Tyrone Reid, Senior Staff Reporter
Thousands of charitable organisations operating in Jamaica are breaking the law by not filing the requisite annual returns with the Companies Office of Jamaica (COJ). The charities are also failing to file income and expenditure statements with the COJ.
Information obtained from the COJ showed that roughly 80 per cent of the just under 4,100 registered charitable organisations in the country are non-compliant.
"There are 4,064 active companies having a form type 'limited by guarantee with share capital" or 'limited by guarantee without share capital' (and only) 893 of these companies are up to date in regards to their filing obligations with the COJ," read a section of a statement provided in response to Sunday Gleaner queries.
Getting charitable organisations, including churches and other benevolent associations, to play by the rules has been a perennial problem for the COJ.
Back in February 2010, with less than a week to the close of an amnesty, only 526 of the more than 2,000 registered charitable groups at that time took advantage of the amnesty by filing the required documents.
The executive agency made an appeal for charitable groups to take advantage of the reduced costs for filing outstanding documents including annual returns as well as income and expenditure statements.
Under that amnesty, charitable groups were allowed to file outstanding documents at reduced fees of between 50 and 75 per cent.
The COJ also warned that groups which do not file documents could be sued or removed from the register but not much has changed since then.
Judith Ramlogan, chief executive officer of the COJ, told The Sunday Gleaner that the non-compliance is not an issue that should be taken lightly.
"It is a big deal because companies ought to be compliant," said Ramlogan.
She suggested that companies that fail to file the required documents are doing more harm to their operations than they know as multilateral lending agencies with grant funds ready to donate to them usually check with the COJ to see if a charitable entity is abiding by the rules.
"International agencies might want to find out if a company is practising good corporate governance (before they donate)," she said.
Ramlogan told our news team that some entities have said they are unable to file the relevant documents with the COJ because their directors are changed on an annual basis. "These are part-time jobs, and they don't have the time to go back and provide the statements. In other cases no proper records are kept or they say that the grants are to carry out the work of the organisation and not for administrative functions," said Ramlogan who added that "compliance requires a full-time person".
Meanwhile, Meris Haughton, director of communications at the Tax Administration Services Department, told our news team that not every entity that claims to be a charity operates as such and plays by the rules.
"There have been instances where a charitable status has been revoked," she said.
Haughton also explained that there are two levels of charitable status in Jamaica.
All charitable entities enjoy income tax exemption while those who are approved charitable organisations are able to accept donations and provide a receipt which allows donors to claim the donation as a deduction, provided it does not exceed one-twentieth of the donors' statutory income.
Haughton said all charitable entities must meet a certain criteria and checks are made periodically to ensure that they meet the requirements in order to receive the income tax exemption.
However, she admitted that the Tax Administration Services Department is not able to review the operations of every charity annually.
"You won't be able to do a hundred per cent yearly, so we do it periodically," she said.
Information gleaned from the Tax Administration Jamaica's (TAJ) website noted that a condition for continued approval is that charitable entities must submit audited financial statements at the end of each financial year.
However, Haughton said the TAJ is not allowed to release the financial statements filed by the charitable entities.
"We would be breaching their privacy act if we did so. There is a general provision that we can't disclose things that are filed to us," she said.
Section 12(h) of the Income Tax Act exempts from Income Tax the income of any corporation or association organised and operated exclusively for religious, charitable, scientific or educational purposes.
Making donations to approved charities
For the purpose of ascertaining the chargeable income or statutory income, as the case may require, any person (individual, company or organisation), may deduct the amount of any donations (not exceeding one twentieth of the statutory income) to any institution or organisation established and operated exclusively for charitable or educational purposes and approved by the minister responsible for finance.
What it means to have charitable status
Under Section 13(1)(q) of the Income Tax Act, any institution or organisation established and operated exclusively for charitable or educational purposes and approved by the minister responsible for finance, by order, is able to accept donations and provide a receipt which allows donors to claim the donation as a deduction, provided it does not exceed one-twentieth (1/20) of statutory income.
- Courtesy of the TAJ
According to Phillips, as part of the planned comprehensive legislative reform of the tax system, legislation will be introduced to provide clear guidelines for the tax treatment of charities until the Charities Act, which is expected to be tabled in Parliament by September ."The harmonisation of tax treatment of charities across all tax types is to be concluded by the end of May 2013. Further, a new registration process for charitable organisations is to be in place by November 2013," said Phillips.