Private educational institutions
Why are they not taxable?
"Ask me my three main priorities for government and I tell you education, education, and education”. This was Rt Hon. Tony Blair of United Kingdom in October 1996. As far as Nigeria is concerned, the level of infrastructural deficit has made education just one of the critical priorities. There are three other priorities in power, housing and transport in no particular order of importance. For instance, Nigeria has an estimated $300 billion infrastructure gap which the current government needs to finance.
The reality today in Nigeria is one in which private educational institutions are thriving at the expense of the public educational institutions. The one time pride primary and secondary are now shadows of themselves. Many are littered with dilapidated structures and reek of neglect. Interventions and salvage missions by alumni organisations are the stories of these institutions at the moment. The uncertain school calendar has also made the tertiary institutions most unattractive and have increased the number of Nigerian freshmen/undergraduates involved in educational pilgrimages outside the country.
The relevance of an educational system in which private educational institutions complement educational service delivery in a competitive manner cannot be over-emphasised. Nigeria's literacy rate is 69.1% and the country has 54% of her citizens between the ages of 15 and 39. It is important that Nigeria must continue to be a learning society, develop talents and raise the ambitions of the youth. It is important also that Nigerian children should continue to be able to not only “gain the basic tools for life and work in schools [but also] to learn the joy of life: the exhilaration of music, the excitement of sport, the beauty of art, the magic of science as well as learn the value of life i.e. what it is to be responsible citizens who give something back to their community.”
Apart from stable curriculum, private educational institutions charge significantly high fees relative to the public educational institutions. The incidence of high tuition and other related fees has provoked the concern whether or not such institutions are taxable in Nigeria.
In Nigeria, the provisions of section 23(1)(c) of Companies Income Tax Act, Cap C.21, Laws of the Federation of Nigeria (LFN) 2007 (as amended) ('CITA') provide that the profits of any company engaged in ecclesiastical, charitable or educational activities of a public character in so far as such profits are not derived from a trade or business carried on by such company shall be exempt from tax. However, CITA provides for taxation of passive income (dividend, interest, rent or royalty) when earned by such educational institutions.