WHY PENTECOSTAL CHURCHES SHOULD PAY TAXES.

WHY PENTECOSTAL CHURCHES SHOULD PAY TAXES.

This is not to suggest that you abandon your church or your faith. Am a Christian and an Economist by profession. For one thing, any religious organization that lives up to its commitments to its congregation and community would have nothing to fear from filing a tax return and should clearly start its expenditure patterns which should be inline with the objectives on its certificate of incorporation, After that, it should then be exempted from paying taxes just like every other non-profit. For another, we need to determine if Pentecostals in Uganda are qualified to maintain their status quo as tax exempt organizations considering their vast financial resources. In Uganda’s corporate Income Tax Act establishes a category of exempt organizations. Tax exempt organizations include charitable, educational and religious institutions of a public character (1st schedule of Income Tax Act, Cap. 340). Therefore, Pentecostals being a religious institution is exempted from income tax in Uganda, Pentecostals are exempted from corporation tax because they are regarded as organization of a public character (Bahemuka, 2006) and a non-profit organization (Non-Governmental Organization Registration Act). But of recent am asking my self why Pentecostals should maintain tax exempt status because they are perceived to be business oriented organizations they advertise, price  special service programs, profit oriented which all qualifies them as businesses.

Pentecostals emerged from the church and the movement is connected with a group of Christians that emphasize the gifts of the Holy Spirit. The free dictionary by Farlex described Pentecostals as “any fundamentalist protestant church that uses revivalist method to achieve experiences comparable to the Pentecostal experience of the first Christian disciples”. The Pentecostals in Uganda are registered under Section 1(d) of the Non-Governmental Organizations (NGOs) Registration Act of 1989, amended 2006.so with that background, the law deems them “Tax Exempt”

It will be obvious to rational people that exempting religious organizations from paying any taxes is a clear case of government "respecting an establishment of religion." But throughout history we have seen many otherwise-lucid thinkers insist otherwise, including Supreme Court justices who uphold biblical views when their taxpayer-funded jobs explicitly require them to uphold the Constitution. Because religious organizations are not accountable to the citizens who subsidize them. If churches engage in charitable work that benefits the community, do all citizens have an interest in supporting such endeavors with various tax exemptions? This is the sound basis for tax exemptions for non-profit organizations, whose activities and finances are subject to audit and public scrutiny. In the case of religious organizations, however, the books are closed. A certain new paper publication in Uganda ran an Article explaining and exposing how the different kampala churches run un Audited  books of accounts, my question is who is responsible for this money and how is it spent? Church groups receiving tax exemptions must annually file a detailed 360 statement itemizing where the money has gone.

What if churches do not engage in charitable work? Or do so far less efficiently, effectively - or charitably – than the Amount of Money (Income) that they made? Religious organizations can and do take great advantage of their tax-free status. Many amass great wealth and vast media empires and buildings - all of it off the tax rolls largely contributing to income inequalities. The point is that religious organizations can and do espouse doctrines of intolerance and hatred, filter funds to foreign enemies ( countries). They are nevertheless tax-exempt, their finances never scrutinized, because they qualify as "religious organizations." Tax-exempt status is a privilege - not a right - and churches should be held to the same standards as other non-profits - if not higher standards.

  

A case study of a  Pentecostal  church in town, in the last month, it made 1, 0004, 000 Us dollars on what they called MMO (“My miracle offering”) and they claimed that their motive was to spend it in Israel, Southern Sudan among other countries, that’s fine a good motive but how much of it will be spent otherwise and go un taxed, on top of that, its economically irrational to see that money is collected in Uganda and being spent or taken outside the country that’s already a leakage and its contributing to our own capital outflow?. In the year 2008, the commissioner for Domestic taxes in his speech while in a conference suggested that religious organizations should have clearly audited books, filled returns and their surplus be taxed, this raised many criticisms but thinking the other way round not the obvious, he had a point, The Revenue collection in the financial year 2011/12 fell short by around 7 billion Uganda shillings and this may be partly because the taxable base is small, if we are to fill that difference we have to expand the base and the church would be such a good rescue, Any Money that Is not spent as per their motive be taxed and assets contribute to property tax.

Because it is easily and routinely abused( The tax Exemption). Consider the proliferation of phony churches as a tax dodge. An IRS attorney cites a brothel "church," where sisterly love is offered to male parishioners in exchange for donations. In Hardenburgh, New York several years ago, 235 of the 239 property owners in that town were granted religious tax exemption because the properties of the owners were made branches of the mail-order "Universal Life Church." In Wisconsin, hotels pay parking lots, farms, and communion wafer bakeries are among the church holdings that are tax exempt. Overall, at least $4.2 billion in tax-exempt religious property now exists in that state alone. It's a racket, and it costs taxpayers even more money to monitor, uncover and fight the abuse it invites - none of which would be necessary if such unenforceable loopholes in our tax code never existed. Many Pastor Drive “High End” cars, have powerful houses and dress in imported suits, make frequent first class travels and more than 70% of their congregation are starving and on Foot, what’s Godly in that, Jesus him self was humiliated so that Man can be raised and  that that’s the man we(the pastors) claim to be following. Lets practice what we preach but not the famous coward saying that “do what I say but not as I do”

It costs you and me billions of shillings. Consider that for every tax dollar/shilling a religious organization does not pay, you and I pay it on its behalf either directly or indirectly and on top of that its us that contribute to the dollars they made, you observe a double loss in this scenario. Many are among the wealthiest organizations in the world: by 1971, the amount of real and personal property owned by U.S. churches was approx. $110 billion. In New York City alone, the amount was $3 billion in 1989. A 1986 estimate showed religious income in that year of approx. $100 billion, or about five times the income of the five largest corporations in the U.S.  All tax free. Ask your self these questions, should the taxes of non-religious citizens be higher to subsidize every church, synagogue, and mosque in town? Should working women pay taxes to subsidize clergy and other employees' paychecks, when such positions are overwhelmingly - and legally - restricted to men? Because it makes no sense to deny that tax exemption is a meaningful public subsidy is to put forth an absurd proposition: just consider what your personal financial picture would look like if you never paid any taxes. Yet it is exactly this type of ludicrous logic on which religious tax exemptions have been upheld time and again by our courts.

In conclusion, Non-taxation of Pentecostals is regarded as tax inequality between Pentecostals and business organizations in the country taxation of Pentecostals would increase government income and also reduce the tax burden of other non-tax exempt organizations in the country.

Am suggesting that URA should provide legislation that would make Pentecostals operate in an environment of increasing regulation and scrutiny. This will check the unethical conducts of Pentecostal pastors. Alternatively Pentecostals should be registered and governed under the Trustee Incorporated Act. The trustees should be people of impeccable character other than the pastors. According to the Act, the trustees are responsible for the properties that come into their hands and are answerable and accountable for their own acts, receipts, neglects and defaults. This will impose strict regime of accountability and protect the activity and integrity of Pentecostals in the country. The current scheme is unfair and unnecessary. Pentecostal Churches can and should pay taxes just like everybody else.

For God and My Country.

Andrew Kyambadde M.

Monetary Economist.

will the Market ever trust Mutebile Again?

Will the market ever trust Mutebile again?

In any case he seems to have run out of ideas that can manage an economy that is out of the reform phase

Conventional monetary economics teaches us that financial markets are by configuration very volatile. Empirical evidence shows that exchange rates are more volatile than the underlying economic variables. Yet exchange rate volatility is dangerous because it makes it difficult to plan economic activities, and also destroys confidence in the currency of a country.

Although market fundamentals can explain changes in long run exchange rates, it is the market expectations that explain changes in short run exchange rates. It is factors such as speculative opinion about future exchange rates, rumours of political instability or uncertainty, loss of confidence in profitability of economic enterprises, real interest rate differentials, and market psychology that dictate currency movements in the short run.  

Over the past twelve months, our shilling has undergone a speculative attack because of the sudden change in exchange rate expectations. Since the February general elections last year, market expectations, fed by political and economic unrest and uncertainty, have worsened speculation leading to more volatility in our financial markets.

This forced Bank of Uganda (BOU) to deplete reserves making the country more vulnerable to speculation and exchange rate overshooting. The market expectations were further worsened by Governor, Emmanuel Tumusiime-Mutebile's media utterances when he told the Financial Times of the UK that government had raided the Treasury, took off with about two months of the country's reserves to purchase fighter jets. Although Mutebile later denied having let out government secrets to the media, only novices could accept his denials.

The shilling is sinking
In his characteristic style, Mutebile told the Financial Times whatever he told them as a way of letting the blame for the deteriorating economy off his sleeves, to the attention of his "friends" at the IMF and the World Bank. Little did he know that speculators were out to take advantage of such reckless utterances and drive our shilling to a record low!

The shilling sank so low, to the gladness of the political animals that this country has bred in crowds and soon the rumour mill was running in gear number five thus, "Mutebile has resigned as BOU Governor." The social network prophets of doom took the opportunity of the resignation of the Afghanistan's Central Bank Governor at the time to get their message home. The pit in which the shilling was falling could only become deeper.

In these very pages, I wrote asking, "Who of the two -- Government and Bank of Uganda -- should we blame for our worsening economic situation?" The BOU's continued claim that it had done enough to keep inflation under check, implied that it was government's fiscal policy that was letting the economy down.

Nevertheless inflation and exchange rate depreciation recently peaked and started to lessen. Then the Basajjabalaba saga came up and once again, our central bank Governor was in the press for the wrong reasons. 

No longer the super Governor
Parliament has been consistent in demanding for his resignation for his role in the Basajjabalaba saga. Mutebile, typical of him, faced the cameras and roared, "Only God can take me out of this chair." He went ahead to asked the market players to ignore "the ramblings in Parliament" because "I am here to stay." Indeed after a heated debate in Parliament, the votes were cast and Mutebile was saved by a visibly divided legislature.

Well, cabinet may have succeeded in defending the Governor but will the market ever trust him again? We all know that the position of Governor is critical as far as the health of the macroeconomy of any country is concerned.

Mutebile has been a very successful Governor in the last decade mainly because everyone, literary everyone - from the executive to parliament to the general public and the development partners - had confidence in him. He has been a super Governor. Can he still enjoy this confidence? 

The other night when I was watching news on a local television I heard a number of our Members of Parliament, the few patriots championing the battle against corruption, asking "When Mutebile says he is going nowhere because if he goes the economy would be affected; was this economy invented by Mutebile?"

Mutebile's sleek record
My answer to them is a big YES. It is Mutebile who in 1987, together with a few of his colleagues at the then Ministry of Planning and some expatriates, authored the famous Economic Recovery Programme (ERP) that marked the beginning of the emergence of the Ugandan Economy we are witnessing today. At the time the Mutebiles authored this program, inflation had reached 358.4%, poverty was at 56.7% and the GDP growth of 1.1% was largely driven by the subsistence sector.

Mr. President, I trust you remember how in 1986 your Marxist economic policies had worsened the already bad economic spell Uganda had faced at the hands of Amin and Obote II.  It is Mutebile who restored both fiscal and monetary discipline; agitated for liberalisation of consumer and producer prices to eliminate distortions such as price controls, black markets, high tariffs, smuggling, excessive printing of money to finance fiscal deficits and fixed exchange rate regime.

It is Mutebile who in 1990 wrote the "Way Forward 1", a macroeconomic strategy he authored while working as Permanent Secretary of the then Ministry for Planning and Economic Development.

This policy paper forever changed the face of the economy of Uganda. In his typical arrogant tone, Mutebile asked you Mr. President and your cabinet to choose between failing the economy under the weight of fiscal indiscipline or work for full and sustainable recovery by stopping NRM's thriftlessness.

It is Mutebile who proposed five key reforms that provided a pebble upon which this economy has been built in the last two or so decades. These are:     

(1)    Merger of Ministry of Finance (MoF) with Ministry of Planning and Economic Development (MoPED) in 1992 to ensure fiscal discipline,

(2)    Granting of independence to the Bank of Uganda through three legislations -- the 1993 BoU Statute, the 1993 Financial Institutions Statute, and the 1995 Constitution,

(3)    Setting up of Uganda Revenue Authority (URA) in 1991 to improve revenue administration,

(4)    Setting up of Uganda Investment Authority (UIA) to administer the Investment Code, and

(5)    Abolition of taxes on export goods

Mr President, without question you agreed to implement these reforms and appointed Mutebile the PS of the newly created Ministry of Finance, Planning and Economic Development to execute the task, until he became the Governor. We all know what these reforms have done for this country. That is how critical Mutebile's contribution to the resurgence of our economy has been.

His economics inapt in post-reform
However, as I wrote in these pages back in 2010 when you, Mr President, renewed Mutebile's contract to give him a third term, the embattled Governor has outlived his usefulness.
He seems to have lost ground to the changing times. Certainly he was at his prime in the 1990s and early 2000s. He seems to have run out of ideas to manage an economy that is out of the reform phase.

We need new blood at BOU and Finance. Luckily, in Louis Kasekende, Mutebile's deputy, we seem to possess a guy better suited to guide the post-reform economy into take-off. He was a star performer at the World Bank where between 2002 and 2004 served as Executive Director before having a three-year distinguished service at African Development Bank as Chief Economist.

I am told that actually there is an ideological cold war at BOU between Mutebile and his deputy. The latter, with support from a good number of other top brains at the Bank, believe that the former is still frozen in the past; agitating for policies and economic ideologies which are not in agreement with today's economic realities.

So could this be the time we prepare for his exit? But as we do so we need to be careful on the timing, tactics, and methodology we employ to uproot this monetary fundamentalist out of this critical seat. That is why I supported government when you protected him against the reckless method of operation by Parliament. That is not how they sack a central bank Governor. You may sack a Syda Bumba or a Kabakumba Matsiko using the method parliament used but not the chief guardian of the economy.

Nevertheless, the bottom line remains that we must prepare the post-Mutebile Uganda because sooner or later he has to leave that position. He has lost the confidence he exuded in the last couple of decades. Our financial markets are now vulnerable to speculative volatility owing to the likely continued onslaught on the man with divine right to print and keep our money!