March 29, 2019

‘Why Nigeria must reduce tax uncertainties, retain high returns’

For Nigeria to attract more foreign investments, government must minimise tax uncertainties, by ensuring that it plans tax reforms such that the content and timing is clearly communicated to tax payers, while maintaining the high investment returns. This would enable the country to be continually identified by business leaders as an investment destination and the future hub for West Africa. Indeed, Nigeria was a leading destination for Africa-bound investments and enjoyed significant growth, but uncertainty around the tax and other variables, have caused many potential investors to adopt a conservative approach to investments. The Partner and Head, Transfer Pricing Sevices of Andersen Tax, Dr. Josh Bamfo, while speaking at the Transfer Pricing Thought Leadership Publication, in Lagos, said Nigeria has consistently been ranked first in sub-Saharan Africa in terms of opportunity and higher returns, but rated the worst in terms of perceived risks and uncertainties. Transfer price is the price at which divisions of a company transact with each other, such as the trade of supplies or labor between departments. Transfer prices are used when individual entities of a larger multi-entity firm are treated and measured as separately run entities. A transfer price can also be known as a transfer cost. According to Bamfo, tax uncertainties, which are typically institutional flaws in process, as well as unclear rules, like in Nigeria, would continue to impact negatively on the country’s investment, trade and compliance level. “FDI goes to environment where there is high returns and certainty. Everybody knows that in this part of the world, there are high returns, but the challenge is the perceived risk. As long as we can bring our risk down, with those higher expected returns, there is going to be more FDI. “Clarity in terms of transfer pricing regulations is very important to a taxpayer – a tax payer wants to minimise cost, while tax administrator wants to maximise revenue. If there is no clarity, there will be uncertainty, which is the risk, and foreign investors would not come in a jurisdiction where there is uncertainty of regulations. “Multinationals who want to come into this sub-region would put into considerations the level of certainty and clarity of tax because this would help them to plan compliance. As long as there is clarity in terms of transfer pricing regulations and our tax administration is fair, there will be inflow of more FDI in Nigeria. “This is because we happened to be the last jurisdiction or region that investors need to take advantage of in terms of opportunities. All the neighbouring countries have been explored,” he said. The Chairman of AndersenTax, Seyi Bickersteth, said if government fails to structure its tax obligations in a manner that depicts clarity and certainty, the country would suffer erosion of tax revenue because investors would move funds to a more favorable jurisdiction. “It means that the countries would loose their revenue because it forces the multinational companies to look at their own policies to be able to benefit,” he said.   Source: Guardian

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CAC Reveals Number Of Registered Companies In Nigeria

The number of registered companies in Nigeria is 3,098,193, the agency in charge of registration of firms in the country, Corporate Affairs Commission (CAC), said Tuesday. According to the commission, these companies were registered in Part A, B and C categories from the inception of the CAC in 1990 to March 21, 2019. CAC was established by the Company and Allied Matters Act promulgated in 1990 to regulate the formation and management of companies in Nigeria. Speaking at the CAC customers forum in Abuja, acting registrar of the commission, Azinge Azuka, said in the last three years, the statistics on registration of firms and companies under Parts Limited Liability Company (A), Business Name (B) and Incorporated Trustee (C) was 618,309. She explained that in 2016, the commission got the sum of 175,098 from the LLC (A), 193,194 from Business name (B) in 2017 and 252,035 from Incorporated Trustee (C) in 2018. Azuka said the number of Annual Returns filed under the Parts A,B and C in the last three years was 190,078. “In that regard, work is at advanced stage to amend it enabling law, the Companies and Allied Matters Act (CAMA) in collaboration with the National Assembly,” she said. “This seeks to ease starting and growing businesses in Nigeria , ensure more appropriate regulation for MSMEs. “Enhance transparency and shareholders engagement align regulate framework with International best practices and make Nigeria an investment destination of choice.”   Source: Concisenews

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National Assembly Passes New Housing Law, To Impose Over 200% Of Personal Income Tax On Low Income Earners

The National Assembly has passed a new law, the National Housing Fund (Establishment) Act 2018. The key provisions of the Bill include the following: Mandatory 2.5 percent contribution of monthly income by employees earning minimum wage and above in public and private sectors to be deducted and remitted monthly by all employers     2.5 percent of income by self-employed individuals     2.5 percent levy on cement, locally produced or imported     Banks, insurance companies and pension fund administrators shall invest a minimum of 10 percent of their profits before tax into the Fund at an interest rate not exceeding 1 percent above rate payable on current accounts by banks     Penalty for non-compliance of up to N100 million for corporates and N10m for individuals     Sanctions include cancellation of operating licenses of banks, insurance companies and PFAs for violations     Withdrawal by contributors who have attained the age of 60 years or 35 years of service to be at interest rate of 2% per annum     The Fund and any refund of contributions are exempted from payment of taxes 10 reasons why the proposed law is a bad idea:     The contribution is regressive as it taxes the poor more than the rich.     Making all employers liable to deduct and remit the contributions monthly (without a threshold) will worsen the ease of doing business and Nigeria’s paying taxes ranking     Introducing earmark taxes and increasing the tax burden of contributors without addressing other fundamental issues like land registration and legal framework for real estate investment trusts is inconsistent with the 2017 National Tax Policy     Imposition of the 2.5% levy on cement is a tax on property development which will make housing even less affordable. It is counter-intuitive to impose a tax on cement in order to make housing development more affordable.     The penalty regime is draconian, excessive and disproportionate to the violations under the law     The exemption from tax clause is badly worded, it means refunds are exempt but contributions are taxable.     Negative impact on the capital market – because banks, insurance companies will have to set aside 10 percent of the profits for NHF investment, the returns available to shareholders will be less hence reducing the attractiveness and value of their shares     Cost of other funds – Since funds will be forcefully diverted from other uses, it means less liquidity and hence higher cost of borrowing     GDP impact – the opportunity cost of the funds going to NHF is that investment will be negatively impacted as well as consumption thereby impacting negatively on GDP growth especially in the likely event that the growth from NHF investment in housing is insufficient to offset the decline in other sector.     Pensioners will be worse off as the return of 2% per annum on their contributions to be withdrawn after attaining 60 years of age or 35 years of service means their investment will be completely eroded.   Source: Mondaq

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Taxation: We need to enhance and expand govt’s revenue base —Buhari

President Muhammadu Buhari has said that the Federal Government will continue to sensitize and encourage Nigerians to cultivate the culture of paying taxes by ensuring fair implementation of policies and effective utilisation of resources. Mr Femi Adesina, the Special Adviser to the President on Media and Publicity, said Buhari stated this when he received the leadership of the Chartered Institute of Taxation of Nigeria at the State House, Abuja on Tuesday. The president revealed that the National Tax Policy document had been reviewed with the aim of institutionalizing a tax payment culture within the Nigerian workforce. Buhari said the progress made in diversifying the economy, providing social security and securing the country could be further improved with enhanced and expanded revenue base. “We have made some progress in the past four years. However, a lot more can still be done. A key step is to enhance and expand Government’s revenue base. “Today, we still rely on oil as our main source of income. This simply is not enough to meet our infrastructure, social services and security needs,’’ he said. While describing Nigerians as hardworking and entrepreneurial, the President said a deeper understanding of the effectiveness of tax on the economy by the populace and fair administration would help in improving government’s revenue shortfalls.   Source: Punch

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Sanitation council calls for tax reduction on sanitary pads

The Water Supply and Sanitation Collaborative Council on Tuesday called on the Federal Government to reduce tax paid on the importation of sanitary pads to promote menstrual health in the country. Dr Virginia Kamowa, the Technical Expert on Menstrual Hygiene Management, WSSCC made this call at the ongoing Training of Trainers Workshop on Menstrual Hygiene Management in Makurdi. According to her, poor access to sanitary materials, potable water and sanitation has been known to be a leading cause of loss of dignity for women and girls. She noted that countries such as Tanzania, Kenya, Canada, and South Africa had reduced such taxes, adding that in the UK, it was compulsory for menstruation education to be taught as a subject in all schools. She said that this had helped the countries to make policies which had promoted inclusion and better the lives of women and girls. “A number of countries have started to develop programmes and integrate menstrual hygiene management in their policies including removing taxes for sanitary materials that women use when they are menstruating. “Recently, the UN Council on Human Rights passed a resolution urging all countries to take decisive action to ensure that women and girls have universal access to information on menstrual products and facilities that are needed for improved menstrual hygiene. “So, it is important that Nigeria removes such barriers such as taxes, so that women and girls will live better and more productive lives.’’   Source: Punch

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