Is It Time To Tax Nigeria’s Churches?

Published 7 years ago

Following the drop in oil prices and the economic crisis that followed, the Nigerian government has been looking for alternative sources of revenue. The viability of agriculture, maritime industry, taxation and a number of other sectors have been considered. Of the plethora of options, the most interesting, and perhaps most controversial, is the option of taxing religious institutions.

The Christian institutions, particularly the Pentecostal churches, appear to be the most affected by the debate.

It is important to note that taxation is a legal issue which can sometimes be tainted with moral bias; whether an institution can be taxed depends on whether the law makes it subject to tax. Religious institutions are not taxed in Nigeria because the current legal regime grants them a tax-exempt status. This is reflected in a number of tax legislations in Nigeria, which grant ecclesiastical bodies (alongside charitable and educational institutions of a public nature) a tax-exempt status unless they engage in a trade or business.


This situation is similar to the United States, where religious institutions enjoy a tax-exempt status with the exception of profits accruing from the institution’s Unrelated Business Taxable Income (UBTI). The Nigerian Tax Appeal Tribunal recently emphasized the tax-exempt status of the institutions under Section 23 of the Companies Income Tax Act in the case of American International Schools of Lagos v Federal Inland Revenue Service (FIRS), by stating that the FIRS cannot tax these institutions unless they derive profits from a trade or business.

Prophets Of Profit

Irrespective of the law, there are a number of reasons – I daresay valid reasons – these institutions should be taxed. The first reason is that churches have branched out into profitable activities (such as owning expensive private schools and publishing houses) while enjoying their tax-exempt status. For this reason, Chief Demola Seriki, a former Minister of State for Interior, stated that religious institutions are not carrying out charitable activities but building empires, using revenues from their businesses to purchase private jets and renting out apartments in the church camps, but refusing to pay land use charge to the government. This statement by a former government official shows the intensity of the debate and reflects the concern of a majority of Nigerians.

Another reason advanced by the supporters of the idea of taxing religious institutions is that religious leaders are getting extremely rich over their non-taxable profits. In 2011, a FORBES ranking of the 10 richest pastors in the world had five Nigerians. The richest on that list is Nigeria’s Pastor David Oyedepo with an estimated net worth of  $150 million. Also worthy of note is that religious institutions contribute approximately 2.5% to the GDP, which is the same as the financial sector.


The Five Richest Pastors In Nigeria

With the current economic situation and the peculiarities of Nigerian religious life, the current law should be amended to ensure that the profits accruing from the private establishments of these religious institutions are taxed. What is proposed is not taxation of church tithes and offerings, but taxation of profits accruing from businesses that are not for religious worship or education.

Two major strategies are proposed for taxing religious institutions and they are not mutually exclusive. First, the new strategy for taxing religious institutions in Mozambique should be adopted. As at April 2017, the Director of Mozambique’s Revenue Authority Augusto Tacandua, announced that churches or religious houses that have sources of income such as schools, daycare centers, and universities, will start paying taxes to the government. The reason for imposing tax on these institutions in these instances is that religious institutions are generating large sums of money from commercial activities and still enjoy tax-exempt status. However, in Nigeria, the tax should be imposed on the profits accruing from such activities when they are not for religious worship or education.

The second strategy is slightly controversial. It is the adoption of a measure proposed in the National Code for Corporate Governance in 2016 which seeks to ensure that religious institutions and NGOs regularly audit these institutions, as required by the law, to ensure that profits accruing from their businesses not relating to religious functions are identified. It further stipulates that failure to carry out this duty will lead to their delisting from religious bodies or NGOs to regular companies. This will result in them becoming corporate bodies which can be taxed.


The creation of a policy for taxing religious institutions will ensure fairness on the one hand and create a new stream of income for the government. – Written by Olika Daniel Godson