March 27, 2019

PWC Nigeria has stressed the need for tax administrators to simplify tax payment process in Nigeria, to increase compliance level. The Head of Tax, PwC Nigeria, Taiwo Oyedele, while speaking at the firm’s Tax Academy in Lagos, on Wednesday, said Nigeria’s tax revenue to GDP ratio ranked among one of the lowest in the world. Oyedele expressed worry over the enormous challenges taxpayers face in the process of paying taxes in Nigeria, underscoring the need for simpler process through the use of technology. He argued that the adoption of technology would fast-track the processes, and ultimately check tax evasion and avoidance in Nigeria.“Nigeria does not 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.   “It is a contradiction when you need tax money, but you make the process very difficult. If you simplify it by using technology, what that does is you are encouraging 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 pays that does not 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.” He continued: “Everything we do today is impacted by technology, which 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. Even when you need your tax clearance certificate in the past, this used to be like rocket science. But with technology, one should be able to get that immediately. We know that these platforms are not perfect yet, so our role as PwC is to help many people to pay their taxes and also paying taxes ourselves,” he added.   Source: Guardian

Taxation globally is seen as a way of mobilising and supporting a nation’s financial resources. In this vein many nations have been taking the initiative to ensure that the tax administration is efficiently operated. The Nigerian tax system is beset by myriad of challenges, such as non-availability of tax statistics, inability to prioritize tax effort, poor tax administration, multiplicity of taxes to mention a few. In the quest to make tax payment stress-free and convenient, and to improve the doing-business environment in Nigeria, the tax management agency has introduced some reform initiatives to reduce the time for filing and paying taxes by 50% and to improve transparency and efficiency in tax administration. Already, the new tax reform initiatives are beginning to bring significant benefits to the government. The new tax reforms by the Federal Government has impacted tax revenue profile of the government as a record N5.3 trillion tax revenue was generated in 2018 based on data released by the Federal Inland Revenue Services (FIRS) recently. The tax reforms majorly centred on ease of filing federal taxes, tax amnesty for voluntary asset declarers (VAIDS) and getting more people into the tax net. The data released by the FIRS Chairman, Mr. Babatunde Fowler, recently showed that the N5.320 trillion collection is the highest revenue ever generated by FIRS in history. The highest in FIRS was N5.07 trillion generated in 2012. FIRS’ generation of N5.3 trillion is significant as it was at a period when oil prices averaged $70 per barrel. The oil price was at an average of $100 to $120 per barrel between 2010 and 2013. The non-oil component of the N5.320 trillion is N2.467 trillion (53.62 per cent), while oil element of the collection is N2.852 trillion (46.38 per cent). Mr. Fowler said: “I believe that if we continue with the same pace, we can reach 20% of the tax mix comprising of revenue from SMEs by 2019. The government fully supports us. Some projects may take a year or more to develop, but citizens’ belief in the tax system is uplifted even when they see work in progress. “Just like some of the other oil-rich countries, we never imagined that taxation would be the main way to generate revenue. Now we appreciate the fact that oil is a resource with a price determined by more developed countries, and with that, we are disadvantaged. “There is a 2026 agenda for African countries to be able to fund their budgets internally without grants or aid. It is something we can do right now. Nigeria can show the rest of the world that it can transform within a short time and fund its own budget with taxation as a primary source of revenue.” This reform initiatives, driven by the Presidential Enabling Business Environment Council (PEBEC), the Federal Inland Revenue Service (FIRS), the Kano State Inland Revenue Service (KIRS) and the Lagos State Inland Revenue Service (LIRS), include: stating the timeline to complete corporate income tax (CIT) audit on the website; registering companies on the E-filing platform and creating a simplified single schedule for each tax type on the platform, an FIRS report recently indicated. Thus with these reforms, the report said taxpayers now file and pay federal taxes online from the comfort of their offices or home; taxpayers now make electronic payment and filing of state taxes including PAYE, etc. and employers now remit statutory deductions on behalf of personnel online. In addition, corporate income tax (CIT) audits is now done within a 63-day timeline and there is access to e-platforms for all classes of tax payers. The report also indicated that the process is simple and seamless as all that the tax payer needs to do is visit the FIRS website, file all federal taxes online and to pay for Value Added Tax and Company Income Tax. Other benefits of these online tax payment platforms include; improved transparency and efficiency in tax collection and administration and improved tax revenue to even make tax payers experience better, the report said, adding that continuous improvement on the e-platform for better taxpayer experience is based on feedback received. For Lagos and Kano states, which represent the two hubs of business in the nation, tax payers can also visit the Lagos Inland Revenue Service (LIRS) and Kano Inland Revenue Service (KIRS) websites to make electronic payment of taxes including monthly PAYE. To enhance service delivery, electronic self-service help desks are available at all FIRS offices for payment of taxes. Dr. Jumoke Oduwole, Senior Special Assistant to the President on Industry, Trade and Investment said: “We are pleased with the results the reforms are achieving, and we hope that as we work to deepen these reforms they will further strengthen the system to truly drive economic growth.”   Source: Dailytrust

Minister of Budget and National Planning, Senator Udoma Udo Udoma and Executive Chairman of Federal Inland Revenue Service (FIRS) Mr. Babatunde Fowler of government’s intention to raise the rate of value added tax (VAT) before the end of 2019 is presently causing ripples among various categories of Nigerians. But experts have warned that such a move will further hurt the Nigeria’s economy and make the people poorer. At a Senate hearing on 2019-2020 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) last Tuesday, served the notice on the lawmakers that in view of imminent wage increment stemming from increase in minimum wage from N18,000 to N30,000, the Federal Government intends to hike the current rate of value added tax (VAT). Udoma recalled “that as a result of agitations from the unions that the President set up a tripartite committee to look at the Minimum Wage. Every five years, it is supposed to be reviewed. It has not been reviewed even though there is no doubt that for both the Federal Government and states; it is a tough time to review wages. But the N18,000 is really too low and it is difficult for people to live on N18,000. The President supported a revision but it is important that as we are revising (the minimum wage), we make sure that it can be funded that is why we set up the Bismark Rewane Technical Committee. So we will be coming to you. There may be some changes maybe in VAT and other things. But we will be coming to you in order to make sure that we can fund the minimum wage.” On his part, Fowler told Senate Committee on Finance “I believe that by the end of this year, government and Nigerian people should be ready for an increase in VAT. A lot of Nigerians travel to Ghana and other West African countries and they can see that theirs’s much higher. They pay when they go for those trips. We should be ready for an increase in VAT. I can certainly see an increase in VAT of at least 35 per cent to 50 per cent this year based on our enforcement activities. There, certainly will be an increase in Company Income Tax and also on Petroleum Profit Tax.” Although Udoma tied the plan to planned wage increment, talks about raising VAT rate in Nigeria has been perennial. As late as January this year, Minister of Finance, Mrs. Zainab Usman at the launch of the Strategic Revenue Growth Initiative in Abuja, targeted at improving revenue sources for government the move had become imperative as a result of the fiscal challenges the government is confronted with in providing infrastructure for its people. “There will be a VAT increase. During the course of 2019, we will have clarity as to which items and what the rate will be and we will have to take a request to the National Assembly for amendment before it takes effect. “There is also going to be luxury tax. Already, there is luxury tax imposed on things like jets, yachts and few exceptional items that are classified as luxury and the Chairman FIRS will speak to that but we are contemplating increasing excise duties on carbonated drinks just like we have excise duties now on Tobacco and alcohol. But this is going to be a subject of study because we have to identify which ones will be affected and the best way in which to apply the taxes”, she stated. However, in a fragile economy just returning to growth trajectory after a biting recession, discouraging consumption by increasing VAT may be counterproductive to the economy. There has thus been a cacophony of voices against the move. Governor of Ebonyi state, Mr David Umahi in criticizing the plan described the concept as digging a hole to fill a hole. “Today, I read in the papers where the federal government is lifting VAT from five percent to 35 percent to pay salaries. For me, it’s all about digging a hole to fill a hole. We have not come to the point of realization of how to solve our problems. So, if VAT is lifted from 5 to 35 percent which means that any of us going to buy anything will pay 35 percent more. So, no one should celebrate (election victories) yet. We are in for deeper problems all over the nation. No governor will make magic or President will make magic until we sit down to solve our problems. If they give us N2 billion and the wage bill is N2 billion, you cannot make any other magic. The most important thing we can do for civil servants is what I have done for you by giving loans to you”, he said. Organised Private Sector (OPS) cautioned against the plan warning that it would hurt manufacturers, businesses and consumers alike. In a statement by Nigeria Employers’ Consultative Association (NECA), umbrella body for OPS and Voice of Business in Nigeria insisted that manufacturers and businesses were already saddled with so many challenges, such as infrastructural decay, power, among others. The statement by NECA’s Director-General, Mr. Timothy Olawale, said “the planned increase would erode the gains of minimum wage for low earners, and further weaken their purchasing power, among others. The planned increase of VAT will have far-reaching implications for manufacturers, businesses and consumers alike. Manufacturers and businesses are already saddled with several challenges, such as infrastructural decay, power, etc. “Some companies are closing shops due to some of these challenges while others are still struggling to stay afloat. The proposed increase in VAT would definitely lead to an increase in the cost of doing business, and would likely be passed to the consumers whose purchasing power is already weak. Government does not have to increase VAT in order to enable it pay minimum wage. However, in the event that government must increase VAT against the will of the people, it should be limited to luxury or