Press Release - Role of Tax Exemptions for NGOs highlighted

Lahore, March 11: NGOs have played an active role for the socio-economic development of Pakistan and they can further contribute in future but their capacities needs to be enhanced, this was recommended by the participants at the conclusion of a four day workshop on ‘Capacity Building Program for NPO Tax Exemptions’ organized by NGO Resource Centre here on Friday.

The workshop was attended by twenty eight participants, mostly head of the organizations and finance managers from 23 major NGOs of Lahore and Southern Punjab. The workshop was organized under NGO Institutional Management and Certification Program (IMCP) funded by United States Agency for International Development (USAID) and Aga Khan FoundationUSA & Pakistan. The workshop was facilitated by Muhammad Ashfaq Ahmed, Project Officer Certification, IMCP, NGORC.

Mr Qadeer Baig, Deputy Director, NGORC highlighted the role of NGOs in the socio-economic development of Pakistan and briefed about the IMCP project and its features.

Highlighting the background of the program, he said that Pakistan’s NGO sector is facing exciting new challenges. The availability of funding from donors and a gradual recognition of the place for civil society among both the public and private spheres has seen tremendous growth in the number and scope of NGOs in the country. Yet, they face many obstacles. Limited access to resources often poses challenge to sustain their organizations and program benefits.

While briefing about the workshop, Muhammad Ashfaq Ahmed, Project Officer IMCP, mentioned that NGORC initiated a ‘Capacity building for NPO Tax Exemptions Program’ that aims at capacity building of NGOs to seek tax exempt status from Central Board of Revenue (CBR).

He also elaborated that this capacity building program consists of three major components: information sharing; training; and follow-up, which has brought major change in the number of NGOs compliance for tax exemption.

Highlighting the background of tax exemption status, he said that previously, about 965 NPOs were registered with the CBR as tax-exempt organizations. The exemption was given under two legal provisions. One of these is Clause 58 of Schedule II of the Income Tax Ordinance, which exempts the NPO’s business income from income tax. The other provision is Section 61 of the Income Tax Ordinance, which exempts a donation to the NPO from tax and also provides for tax relief to the NPO on certain costs (for example, utility bills). Of the total number of registered tax-exempt NPOs, only about 38 have been exempted under Clause 58. The CBR exhibits caution for granting Clause 58 exemption because it can distort the market.

Every year, approximately one-third (300) of the NPOs registered with the CBR apply for renewal of their tax-exempt status. Whereas every year, about 130 – 150 NPOs apply to the CBR. Out of those who have been applying in the past, only about 60 get tax exemptions from the CBR in any given year.

While discussing in groups, participants highlighted the role of NGOs in the process of socio-economic development of Pakistan and emphasized that Tax Exemption Status would further open new doors of corporate and indigenous philanthropy for them.

Participants also appreciated the efforts made by NGORC for facilitation in getting tax exemptions status which has enhanced their capacities to meet the set criteria and also follow the process in a much more systematic manner.

During the workshop participants were briefed about the different parameters, types of tax exemptions status and their benefits. While discussing, these concepts participants also shared their experiences of working with CBR and highlighted the problems faced by them in terms of getting tax exemptions status information and application process.

During the discussion, participants also developed strategies for applying for the tax exemptions status and also asked for the NGORC’s assistance in this process.

Earlier, as a part of this program NGORC has conducted seven such workshops throughout Pakistan attended by more than 100 NGOs. In future, NGORC plans to organized few similar workshops too.