests of its
members in accordance with cooperative principles.[22] Unlike the Charitable Trusts Act,
there is appointed under the Cooperative Societies Act a Registrar of
Cooperative Societies who is the issuing authority for the certificate of
registration.[23]
Registration
is done simply by applying in the prescribed form to the Registrar pursuant to
Section 6 of the Act. Information to be
provided include the proposed name of the society, particulars of the meeting
at which it was resolved to have the society registered, list of members and
capital subscribed by each, name and address of the committee and officers of
the society, and address of the society.
Further, such application must be accompanied by three (3) copies of the
proposed bylaws of the society, and such other information as may be required
by the Registrar. The process is
considered complete with the issuance of the certificate of registration upon
payment of the prescribed fee[24],
by the Registrar.
c. Credit Unions
Although the Credit Unions Act [25]is
not clear on whether registration or incorporation only follows application, it
can be inferred from section 5 that the filing of a Memorandum of Association
(MOA) marks the beginning of the registration process. Filed together with such MOA will be an
affidavit verifying the signatures to such Memorandum of Association, a copy of
the supplementary bylaws, a copy of a report of the preliminary meeting of
members preceding such filing, and a prescribed fee.[26] Matters that need to be stated in the
Memorandum of Association to be filed include: name of the credit union; group
of person(s) to whom membership is limited; address of credit union office in
(ii) Registration[29]
Authority
The responsibility
for registering non-membership NGOs falls generally on the Registrar of
Companies – an authority set up under the Companies
Act.[30]
For membership organisations, registration is covered under either of the
statutes addressed in (i) above. Thus,
registration of membership organisations will be as follows:
a.
cooperative societies to be registered by the
Registrar of Societies;[31]
b.
credit unions to be registered by the Registrar of
Credit Unions;[32]and,
c.
charitable trusts to be registered by the Registrar of
Companies.[33]
Categories (a) and (c) are currently being performed
by a single Public Service officer designated as the Registrar-General. Category
(b) however is performed by the head of the Financial Institutions Department
within the Central Bank of
(iii) Registry
As
earlier highlighted, there is no centralised registry for NGOs, as separate
statutes create their own registries.
However, from an operational perspective, there is some element of
centralisation as all such records can be searched or inspected at the Office
of the Registrar-General, which is a public office. In terms of statutory registries, these do
exist under the Cooperative Societies Act[34],
and the Credit Unions Act,[35]
whilst the Charitable Trusts Act[36]
utilises the existing registry under the Companies
Act. Public accessibility to such
registers and records is guaranteed in all cases. With the exception of the Register of
Cooperative Societies, public access to those of credit unions and charitable
trusts would require the payment of nominal fees.
B.
Cancellation, Dissolution and Liquidation
(i) Cancellation
Specific
provisions, with implications for both membership and non-membership
organisations, provide for the cancellation of NGOs from their respective
registers. In general, such cancellation can be done voluntarily or
involuntarily. Of particular interest will be involuntary cancellations and
dissolutions, all of which have been addressed in the statutes to be examined.
a. Charitable
Trusts
Section
12 of the Charitable Trusts Act provides
for the cancellation of any incorporated trust board on specified grounds.
Accordingly, the Registrar of Companies may, by notice, cancel the
incorporation of a trust board if he is satisfied that:
i.
incorporation was obtained by fraud, misrepresentation
or mistake;
ii.
the objects of an association of which the trust has
been incorporated becomes unlawful;
iii.
the association and or its board of trustees is being
used for unlawful purposes;
iv.
Board of trustees has become defunct or has been
dissolved; or
v.
the board of trustees is not by reason of the state of
its affairs able to properly exercise its functions.
b. Cooperative
Societies
By virtue
of section 34 of the Cooperative
Societies Act, the Registrar of Societies may by order cancel the
registration of a society on certain grounds listed therein. This can be done after an inquiry or
inspection upon the Registrar’s own motion of the affairs and accounts of the
society, or upon application by at least three-fourths of the society’s
members. The Registrar can also cancel the registration of a duly registered
society by order in writing where it is proved to his satisfaction that the
number of members has been reduced to less than ten. It must also be noted that no registered
society can be wound up except by order of the Registrar.[37]
c. Credit Unions
Whilst section 73 of the Credit Unions Act empowers the Registrar
of Credit Unions to cancel registration of a credit union, the exercise of this
power is quite distinctive in that such cancellation is subject to the approval
of the Minister. The provisions dealing with
processes and grounds for cancellation of credit unions are almost identical to
those in the Cooperative Societies Act. Thus, the order for cancellation can be
issued:
i.
after
an investigation has been made into the affairs of a credit union;
ii.
if
incorporation is obtained by fraud, or mistake;
iii.
if
membership is less than fifteen; or
iv.
upon
violations by a credit union of the Act, regulations and bylaws.
Pending
coming into effect of the order for cancellation, further order can also be
made by the Registrar for the safe custody of the documents and securities and
for the protection of the assets of the dissolved credit union.[38]
(ii) Appeals
Appeals
against cancellation orders and notices are permissible under the Charitable Trusts Act, Cooperative Societies
Act, and Credit Unions Act
respectively. For cancellations under
the Charitable Trusts Act, a member
may within thirty (30) days appeal the decision of the Registrar to the High
Court.[39] Similarly, any aggrieved member of a
registered society may, within two (2) months, appeal the Registrar’s order to
the Minister.[40] The Credit
Unions Act takes a similar approach in allowing appeals by members to the
Minister within two (2) months of a cancellation order.[41]
Whilst both the Credit Unions Act and
the Cooperative Societies Act do not
define “Minister”, guidance can be had from the Interpretation and General Provisions Act, which clarifies that:
The expression “the
Minister” in an Act means the Minister for the time being responsible for the administration of the Act or…the
Minister so responsible with respect to the provision of the Act in which the
expression occurs.[42]
It must be
noted however that further provisions in both the Cooperative Societies Act and Credit
Unions Act purport to limit the jurisdiction of courts. Hence, the Cooperative Societies Act[43],
which is also replicated in the Credit
Unions Act, expressly states:
Save in so far as is
hereinbefore expressly provided, no civil court shall have jurisdiction in
respect of any
matter concerned with the dissolution of a registered society under this Act.
(iii) Liquidation
a. Cooperative Societies
Upon cancellation
pursuant to s.34 (1) of the Cooperative
Societies Act, the Registrar then appoints one or more persons to
be, subjected to his direction and control, the liquidator (s)of the society.[44]
The liquidator is equipped with a wide scope of powers[45]
which can be used to summon inter alia
the attendance of parties and witnesses and to compel the production of
documents by the same means and so far as may be in the same manner as is
provided in a civil court.[46]
At the closure of
the liquidation process, a sequence of priorities takes place with regard to
the assets of the society[47].
First, funds of the society will be used to cover a liquidation cost, which is
followed by the discharge of all deposit liabilities to its depositors followed
by discharge of liabilities of the society. Next is the payment of the share
capital followed by payments of dividends if so prescribed in the by-laws of
the society. Any unclaimed[48]
assets will be published in the Gazette upon the closing of the liquidation.[49]
b. Credit Unions
Upon cancellation, a
liquidator is to be appointed by the Registrar to exercise such powers[50]
as may be conferred upon him for the liquidation of the credit union.[51]
There is great similarity in the process and procedures for liquidating credit unions
and cooperative societies. The effect of liquidation is spelt out in section 80
of the Credit Unions Act.[52]
C.
Purposes and Activities of NGOs
Whilst Solomon Islands, in general, has an environment
which is flexible in accommodating organisations of various natures and a
diversity of purposes and objects, common guidelines were set in the country’s
laws to ensure uniformity thus avoidance of arbitrariness.
Currently operating in the country are NGOs
whose objects are either for public benefit or private membership benefit. But in either case, the common denominator
which would arguably get the highest subscription from NGOs is the promotion of
economic interests of members.
Nonetheless, an examination of the operating Acts would provide an
insight into the purposes and activities governed under
(i) Legislative Approach towards Objects of Organisations
a. Charitable Trust
The Charitable Trusts Act is unequivocal in providing for the registration of an association whose object is one of either a religious, educational, literary, scientific, social or charitable purpose.[53]
b.
Cooperative Societies
The Cooperative Societies Act, by virtue of section 4, governs the registration and operation of a society whose object is the promotion of the economic interests of its members in accordance with cooperative principles.[54]
c.
Credit Unions
The Credit Unions Act regulates a union of persons associating themselves for the objects of promoting thrift among members, creation of a source of credit at fair and reasonable rates for provident and production purposes, receiving of members’ savings, and for the improvement of the social and economic well-being of its members.[55]
d.
Voluntary Aid
Section 5 of the Solomon Islands Red Cross Society Act list the objects of the society, most of which relate to voluntary work and aid in the event of both man-made and natural disasters. Thus, the Society is recognised as a voluntary aid society auxiliary to public authorities.[56]
e.
Sports
The Solomon Islands National Sports Council Act
establishes a national sports council whose function or purpose includes the
fostering and promotion of the development of sport and recreation in
f.
Education
The Winston Churchill Memorial Trust Fund Act is unique in that it establishes a fund, instead of an enabling environment, to be used for the purposes of providing scholarships, bursaries or other means to enable residents of Solomon Islands serve better either in the public or private capacity in the interest and development of the country.
(ii) Determination of Status
It is
quite unfortunate however that there is not in existence any institution,
whether statutory or otherwise, the function of which is to determine the
qualification or otherwise of NGOs for either public benefit or charitable
status. This is a matter left to the
enabling statutes and internal governance arrangements of such organisations,
for instance, constitutions and memorandum of associations.
(iii) Media Access
Media in
2. GOVERNANCE
(i) Governing Bodies
The following internal governing bodies are
established under statute for both membership and non-membership organisations:
a. Charitable
Trusts Act
i. Board of Trustees[58]
b. Cooperative
Societies Act
i. Committees as prescribed in a society’s
bylaws
c. Winston
Churchill Memorial Trust Act
i. Board of Trustees[59]
d.
Credit Unions Act
i.
Board of Directors[60]
ii.
Credit Committee[61]
iii.
Supervisory Committee[62]
iv.
League of Credit Unions[63]
a.
i. National Sports Council[64]
b.
i.
Council[65]
ii.
Management Committee[66]
(ii)
Powers and Duties of Organisations and Governing Bodies
The powers of governing bodies registered under laws
of
a. Charitable
Trusts Act
i. Board of Trustees
To have
perpetual succession and a common seal, and may hold real and personal property
of whatsoever nature, sue and be sued in all proceedings civil or criminal, and
do and suffer to be done all that corporate bodies may do and suffer to be done.[67]
b. Cooperative
Societies Act
Pursuant to section 8 of the Act, a cooperative
society have perpetual succession and with power to hold property, to enter into
contracts, to institute and defend suits and other legal proceedings, and to do
all things necessary for the purpose of its Constitution. These powers will be exercised on behalf of
the society by a committee elected at the annual general meeting of the same.[68]
c. Winston
Churchill Memorial Trust Act
By virtue of section 8 of the Act, the Board of
Trustees is empowered:
·
to solicit, acquire,
purchase, take, hold and enjoy any moneys or other movable or immovable
property;
·
sell, convey, assign, exchange,
surrender, yield up, mortgage, demise, transfer, donate or otherwise dispose of
or deal with any moneys or other movable or immovable property; and
·
do such other things as may
be necessary or expedient for the purpose of carrying out the objects of the
Fund.
d.
Credit Unions Act
Whilst most issues will be governed by the bylaws and
supplementary bylaws of a credit union, some of the powers prescribed in the
Act to be exercised on behalf of a credit union by its Board of Directors
include:
·
the power to invest or
deposit its funds with licensed banks in Solomon Islands or with other credit
union;[69] to
borrow from persons or institutions subject to certain limitations;[70] and
granting of loans to members for productive and provident purposes.[71]
In addition to the Board of Directors, there is a
Credit Committee, and a Supervisory Committee.
The Credit Committee has general supervision over all loans to members
and the fixing of amounts of interest on loans; [72]
imposition of security conditions on loans, and the determination of guarantors
required for loans and conditions of repayment.[73] Likewise, the Supervisory Committee has the
duty to examine the affairs of the credit union, including the auditing of its
books.[74]
Another creation of the Act is the League of Credit
Unions which has the purpose of providing guidance, promoting and protecting
the common interest of credit unions.[75] The
League thus operates as the supervisory body of all credit unions registered
under the Act.[76]
e.
The powers vested in the Council include the granting
of monies or loans on such conditions to persons or organisations engaged in
the execution or promotion of any sporting or recreational activity,
utilisation and development of land or other property for recreational
purposes, and such other activities necessary for the promotion of the growth
of sporting and recreational activities in Solomon Islands.[77]
f.
The Society has perpetual succession with the power,
through the Council, to sue and be sued, purchase, acquire, hold, manage and
dispose of movable and immovable property and to enter into such contracts as
it may consider necessary or expedient for the purpose of performing its
functions and objects.[78] These powers are further reduced in statutes
which may be exercised by a management committee.[79]
g.
The Act governs a trust board which is incorporated
pursuant to the Charitable Trusts
Act. By virtue of section 4, the
Trust Board may from time to time in its discretion amalgamate investments and
trust funds held by or vested in it for provincial, diocesan, charitable or
other church purposes in the Province of the Church of Melanesia in one
investment fund.
h.
Church of the
By virtue of the Act, the Archbishop of Melanesia is a
corporation sole with perpetual succession, and with power to acquire, hold, manage,
control, grant, transfer, mortgage, charge, lease, sell, demise, dispose of,
create or reserve easements over, or otherwise deal with, any property, and
capable of suing and being sued.[80]
iii. Supervision and Audit of Accounts
Presenting a general
overview, organisations that are registered under the Cooperative Societies
Act will be subject to the regulatory powers of the Registrar of
Societies. Such organisations are
required to submit to the Registrar their yearly balance sheets closing on December
31st of the preceding year; prepare and present reports of their
yearly operations to annual general meetings; and have quarterly returns sent
to the Registrar.[81]
Of importance is the mandatory
requirement to have their accounts audited at least once a year by persons
authorised by the Registrar.[82] Similarly, the account of a credit union is
subject to yearly auditing by an auditor authorised by the Registrar of Credit
Unions and approved by the Supervisory Committee.[83]
Although it plays some form of supervision and direction, the League of Credit
Unions has no express power to audit the accounts of its members, as such is
within the powers of the Registrar of Credit Unions.
The National Sports
Council is required to prepare statements of accounts for each financial year,[84]
and have its accounts audited by the Auditor-General or such other person on
such terms and conditions the Auditor-General may impose.[85]
There are no provisions of the same in either the Winston Churchill Memorial Trust Act or the Charitable Trusts Act. But
it is presumed that such trusts, by operation of their internal rules, will
have their accounts at some stage supervised and audited. This seems the likely case for trusts
registered under the Charitable Trusts
Act.
iv. Conflicts of Interest
Given,
that Common law forms part of the received laws of
v.
Distribution of Profits and other Private Benefits
a. Cooperative Societies
The Cooperative Societies Act permits the
distribution or disposal of profits to members after a fourth of the net profit
is being carried forward to a reserve fund.[86] Thus, such profits available for distribution
may be divided among the members by way of dividend or bonus. Rule 19(2) provide
that a bonus based on wages or on the value of the products of a member, or a
bonus or rebate on patronage calculated in proportion to the amount of business
done by each member with the registered society, may be distributed every year
after audits have been carried out.[87] Note further that no registered society is to
pay dividend on share capital exceeding five (5) per cent per annum on the
capital actually paid up.[88]
b. Credit Unions
By virtue
of the Credit Unions Act, dividends
can be paid on members’ shares after ten per cent of the gross income has been
transferred to a reserve fund, and deduction of operational expenditure for the
year has been made.[89]
The maximum rate for the payment of dividends on members’ shares is six (6) per
cent per annum.
vi.
Umbrella Organisations
There are
currently in existence two organisations which can be described as umbrella
organisations. One is established by
statute, whilst the other is set up voluntarily. The League of Credit Unions, created by the Credit Unions Act with prescribed
supervisory functions, operates as the statutory umbrella body for credit
unions. Similarly, a grouping of NGOs
has led to the voluntary creation of a supposedly coordinating body – the
Development Services Exchange. Contrary
to the League of Credit Unions, the powers and functions of the Exchange are
not well defined. Neither does it assume
any sanctioned supervisory role over NGOs generally.
3. FINANCE & ECONOMIC ACTIVITIES
A. Fundraising Activities
NGOs have to date enjoyed in general an environment in
which their fundraising drives are undertaken without much difficulty subject
to prior arrangement with the relevant authorities. In other words, bureaucratic processes, if
any, do not necessarily pose any major hindrances to successful fundraising
drives for charitable or related purposes.
The most active fundraiser is the Red Cross Society,
which employs for instance, door-to-door appeals that proves to be successful over
the years. By practice, what is normally
required in such cases is the authorisation issued by the local government
authority exercising jurisdiction over the activity in question or the area
within which the purported fundraising is to be held. Despite this general situation however, there
are certain fundraising activities, such as lotteries, which require special
permits or authorisations.
Taking lotteries is an ideal form of fundraising drive
for most organisations, although it is expressly required by the Gaming and Lotteries Act[90]
that a Commercial Gaming Permit is required for such purpose (s). However, section 15 of the Act provides
exemption from this requirement for any society established and conducted
wholly or mainly for:
(a) charitable
purposes;
(b) participation
in or support of athletic sports or games or cultural activities; or
(c) any
purpose not being for private gain or purposes of any commercial nature.
A more
common form of fundraising by NGOs is through film or TV shows, an activity
which is governed by the Cinematograph
Act.[91]
Whilst a theatre licence is required from the Licensing Authority, section 4(5)
provides exemption to the effect that no fee shall be chargeable in respect of
any cinematograph exhibition given for any charitable, educational or public
purpose (s).[92] The above demonstrates a flexible environment
within which NGOs can carry out fundraisings.
B. Tax Exemptions and Deductions
The financial
implications of the operations of NGOs in terms of management and fulfilment of
their objects is so significant that lack of financial mechanisms to ensure
their financial sustainability will lead to an environment within which they
may not be able to thrive. Considered
below are some of the mechanisms that are specifically provided in their
respective Acts; viz. the Customs &
Excise Act,[93]
Good Tax Act,[94] Income Tax Act,[95] Sales Tax Act,[96]
and Stamp Duties Act.[97]
(i)
Customs & Excise Act
Whilst no
specific reference is made to the exemption of charitable, religious or other
related bodies from the payment of import or export duties, section 8 of the
Act is wide in scope to allow application by NGOs for such exemption. Like so, by virtue of section 8, the Minister may in any case direct the
remission or refund in whole or in part of any duty payable or paid on any
goods imported or exported, or manufactured in Solomon Islands....
(ii)
Goods Tax Act
Section 37
of the Act provides for exemption of certain persons or goods (value) from the
goods tax. Hence, in the First Schedule
to the Act, goods, equipment and materials that attract exemption from tax are
those used, (and not for sale):[98]
a.
by an
institute of learning conducted by an organisation not carried on for the
profit of an individual;
b.
by a
society, institution or organisation established and carried on exclusively or
principally for the promotion of the interests of a university or school
conducted by an organisation not carried on for the profit of an individual;
c.
by a
society, institution or organisation established and carried on exclusively or
principally for the promotion of sport;
d.
by any religious, charitable or benevolent
institution;
e.
in
churches and church services and articles for use in religious institutions;
f.
in
the construction, repair or alteration of buildings or other structures used as
a place of worship or for the advancement of any religious, charitable or
benevolent activities.
(iii)
Income Tax Act
Pursuant
to section 16(1) of the Act, the income that accrues in or is derived from
Solomon Islands shall be exempt from tax to the extent specified in the Third
Schedule. Accordingly, the following
incomes, as detailed in the Schedule, are exempted:
a.
income of any religious, charitable, benevolent or
educational institution approved by the Minister;[99]
b.
income of any cooperative society registered under the
Cooperative Societies Act the
principal objects of which are the acquisition or development of agricultural
land, so far as that income is derived from agriculture;[100]
c.
the income of an association of person established
solely for the purpose of controlling or furthering any amateur sport or game
if no part of the income or other funds of the society or association is used
or available for the pecuniary profit of any proprietor, member or shareholder
thereof;[101]
d.
income of any club, society or association, organised
and operated exclusively for the social welfare, civic improvement, pleasure or
recreation, or for any other purpose.[102]
Although
no specific reference is made with respect to the income from foreign sources
(funding), the above categories are wide in scope to regard such funding as ‘income’ of the society or association
concerned. Additionally, there is lack
of provision in the Act expressly providing for tax relief or deductions in the
event of personal donations for charitable or related causes.
(iv) Sale Tax Act
Section 6
of the Sales Tax Act provides
a general avenue which can be utilised by NGOs for purposes of exemption. Thus, the
Minister may by general notice determine either generally or in any case or
class of cases, or any persons entitled to relief from sales tax and any such
relief may be made subject to any condition the Minister may impose.[103]
(v) Stamp Duties Act
Pursuant to section 3 and Schedule to the Act, any
transfer of property to or in trust for any corporation or body of persons
associated for religious, charitable or educational purposes, and any instrument
for declaring or defining the trust or for appointing new trustees in respect
of such property shall be exempted from tax impositions.[104]
Note further that all instruments made under the Cooperative Societies Act are
also exempted.[105]
4. CONCLUSIONS
Whilst
the foregoing demonstrates an environment which is characteristic of an
‘open-access’ system for NGOs to get established, there are undeniably
loopholes still existing in relation to inter
alia their operations. Below are
some brief observations of the current situation.
Firstly,
the legal framework has in general fallen short or in the most, lacking in
terms of putting in place some mechanism that ensures and guarantees an
adequate level of transparency and accountability within the NGO sector. Put it simply, public scrutiny of NGO
affairs, financial or otherwise, is not fully guaranteed within the current
legal framework. For instance, the
auditing of accounts of a public-benefit organisation alone does not
necessarily yield any good relationship between the same and the public if the
latter is denied access to such accounts and records. Worse still, NGOs, in particular, those well
funded by overseas donors, are currently not subject to any mandatory
requirements to have their statement of accounts published or accessible to the
public in the interest of transparency. In all these situations, the Government
is a bystander for want of jurisdiction to intervene in the interest of the
public.
Secondly,
given most NGOs are well-funded through overseas donors - thus having the
capacity to undertake major projects – there is present a general perception
that the Government is sidestepped in most development issues. As a result, the development goals of NGOs,
which are targeted towards achieving their own constituent objects, do not
always conform to Government development policies, both short and long
term. This speaks well of the fact that
there is little coordination between the two parties due to the absence of any
legal or regulatory framework setting out the jurisdictional or administrative
aspects of the working relationship between the same. As can be observed, partnership arrangements
to date have been carried out on an ad
hoc basis and mostly sporadic. This partnership
between NGOs and the Government is vital for the country, thus, needs to be
secure.
The
alternative therefore is to have a regulatory organ that facilitates the
working relationship between NGOs and the Government. Unfortunately, this does not exist within the
Government bureaucracy, let alone the department[106]
which should have played a regulatory role over NGOs. Given this situation, there needs to be an
organ - preferably a statutory body - that should be empowered with
supervisory, regulatory, auditing, enforcement and other such powers necessary
for ‘managing’ the NGO sector. A
rationale is to centralise all these functions whilst simultaneously addressing
the current chaotic situation of ‘overlaps’ and ‘piecemeal approaches’ in
different statutes.
Thirdly,
whilst the current tax regime in relation to NGOs focuses more on the recipient
organisation, it fails to acknowledge through specific provisions the donor or
‘good-Samaritan’. In other words,
there is little incentive offered within the tax regime that will render
voluntary donations for charitable and related purposes an attractive investment. Whilst assessing the taxable income of a
tax-payer, the Income Tax Act, for
instance, does not provide for deduction (of equal value) for a tax-payer who
has specifically made a generous donation in money or in kind to a charitable,
religious, benevolent, educational, or other approved institution. This operates to the effect of creating a
disincentive for donation of much-needed funds by individual citizens and
resident companies.
Finally,
whilst the NGO sector is allowed to flourish, there is an inherent risk of
abuse of the privileges enjoyed by these organisations. Such risk is further aggravated by a legal
and regulatory environment which is too flexible, coupled with the lack of
effective monitoring mechanisms. One
such potential risk against which there is still absence of effective
monitoring mechanisms to deter, is the infiltrating tentacles of overseas
criminal syndicates. Lack of legal provisions to effectively monitor and
identify the source of overseas donations to NGOs in the country may create an
opportunity for international criminal organisations to exploit the situation
under the pretext of charity. This can potentially happen, for instance, for
purposes of tax evasion in the countries from which such funds are transferred.
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