The ‘I Before You’ Syndrome

A System can be defined as units or parts (sub-systems) that interact with each part or unit to function as a whole. The units or parts are designed in a manner that makes its operations optimal with less grid-lock and distractions or un-necessary overlapping that will create bottle necks or tardiness to function effectively so much so that all the units that make a whole will almost automatically fit into place to give one big system.

A well managed system institutionalized becomes so functional that every body will on entry into the system know what to do and how to do it without relying on brain wave or native intelligence or worst still rely on the ‘thoughts’ of the man on the spot to carry out official functions as was the case with our military detractors, extended by our ‘Mr. know all’ General OBJ even when we claim to be operating a democratic system of government.

Some of the features of a functional system lies in its ability to be self regulatory, detects deviations from set standards which it allows for setting with ease in the first place and setting of further standards, makes planning easy and effective and gives enough room for appraisal of operations and above all brings about efficiency and professionalism because of its effectiveness. A good functional system even allow for accurate projections to be made in all the areas of society’s needs with precision.

System is so central to human activities that no plan no matter how good it may look like can function in a dysfunctional system though a functional system is a result of good planning. So total is a system that it is easy to discern a functional society viding the system in place thus allowing things to done in a particular way with character as the common denominator.

Whether in governance or business or even in our private lives, its none application gives room for dislocations through faulty assumptions that sometimes are very costly and fatal resulting to instability and social vices. A good example is our inability to have a budget on time. Inter and intra governmental conflict in the country is also another sore point of the confused situation we are into.

For a very long while now you see and hear Nigerians lamenting either through write-ups in the newspapers or comments on TV station(s) the break down of system in Nigeria or lack of it claiming that that is why nothing functions here. Often comparison is drawn between Nigeria and Europe and United States of America, places where in their reckoning things work. They are absolutely right except that no one so far has posited why theirs is working and ours is not.

What we have not been able to do like others we often refer to is that we have allowed institutions that should be nurtured and grown into functional systems to be revolved around individuals who are holders of those offices at any point in time. Rather than allow institutions to make persons we allow persons to make the institutions, a direct opposite of what obtains in the places we see and refer to as better than ours.

Bastardization of institutions started with IBB regime when the civil service was dismantled all because one man wants to remain in power at all cost and the rules will not fast track it hence total demolition of all the structures built over time that has given a semblance of system to our governance. Ask Gen. Gowon the usefulness of the civil service and see what a good system it was before IBB and all the rapacious regimes that followed later including Obasanjos’.

Now we today are celebrating the judiciary as the last hope of the common man with some even suggesting rightly too as the only institution or arm of government functioning. The fact is that is about the only institution spared by all the military regimes that has ruled this country even though it is for selfish reasons. The judiciary managed to resist or escape the over-bearing tendencies of the military for reason known to them.

Painfully though is the fact that Nigerians in more than so many ways contributed immensely to the destruction of our institutions through direct collaboration and or complacency. The attitude we exhibited in enthroning ‘me’ instead of ‘we’ that has seen individuals more powerful or relevant than the institution they head is what we are all witnessing in the case of Nuhu Ribadu and the EFCC and the police as institution.

The role of the media on this saga, who was supposed to educate on issues of this nature, is to say the least, is appalling. There is the suggestion going by the write-ups in the media that Ribadu is being given some bad treatment thus insinuating he is bigger than EFCC or that without him there will be no EFCC. And it is a shame that the watch dog role the media is supposed to play in ensuring public office holders account for their stewardship which Nuhu Ribadu has failed to do so far is being questioned shamelessly. We did it during the regimes of IBB, Sani Abacha, even Obasanjo. But they all have left office and Nigeria remains. Some sanity please.

It is my opinion that Ribadu should go and answer to questions being raised over his stewardship at EFCC. He should also realize that he is a police man first before being Chairman of EFCC and most importantly him as a lawyer ought to know and he should know that the police are an institution with its rules and regulation. The police have its own system still functioning. If for any reason he finds it difficult to operate within that system he should honourably bow out. The people urging him on knows this and will deny him soon, very soon.

By the way where is DSP Ogugbuaja?

CHURCHES, MOSQUES, NGOs TO START PAYING TAXES FROM NEXT YEAR

The tax exemption status of religion based organizations and non government organisations are to be reviewed to align with international standards. This, according to a source in the Presidency, is to appropriately integrate otherwise tax exempt organizations into the taxable entities mainstream so as to drive the new impetus to fund the growth of the national economy from non oil revenue.

In line with this new thinking, the source informed that the Presidency has given its backing to the Nigeria Accounting Standard Board to evolve accounting standards that will serve as framework for tax exempt organizations to file their accounts and to be able to delineate which of their income is taxable from next year.

“The government does not intend to tax the income of churches, mosques or non-governmental organization or any other organization that naturally enjoys tax exemption status. The law is clear on the exemption status of such organizations. What the government has decided to do is to streamline income made in the furtherance of charitable activities of the tax exempt organizations and remove it from income made from what is known universally as unrelated business income,” the source said   

“So many religious organizations have, in fact, transformed into profit earning business enterprises and it is just proper that they are properly assessed for the purpose of taxation under the unrelated business income tax (UBIT),” the source argued. “These organizations are involved in various types of commercial activities, such as operating publishing houses, hotels, factories, radio and TV stations, parking lots, newspapers, bakeries, and restaurants. The Tax Reform will make income derived by churches from unrelated trade or business subject to tax.”

Another source at the Nigeria Accounting Standard Board argued the justification for taxing the unrelated business income of tax exempt organisations

The problem at which the tax on unrelated business income is directed is primarily that of unfair competition. The tax-free status of religion based organizations and NGOs enables them to use their profits tax-free to expand operations, while their competitors can expand only with the profits remaining after taxes. Also, a number of examples have arisen where these organizations have, in effect, used their tax exemptions to buy an ordinary business. That is, they have acquired the business with little or no investment on their own part and paid for it in instalments out of subsequent earnings – a procedure which usually could not be followed if the business were taxable. The idea is to impose the same tax on income derived from an unrelated trade or business as is borne by their competitors. It is, however, not intended that the tax imposed on unrelated business income will have any effect on the tax-exempt status of any organization,” the source explained.

The United States of America’s Internal Revenue Service Code, the template, which the NASB, is likely to adapt in its accounting standard to effect taxation of unrelated business income of affected organizations from next year, explains that churches and religious organizations, like other tax-exempt organizations, may engage in income-producing activities unrelated to their tax-exempt purposes, as long as the unrelated activities are not a substantial part of the organization’s activities. However, the net income from such activities will be subject to the UBIT if the following three conditions are met:

•                      the activity constitutes a trade or business,

•                      the trade or business is regularly carried on, and

•                      the trade or business is not substantially related to the organization’s exempt purpose. (The fact that the organization uses the income to further its charitable or religious purposes does not make the activity substantially related to its exempt purposes.)

 

Exceptions to Unrelated Business Income Tax

Even if an activity meets the above three criteria, the income may not be subject to tax if it meets one of the following exceptions: (a) substantially all of the work in operating the trade or business is performed by volunteers; (b) the activity is conducted by the organization primarily for the convenience of its members; or (c) the trade or business involves the selling of merchandise substantially all of which was donated.

In general, rents from real property, royalties, capital gains, and interest and dividends are not subject to the unrelated business income tax unless financed with borrowed money.

 

The code also provides examples of Unrelated Trade or Business Activities:  Unrelated trade or business activities vary depending on types of activities, as shown below.

Advertising

Many tax-exempt organizations sell advertising in their publications or other forms of public communication. Generally, income from the sale of advertising is unrelated trade or business income. This may include the sale of advertising space in weekly bulletins, magazines or journals, or on church or religious organization Web sites.

 

Sale of merchandise and publications

The sale of merchandise and publications (including the actual publication of materials) can be considered the conduct of an unrelated trade or business if the items involved do not have a substantial relationship to the exempt purposes of the organization.

 

 Rental income

Generally, income derived from the rental of real property and incidental personal property is excluded from unrelated business income. However, there are certain situations in which rental income may be unrelated business taxable income:

•                      if a church rents out property on which there is debt outstanding (for example, a mortgage note), the rental income may constitute unrelated debt-financed income subject to UBIT. (However, if a church or convention or association of churches acquires debt-financed land for use in its exempt purposes within 15 years of the time of acquisition, then income from the rental of the land may not constitute unrelated business income.),

•                      if personal services are rendered in connection with the rental, then the income may be unrelated business taxable income, or

•                      if a church charges for the use of the parking lot, the income may be unrelated business taxable income.

 

Parking lots

If a church owns a parking lot that is used by church members and visitors while attending church services, any parking fee paid to the church would not be subject to UBIT. However, if a church operates a parking lot that is used by members of the general public, parking fees would be taxable, as this activity would not be substantially related to the church’s exempt purpose, and parking fees are not treated as rent from real property. If the church enters into a lease with a third party who operates the church’s parking lot and pays rent to the church, such payments would not be subject to tax, as they would constitute rent from real property.

Whether an income-producing activity is an unrelated trade or business activity depends on all the facts and circumstances.