Churches are not fully exempted from tax despite what some people believe. Many Churches break tax laws for various reasons for example outright tax evasion or lack of knowledge about their tax obligations.
a. Affiliate Disclosure: These are affiliate links from which we receive a commission at no cost. Read full Affiliate marketing disclosure HERE.
b. Tax Contents Disclaimer: The tax industry in Kenya is very dynamic. The tax contents in the posts are not professional advice. Read full disclosure HERE.
One day, I was watching a certain famous Pastor preaching on TV. After the sermon ended, the Pastor invited the listeners to send a certain amount of money to be prayed for. Prayers are supposed to be free but now the Pastor was selling prayer services.
The Pastor went ahead and informed the listeners the Holy water from Jordan had arrived and anyone who needed the water should send a certain n amount of money but they will have to pay for delivery charges. The Pastor also talked about the anointing water and handkerchiefs on sale for more blessings.
I have a question for you: Was the Pastor aware about tax obligations for the services they were offering and the goods they were selling?
Why Tax Comply?
Let us discuss the importance of tax obligation’s awareness by Churches. There are many reasons why Churches should be aware of their obligations. The following are some of those reasons.
1. Avoid legal problems:
By not complying with tax laws, the Church may face legal consequences, penalties, fines, etc. Churches can avoid these consequences and retain their legal compliance by being aware of their tax obligations.
2. Keep Church’s tax-exempt status.
While churches are often exempt from country tax laws, there are a few restrictions on this exemption. By complying with these requirements and upholding their tax obligations, Churches can keep their tax-exempt status.
3. Preserve Church’s reputation:
By breaking tax laws, the Church runs the risk of damaging its standing and losing the confidence of the general public. Being aware of their tax responsibilities and following the tax laws, Churches can avoid negative.
4. Uphold biblical principles:
Churches have a responsibility to manage their resources, which includes paying taxes. One way Churches can demonstrate their commitment to biblical principles is by complying with tax laws.
5. Ensure fair treatment:
Complying with tax laws ensures that Churches receive the same treatment as other persons for example non-profit organizations. By timely filing their taxes returns, Churches can ensure they receive the same advantages and safeguards as other taxpayers.
6. Maintain transparency:
Complying with tax laws ensures that the church’s financial activities are visible to the general public and its members. Being aware of and abiding by their tax obligations, Churches may give a clear and accurate picture of their financial condition.
7. Avoid conflicts of interest:
Financial management conflicts of interest or irregularities can be avoided by adhering to tax laws. One way that Churches will guarantee and demonstrate that financial choices are made with the organization’s and its members’ best interests in mind is by paying their taxes.
8. Ensure compliance with other laws:
In addition to tax requirements, Churches must abide by other laws. Churches can avoid legal issues and maintain their status by being aware of and adhering to all laws in the land.
9. Avoid unintentional noncompliance:
Churches can avoid unintentional noncompliance brought on by a lack of legal understanding by being aware of their tax obligations. By being informed of their tax obligations, Churches can take proactive steps to ensure they are in compliance with all laws in the land.
10. Enhance financial resources:
By eliminating unnecessary taxes penalties, Churches can enhance their financial resources by adhering to tax laws. By timely filing their tax returns, Churches can allocate more funds to their main goals.
11. Protect donors:
Churches are responsible for protecting their donors from dishonest or unethical behaviour, like tax fraud. By timely filing their tax returns, Churches can demonstrate their adherence to moral fundraising techniques.
12. Ensure proper use of funds:
Complying with tax laws enables the legal application of Church funds. By complying with tax laws, Churches can ensure that funds are dispersed in line with their mission and tenets.
13. Comply with reporting obligations:
To be in compliance with tax laws, the Church must submit annual reports to the tax authorities as part of its reporting obligations. By keeping these obligations, Churches can show that they value transparency and accountability.
14. Avoid negative publicity:
Failure to abide by tax laws may result in negative publicity and damage the Church’s reputation. Churches can prevent these negative effects and maintain a positive reputation by being aware of and fulfilling their tax obligations.
15. Create accountability:
When tax laws are followed, the Church’s financial management and activities will be accountable. For example, Churches can demonstrate their commitment to prudent financial management by timely filing their tax returns.
16. Protect the pastor and board members:
To protect the pastor and board members from personal liability, tax laws must be followed. Churches can avoid legal issues that could put certain leaders in jeopardy by being conscious of and following through with their tax obligations.
17. Set a good example:
Complying with tax laws sets a good example for the Church as well as the congregation. Churches can demonstrate their commitment to moral behavior and inspire others to do the same by paying their taxes on time.
18. Ensure eligibility for grants and other funding:
Many grant programs and other funding sources have requirements for eligibility that include compliance with tax law. Churches can make the most of their funding options and ensure they are eligible for these opportunities by complying with tax laws for example timely filing tax returns.
19. Avoid audits and investigations:
If Churches break the law on taxes, the tax authority or other regulatory agencies may audit or investigate you. Churches can avoid the spotlight and maintain a low profile with regulators by understanding and meeting their tax obligations.
20. Respect government authority:
Churches have a responsibility to respect and follow all laws of the land, especially tax laws. Awareness of and meeting tax duties will help the Church demonstrate commitment to following tax laws and serve as role models for their congregants and the greater public.
Conclusion
Understanding and complying with tax obligations is crucial for Churches. Compliance with tax laws not only helps Churches avoid legal problems and keep their tax-exempt status, but it also promotes transparency, accountability, and moral behavior in financial management
By being aware of their tax duties and meeting reporting requirements, Churches can demonstrate their commitment to good stewardship, protect their donors, and expand their options for funding.
Furthermore, following tax laws can aid Churches maintain their reputation, foster public confidence, and set a positive example for their members and the general public. Churches are required to make tax compliance a priority and maintain ongoing awareness of their tax obligations as a result.
Church Tax Compliance
Churches fail to comp,y with tax laws because of two reasons:
a. They do not want to pay tax.
b. They do not know how to comply with tax laws.
Thank you for reading the article.
Dr. Wakaguyu Wa Kiburi.
