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II. Taxation Regime
On the question of income tax, although there is no clear law on the matter, the practice is that income tax is charged on wages, salaries and profits, so that a non-profit organization would not be expected to pay income tax. If, however, the income tax department questions the non-profit status of an organization, it is useful to produce a license of the Minister given under section 20 of the Companies Act, quoted above. In the letter applying for this license (to be exempt from using the word "Limited" as part of its name), the applicant company states that the company is not for profit and limited by guarantee, that it will apply its profits, if any, and other income to the promotion of its objects, that it will prohibit the payment of dividends to members, and that upon dissolution its assets will not be distributed to members but rather to a similar type company.
Normally a non-profit company is subject to all other taxes, but sometimes the government will exempt such companies from the payment of import duties or part of them for certain capital goods it uses to promote its objects, such as vehicles or equipment. This is completely arbitrary, relying on the discretionary powers granted by the relevant laws to the Minister of Finance. In practice, the Minister may use political criteria to determine whether to grant such exemption or by how much.
With regard to tax relief for persons donating to non-profit organizations, the matter is again dependent on discretion, this time on that of the Commissioner of Income Tax. The recipient NPO must satisfy the Commissioner that the donation is being used for an ecclesiastical, educational or charitable purpose or for cultural purposes for the improvement of amenities in towns and villages. In an interview for this paper, the Commissioner added that she will usually require the NPO to show that the objects on which it spends the donations are available to the public, and that anyone can benefit without discrimination. She also stated that normally an organization should seek approval for tax-exempt donations before it receives them; a letter from the Commissioner will also then prove useful in its fund-raising activities. For a person to claim exemption, the donations must aggregate at least $250, and the maximum any person can claim is one-sixth of her chargeable income. Receipts must be attached to the claim.
Some NPOs receive donations from government through a part of the budget voted annually by the National Assembly. There is an item in the budget headed "Official Charities Fund", and although very few NPOs receive direct assistance through this mechanism, a few do. The matter of whether any particular NPO gets any assistance or not, and if it does how much, is totally arbitrary. Indeed, during the yearly budget preparation sessions in Cabinet this Fund is notoriously used by members as a "pork barrel", each trying to get his or her pet project funded. It is from this fund that monies are earmarked for sports, health and other social services, community projects, etc., and each representative on the government side tries to get something for her/his constituency. In the end, there is very little scope for assistance to NPOs, although some traditional charity" agencies have the advantage in this process.
Of late, however, the development NGOs' network, the Association of National Development Agencies (ANDA) has been granted a small donation from this fund. Some of the NPOs which received donations in 1997 include: the Council of Voluntary Social Services (a network of charity-type NGOs and groups), the Boy Scouts and Girl Guides, the Young Men and the Young Women's Christian Association, the Red Cross Society, Help Age, the Council for the Visually Impaired, and the Association of National Development Agencies (ANDA). The latter is the only development-oriented agency to receive a subvention, and the grand total it received was Bze. $5,200.
It has become a more general practice during the past five years or so for government to grant contracts to NGOs to carry out certain projects, such as work with refugees, research, facilitating seminars, etc. The amounts so expended are still quite small, and limited to a small number of NGOs, and are often part of an arrangement with an international agency.
Some concrete examples of NGOs being granted such contracts are noted in the next section, but there is no format or policy guideline followed by government for so doing. Again, it is a very arbitrary matter, depending on whether the NGO has "contacts" in government or particular skills that the government needs. There are, for example, no procedures for opening contracts to bidding or other forms of evaluating the best candidate.
The influence of foreign agencies, however, as the cases below cited illustrate, is important in this regard. One highly significant recent development, for example, is related to a loan for reconstruction of the Southern Highway from the Interamerican Development Bank. Following protests by the Maya and concerns expressed by other groups, including environmental agency, the government at the behest and with the funding support of the Bank instituted mechanisms which included NGOs and community groups for advising on socially-sensitive issues, and some NGOs are granted contracts for studies and other work flowing from this initiative.
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