SOURCE:

Faculty: Law
Department: Law

CONTRIBUTORS:

Nwabachili, C. O.
Okeke, G.

ABSTRACT:

Tax is a compulsory levy on individual or organisation by the government as a statutory obligation. The classical function of the tax system is the raising of revenue to meet government expenditures. Exempt income is an income liable to be taxed by law but expressly excluded by another provision of the law. Tax exemptions are granted specifically to specialized companies, religious organisations, charitable, or non-governmental organisations and so on in relation to income derived by them. Incomes exempted from the payment of taxes are income ordinarily chargeable to tax but exempted by the express provision of the law. with regards to charitable trusts, the most significant factor is the creation of trust intervivos which has been for the avoidance of taxation. Charitable trusts are those trusts which are considered to be of such value and importance to the community that they receive favourable tax treatment. Furthermore, religious organisations which include churches et ceteraand the non-governmental organisations enjoy the samefavourable tax treatment. Tax exemption has been criticized as a subsidy granted by legislative grace to theseorganisations performing services that the government would otherwise have to perform and that such a subsisdy relieves the exempt organisation of tax obligations that other tax payers are often obliged to assume. Thus, they are exempted as a subsidy granted by the government in reciprocity. Nevertheless, others have argued that tax exemption is not subsidy. Since the grant of a tax exemption is not sponsorship, as the government does not transfer part of its revenue to these organisations but simply abstains from demandingthat these organisations should support the state. However, be that as it may, the objectivesof this study among others are to criticise the tax exemption granted to these organisation and also to buttress that though, there is a proviso to the law that income from trade and business carried out by these organisations are not exempted from taxation, but in practice these incomes are not chargeable to tax due to paucity of enforcement mechanism s in our tax administration. In carrying out this task, the researcher adopted doctrinal approach using the analytical, expository and comparative methods. Primary and secondary sources of data collection were also relied on. The study advocated among others,for the creation of Charity Commission, modification of the legislative frameworks, sesnsitisation programmes, rendering of financial account to Reporting Council of Nigeria.