Githae puts Kenyan churches on notice over income tax - Corporate ...

Minister for Finance Njeru Githae displays the budget briefcase outside Treasury on 14 June 2012. PHOTO / JAYNE NGARI ?

The Treasury has put churches on notice that they are the next in line to pay taxes for commercial activities that give them an unfair advantage over other investors.

Finance minister Njeru Githae on Tuesday said that some churches and other charitable organisations were running businesses that have not been declared to the Kenya Revenue Authority for payment of tax.

?They must now distinguish what is charitable from commercial activities.

Income from investments in matatus, buildings, schools and hotels must be taxed,? Mr Githae said on the sidelines of the Development Partners Forum at the Kenyatta International Conference Centre in Nairobi.

Housing assistant minister Margaret Wanjiru, however, said the government should put in place a legal framework to define what was charitable and what constituted commercial enterprises before enforcing taxation on church investments.

Ms Wanjiru is the head of Jesus is Alive Ministries (JAIM), a church organisations with vast interests in the Public Service Transport sector.

?As far as I know, any church running a commercial enterprise has been paying taxes. Wherever you put in capital you pay taxes,? she said.

She said treasury should first put in place a more structured way to effect taxation even on landlords.

?I suggest the government engaging stakeholders before taxing. I do not get exemptions from VAT because I am a church minister,? she added.

Although charitable organisations such as churches are tax-exempt, they have dabbled in commercial activities, from running public service vehicles to hotels and conference centres.

Mr Githae said churches were exploiting loopholes in the system to avoid paying taxes. He said charitable organisations should declare such businesses to KRA, which he said was ?cleaning up the tax system? to rope in every Kenyan or commercial enterprises that are supposed to remit tax.

Ms Wanjiru said that in order to strengthen the government position on effecting taxes on landlords or charitable organizations enterprises, there must be consultations.

?We have churches that are unstructured and this is why I insist that government includes stakeholders and build their capacity in order to move forward,? the assistant minister said.

Ms Wanjiru said tenants would shoulder the burden of increased tax on rental income slapped on landlords.

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