About eighteen months ago I remember being scandalised by the suggestion that Oxfam should pay tax to the Sri Lankan government to enable them to get 25 four wheel drive vehicles released from the docks in Columbo to assist with Oxfams aid relief effort following the tsunami. In the end it transpired that Oxfam had to pay the Sri Lankan government $1m in import duty for the vehicles used in the tsunami reconstruction.
Now a similar scenario is unfolding in Aceh in Indonesia. The Indonesian government is imposing a tax on the use of millions of dollars of aid contributions. The government is claiming that NGOs need to pay a 10% value added tax on donations used to pay sub contractors for reconstruction and other relief effort. USAID has received a tax bill for $10m for a project where it is rebuilding the highway down the western coast of Aceh. Another American NGO has received a 10% tax bill on a $1.5m project to build a school in Aceh and the project is now under threat due to a shortfall in funds.
Where is the incentive for NGOs to step in and help if when disaster strike the governments of those countries affected turn round and bite the hand that feeds them. The NGOs will of course do their best help when these disasters strike regardless of the politics or the attempt to tax their aid but what about those who fund the NGOs. They will not continually dip into their pockets to provide funds that just disappear into the national coffers of the affected nations without ever going near those the money was intended to help. If the UN wants to do something useful how about getting all nations to agree not to tax those who come to help them when they are afflicted by some disaster.