March 25, 2019 – Sunmola David & CO

MAN Cautions FG Against VAT Increment

The Manufacturers Association of Nigeria (MAN) on Thursday said the proposed VAT rate incremement was unfriendly to the manufacturing sector. The Director-General of the association, Mr Segun Ajayi-Kadir, made the remarks in Lagos, in spite of the rebuttal from the Federal Inland Revenue Service (FIRS) on the issue. Ajayi-Kadir also said the proposed VAT increment did not take into cognisance the prevailing times and ongoing government efforts to re-invigorate the economy. The director-general said that as plausible as the recommendation to increase VAT looked, implementing it at this time would boomerang. According to him, the timing is inappropriate, especially at a time when the minimum wage of N30,000 was just agreed upon. “This can send the wrong signals that the government is insensitive to the plights of the low- and middle-income earners, who are clearly in the majority. “MAN still wishes to state the implication of carrying out such policy, if the alleged proposed increase in VAT is anything to go by. “It will be seen as a typical case of government simply taking back what was given with the right hand through the National Minimum Wage with the left hand, through increase in VAT,” he said. Ajayi-Kadir urged the Federal Government not to increase VAT at this point in time, but to consider the implementation of the other tax specific recommendations. He also advised the government to continue to ramp-up support for the manufacturing sector in the best interest of the over 200 million Nigerians. The director-general said that Nigerian economy would be in a more vulnerable state, if VAT should be increased now. He said that the burden of the tax would be shifted to the Nigerian consumers that were already struggling. In addition, Ajayi-Kadir said the economy would certainly experience demand crunch, inventory of unsold items would soar, profitability of manufacturing concerns would be negatively impacted, many factories would witness serious downturn or wound down operations. This would also worsen the already high unemployment position in the country. According to him, this is above 23 per cent, as Nigerians currently employed by manufacturing concerns and other businesses may join the reserved army of unemployed and further bloat the unemployment rate. “MAN as a strategic stakeholder in the nation’s development agenda, appreciates the need for government to generate more revenue to fund its developmental initiatives amidst declining revenue from oil. “However, government should thread with caution in the drive for improved revenue for the following reasons. “The economy just recently exited recession with the fragile growth rate of less than two per cent recorded in 2018 and should be delicately managed. “The precarious macroeconomic condition of the country requires palliatives that will improve investment and not higher tax burden. “The prevailing high lending rate, double digit inflation, low per capita income, high unemployment rate and a low 1.91 per cent growth rate, amidst 2.6 per cent population growth rate that are already cumulatively limiting competitiveness, can be further worsened. “Any increase at this time will not be in sync with the standard practice that expects the administration and implementation of VAT to be effected in a manner that distortion and possible adverse effect on the economy are minimised or avoided. “An increased VAT will spur spontaneous increase in inflation rate occasioned by increased prices of goods and services, ” he said. Ajayi-Kadir decried the unfair comparison of VAT rate in Nigeria with other countries in Africa, stating that the macroeconomic dynamics and the level of competitiveness in these countries were not the same with the country. In addition, he said the fact that many states of the federation also had other consumption taxes like VAT currently being levied on businesses should call for circumspection. “There is no doubt that VAT is an important revenue source to the government for running the affairs of the country. “However, the principle of a good tax system is predicated on payment convenience, otherwise it could boomerang, leading to crowding out of businesses; more misery to the citizens and even lesser revenue to the government. “The high PCI and National Minimum Wage countries like South Africa, China and the likes are able to adequately offset the impact of high VAT on growth and wellbeing of the populace,” he said. Ajayi-Kadir proposed that an ideal tax policy should be such that took into cognisance, the status of the economy. “An ideal VAT policy for Nigeria should take into account, the current profiles of Nigeria’s Per Capita Income (PCI), National Minimum Wage (NMW); and Global Competitiveness. “PCI and NMW will help highlight what will be the implication of upward review of VAT on the already depleted wellbeing of majority of Nigerians. “While Global Competitiveness will present insight on the impact of such review on the real sector, particularly the manufacturing sector. “Conversely, given the low Nigeria’s PCI, NMW and Global competitiveness, any increase in VAT at this time, will further depress consumption, industrial production and wellbeing of Nigerians. “In MAN’s previous position and recommendations, the association had advised government to widen the tax net rather than increasing the rate to meet the growing need for more revenue to address the development objective of the country. “There is also the need to harmonise taxes/levies/fees payable by businesses, so as to attract more investments that will translate to higher productivity, and more tax revenue for the government in the medium and long term,” he said. (NAN). Source: Leadership

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Deadline For Filing Of Annual Employees’ Tax Returns (Form A)

TAX SERVICES / Tobi Aminu

Section 41 of the Personal Income Tax Act (PITA) Cap P8 LFN 2004 (as amended) requires all individuals to submit their individual tax returns (Form A) with the relevant tax authority. This return is for all income earned from all sources in the preceding year and it is due for submission by 31 March of every year. Individuals are by this notice, reminded of their statutory obligation to file their 2018 annual tax returns with the relevant tax authority, on or before the deadline of 31 March 2019. In the same manner as the employers’ tax returns (Form H1) were filed, Form A for Lagos State Internal Revenue Service (LIRS) and Rivers State Internal Revenue Service (RIRS) should be filed online. Source: Mondaq

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Supreme Audit Institutions not appreciated – Ayine, Auditor-General of the Federation

Accountancy Services / Tobi Aminu

The Auditor-General for the Federation, Mr. Anthony M. Ayine, has identified years of weak auditing, especially in developing countries, as the root cause of poor appreciation by citizens of the value and importance of Supreme Audit Institutions for their central role in the accountability cycle across the world. Ayine spoke when he presented a paper as one of the lead speakers at the just concluded 9th International Public Sector Conference organised by the Association of Chartered Certified Accountants (ACCA), in Prague, Czech Republic. “Years of weak auditing cause the average citizen to be unaware of the value and importance of the SAI as an institution that is central to the accountability cycle,” he declared. In his words, “there is a need for the citizens to participate more and become better aware of the role of the SAI.” Speaking on the principal challenges facing Supreme Audit Institutions (SAIs) globally, Mr. Ayine said it was regrettable that “the INTOSAI Lima Declaration of 1977 on the prerequisites for the independent and effective functioning of SAI is yet to be well applied across many developing countries.” The Declaration of Lima, adopted by the IX International Congress of INTOSAI in Lima, Peru, in 1977, is considered to be the Magna Carta of government audit and defines the prerequisites for its independent and effective functioning. The International Organisation of Supreme Audit Institutions is the worldwide affiliation of governmental entities whose members comprise of Chief Financial Controller, Comptroller-General, Auditor-General Offices of nations and it was founded in 1953 in Havana, Cuba, but with headquarters in Vienna, Austria. While recognising social media as “a key channel” for information dissemination, Mr. Ayine however advised Supreme Audit Institutions to be careful so as “not to get the institution involved in public debates,” says the key question remains ‘how vocal should SAI be on social media?’ Mr. Ayine also gave some pieces of advice on how SAIs can support the implementation of Sustainable Development Goals. According to him, “SAIs can baseline, benchmark and track progress across the various institutions responsible for delivery of the government’s commitment under each SDG.” Similarly, he told his audience that SAIs “can also invest in their capacity to give expert recommendations to these key institutions,” while SAI reports “should be timely and the possible efficiency savings or gains should be clear.” Speaking further on the role SAIs can play in supporting SDGs implementation, Mr. Ayine, who was recently appointed onto the African Union (AU) Board of External Auditors, said: “Year-on-year audits by the SAIs will help maintain the focus on achieving the SGDs, and will help ensure that improvements that are achieved are sustained.” Speaking from his vantage position, Mr. Ayine advised SAIs on how they can take advantage of professional accountancy organisations to support the sustainable public sector. He stated: “There are significant competency gaps within the public sector finance professional cadre, especially in developing countries. IPSAS (International Public Sector Accounting Standards) implementation is a case in point. Professional accountancy organisations should continue to reach out to public institutions with these competency gaps and offer their support, especially with training and certification. “Professional accountancy organisations can also look more closely at various disciplines that intersect with accountancy, and perhaps provide more support for cross-disciplinary expertise,” he said, adding: “This will be of great value for accountants and other financial professionals working in the SDG space.” The flagship global event for finance professionals in the public sector featured leading public sector speakers at the top of the profession and brought together hundreds of public-sector finance professionals from across the globe. The stellar line-up of speakers among whom was Nigeria’s Auditor-General, Mr. Ayine, included Mr. Tomáš Vyhnánek, Deputy Minister, Ministry of Finance of the Czech Republic; Pamela Monroe-Ellis, Auditor-General, Jamaica; Stephen Walker, President, Chartered Accountants Australia New Zealand; Mike Driver, Head of the Government Finance Function, UK Civil Service and Thomas Müller-Marqués Berger, Chair, Accountancy Europe Public Sector Panel. Helen Brand, chief executive at ACCA said of the “fantastic line-up of speakers” from across the world: “The public sector faces increasing financial constraints at a time when expectations about the quality of public services are growing,” and pointed out that the conference aimed to show “how professional accountants can be at the heart of driving change and improving accountability, in order to ensure the public sector can meet the demands of the future.” Iain Mansfield, Head of Public Sector at ACCA said: “ACCA creates professional accountants who build successful careers within the public sector – that’s why we have over 64,000 public-sector members and students across the globe. “I’m delighted that at this conference ACCA is continuing to set the agenda in public- financial management, to help build the public sector accountancy profession the world needs.” ACCA’s International Public Sector Conference 2019 brought together senior decision-makers from ministries of finance, national audit offices and national accounting bodies, leaders in the local government sector, representatives from the global development community and international bodies and senior private sector accountants who work with the public sector in audit, financing and consultancy. Source: Sunnewsonline

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Improve fiscal policies, expand tax base, Economic Commission for Africa ES urges nations

Tax news, TAX SERVICES / Tobi Aminu

The Executive Secretary of the Economic Commission for Africa, Vera Songwe, has called on countries on the continent to improve their fiscal policies, as well as expand their tax base, so they have resources to fund their development projects. Songwe made this call at the 38th meeting of the Committee of Experts of the Conference of African Ministers of Finance, Planning and Economic Development, which opened in Marrakesh, Morocco, on Wednesday. A statement issued by the Communications Section of ECA revealed that Songwe made the call during her opening remarks to the meeting. Songwe said the ability to increase revenue collection was key to the continent’s capacity to finance its development, in particular Agenda 2030 for sustainable development and Africa’s Agenda 2063. “The potential of Africa is, and has always been, promising. With a growing working-age population; abundant arable land and a multitude of other resources, the continent has all the pre-requisites for rapid economic transformation in the next decade,” she said. “However, ensuring the availability of adequate public resources and quality investments to drive structural change requires responsive policies that promote fiscal sustainability, optimize returns from economic activity, and enable economies to fully participate in an increasingly interconnected and globalised world.” She said the meeting of experts will discuss possible solutions. “We are looking for how we can finance better, faster and more equitably our growth and how we can ensure that our young populations can participate in this growth that we are talking about. We can do that by ensuring that we have good fiscal policy. We would want to be like Morocco at 25 per cent so we can actually power growth.” Speaking on tax collection, Songwe said, “Africa could boost revenues by per cent of GDP by addressing its capacity tax constraints. In addition, by better aligning tax rates and revenues with business cycles, countries can boost government revenue by five per cent.” “With just over a decade remaining to achieve the sustainable development goals, it is imperative that the scope and mechanisms of domestic resource mobilization be revolutionized to bridge the financing gap, promote macroeconomic stability and limit external borrowing,” she said. Ms. Songwe also spoke on the importance of digitalization and the digital economy in driving growth as well as optimizing fiscal performance on the continent. She added that the continent would need to re-skill its youth to ensure the digital age is used to Africa’s full advantage. For his part, the outgoing chair of the bureau of the committee of experts, Elsadig Bakheit Ilfaki Adballa of Sudan, also urged the continent to embrace the digital age to expand its revenue base, create employment for the youth and deal with most of its challenges. “With the advent of the digital age, Africa can use the new technologies to push for sustainable development on the continent,” he said. Incoming Chair, Zouhair Chorfi, Morocco’s Economic and Finance Ministry’s Secretary General, said digitization was a great opportunity for Africa. “Our continent is ripe for transformation and Morocco is ready to play its part in making sure we optimize digital tools,” he said. The Conference of Ministers is focusing on the theme; “Fiscal policy, trade and the private sector in the digital era: A strategy for Africa”. Source: Punch

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Experts Harp On Digitisation of Tax Process

Tax news / Tobi Aminu

Tax experts at PwC Nigeria have said digitising the processes of tax payment in the country will increase compliance level, among other benefits. The Head of Tax, PwC Nigeria, Mr Taiwo Oyedele, said this on the sidelines at the PWC Tax academy held in Lagos recently. He lamented the stress and some of the issues associated with the paper tax filing and its proneness to several losses of documents or mix-ups, adding that the earlier “we sort full digital alternatives in tax filing processes, the better.” Oyedele said: “I think it is no longer a question of tax; everything we do today is impacted by technology and technology is making things better and faster and more cost-efficient and cost-effective. “So, it is no longer acceptable for authorities to live in the past. Even though Nigeria is starting late, they say better late than never. “So the idea now is to make technology the platform, not an option, for tax compliance in terms of calculating your taxes, making your payments, and filing your returns, such that even when you need, say for example, your tax clearance certificate, in the past, this used to be like rocket science. “With technology now, one should be able to get that immediately. We know that these platforms are not perfect yet, so our role as PwC, helping so many people to pay their taxes and also paying taxes ourselves, it is to say once we identify what the problems are, we get the stakeholders to come together to see how we can fix it. It is not enough to criticise, we must find the solution together.” He further added: “With our experience dealing with other countries, we know things that work in other places. So, it is very good that we have the Federal Inland Revenue Service, the Lagos State Internal Revenue Service and PEBEC. It is the beginning of the process, and we hope that by this time next year, all these processes will be much better such that the experience of the taxpayer will be a lot better.” He further pointed out that technology would increase tax compliance and in turn increase contribution to the Gross Domestic Product. He added: “Nigeria doesn’t rank very well on the ease of paying taxes. So, Nigeria’s tax revenue to GDP ratio is one of the lowest in the world, yet it is one of the most difficult places to pay tax. “So, it is a contradiction: you need tax money but you make the process very difficult. So, if you simplify it by using technology, what that does is you encourage more people to pay. There is something about compliance cost; it is something that does not benefit government and the taxpayer. “It is actually the money the taxpayer pay that doesn’t get to the government. So, both the taxpayer and the government have an objective to reduce that cost. That is something that technology does for you. It reduces your cost of compliance, and therefore you can get more people into the tax net.” Source: Thisdays

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