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The International Journal
of Not-for-Profit Law

Volume 9, Issue 1, December 2006

A publication of the International Center for Not-for-Profit Law

Table of Contents

Letter from the Editor


A New Take on Tithing
Claude Rosenberg and Tim Stone

The Great Divide in American Giving
Arthur C. Brooks


Salvation in Court: The Salvation Army v. Russia
Douglas Rutzen

Turkish Grand National Assembly Approves New Law on Foundations

Non-Profit Organizations in South Africa: Reaping the Benefits of the Income Tax Campaign
Tessa Brewis and Ricardo Wyngaard

Civil Society and Electoral Mandate Protection in Southeastern Nigeria
B.U. Nwosu

Velvet Revolution in Iran?
Martin Beck Matuštík

The Russian NGO Law: Potential Conflicts with International, National, and Foreign Legislation
Alison Kamhi

NGOs and Their Role in the Global South
Monsiapile Kajimbwa

Toward an Economic Interpretation of the Nondistribution Constraint
Vladislav Valentinov

Guiding Principles on Non-Governmental Organizations (NGOs)
United States Department of State

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Non-Profit Organizations in South Africa: Reaping the Benefits of the Income Tax Campaign

Tessa Brewis and Ricardo Wyngaard1

In November 2006 an Amendment Bill was passed by Parliament in South Africa that will significantly improve the tax system for non-profit organizations.2 The amendments are viewed as yet another victory for the non-profit sector, as well as an affirmation of the importance of the ongoing Tax Campaign.

The Tax Campaign, which began in the early 1990s, yielded its first major results in 2001 with a complete overhaul of the system of taxation for non-profits and the introduction of the concept of public benefit organizations (PBOs) into the tax legislation. Since then, the Non-Profit Consortium, with the support of key partners such as the Legal Resources Centre, the South African Council of Churches, the Charities Aid Foundation Southern Africa, and more recently the International Center for Not-for-Profit Law, has continued to campaign for the further refinement and improved implementation of the law.

The budget tax proposals announced by the Minister of Finance in February 2006 signified a triumph for persistent advocacy, in that they addressed many of the issues raised by NPC in its submissions and meetings with revenue officials. The budget tax proposals placed the following items on the agenda for the year: the lists of tax-exempt public benefit activities would be refined and extended; the rules for permissible investments for PBOs would be relaxed; the statutory tax rates for the taxable trading activities of all PBOs irrespective of their legal form would be aligned; the dual registration process would be streamlined; and tax benefits would be extended to foreign PBOs operating in South Africa.

The draft version of the bill, published in September 2006, reflected the items identified by the Minister of Finance and concerns raised by the NPC. Although the majority of proposals in the draft bill benefited the non-profit sector, a number of shortcomings were identified. For example, the new aligned tax rates would have meant a 5% increase for most organizations,3 and complicated rules were proposed to prevent PBOs from undertaking foreign investments. The Non-Profit Consortium responded by making a joint submission, together with the Legal Resources Centre and Douglas and Velcich, to the Finance Portfolio Committee, and also arranging an urgent meeting between civil society stakeholders and revenue officials. The final version of the amendments include the majority of NPC's recommendations.

The final changes to the legislation, which will come into operation in early 2007, include the following major advances:

The ongoing interaction between civil society stakeholders and revenue officials has yielded many positive outcomes. Over the years, the relationship has developed into one of mutual assistance and respect, resulting in consistent improvements to the tax system for non-profits. Already on the agenda for 2007 is relief for small organizations, a possible tax amnesty for NPOs, and an increase in tax benefits for donors.


1 Tessa Brewis and Ricardo Wyngaard are affiliated with The Non-Profit Consortium.

2 The Revenue Laws Amendment Bill (33 of 2006) was released on November 3, 2006. For a discussion of earlier developments in law concerning non-profit organizations, see Karen Nelson, "The Taxation of NPOs in South Africa: Rapid Change After a Decade of Lobbying," International Journal of Not-for-Profit Law, vol. 3, no. 1, http://www.icnl.org/JOURNAL/vol3iss1/ar_nelson1.htm.

3 PBOs exceeding the trading limitations contained in the Income Tax Act must pay tax on the income generated from such excessive trading.


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