Tax Penalties, Backdated Assessments Threaten NGOs – Report

A report released titled "Compliance or Constriction? Assessing the Nigeria Revenue Service Tax Drive and Its Impact on the Sustainability of Nigerian Civil Society" warns that aggressive tax enforcement by the Nigeria Revenue Service (NRS) is causing significant financial stress on Nigerian civil society organizations. The study, conducted by Dayo Olaide and Olalekan Saidi, surveyed 53 nonprofit organizations between 2023 and 2025.

The findings reveal that 43.4% of the surveyed organizations, 23 out of 53, received some form of financial demand from tax authorities. Among those approached, 14 reported additional penalties or interest on top of the principal tax liabilities. The report warns that these unexpected financial obligations, particularly for organizations that heavily rely on donor-funded projects, limited reserves, and have little room for unplanned expenses, could significantly undermine their ability to deliver public-interest programs.

Interestingly, even organizations that paid their tax assessments in full or those that negotiated payment arrangements were still hit with penalties. The study found that in six out of nine cases where organizations had unresolved cases, they also reported penalties. This suggests that contesting an assessment or negotiating a payment plan does not necessarily alleviate the additional financial burden caused by penalties and interest.

The report notes that the combination of principal assessments, penalties, and interest often creates liabilities that organizations did not anticipate when preparing their budgets. Existing grant agreements often prohibit organizations from charging these unexpected liabilities to project funds, forcing them to seek alternative sources of payment. For nonprofits with limited unrestricted income, the added costs may necessitate difficult decisions between meeting tax obligations and maintaining planned activities.

Larger organizations faced more complex tax demands, including value-added tax (VAT), withholding tax, and stamp duties, while smaller and newer organizations reported narrower tax exposures. However, the study emphasizes that even modest assessments could pose serious difficulties for organizations with limited reserves. Over half of the surveyed organizations facing demands between ₦5 million and ₦20 million, and those above ₦20 million, reported very severe financial effects.

Additionally, half of the organizations facing demands below ₦1 million also classified the impact as very severe.