May 23, 2019 – Sunmola David & CO

VAT: Airlines count losses over Customs implementation delay

Nigerian airlines have expressed their misgivings over Nigerian Customs Service (NCS) delay to implement President Muhammadu Buhari’s Executive Order on the removal of Value Added Tax (VAT) from all forms of shared transportation taxes paid by local operating in the country. This comes as the Minister of State for Aviation, Mr. Hadi Sirika, announced that the local airline industry recorded a 30 per cent growth in passenger patronage in 2018. Sirika, who was speaking at an aviation stakeholders forum in Lagos at the weekend said passenger patronage grew in the last one year from 15 million to 18 million with the Lagos and Abuja airports gradually emerging as hubs in the West African sub-region. “More people are now flying in Nigeria and the country has recorded an average growth of 30 per cent on the domestic route,” Sirika said. However, the Secretary to the Airlines Operators of Nigeria (AON), Mr. Iroro Ewos, speaking at the same event, said growth would have appreciated if Customs and the Federal Inland Revenue Services (FIRS), had executed a government directive to abolish VAT payment by local airlines to free up more funds for investments in more aircraft acquisition and routes expansion within and outside the country. Ewos said VAT payment continues to add to an already bloated overhead for airlines stifling the ability to make returns on investment even as he expressed the optimism that its removal will see cost of air tickets crashed with more passengers flying on domestic routes. “Airline owners are concerned that despite the Executive Order, which was given about a year ago, airlines are still required to pay VAT due to the insistence of FIRS that they work with the law and they are yet to see a government white paper to that effect before they can suspend the collection of VAT from air transportation,” said Ewos. “We are optimistic that VAT abolition will encourage more people to travel as this would impact positively in the reduction of air fares and this will in turn promote increased air transport activity in the country and encourage greater contribution to the GDP,” added Ewos. According to him, “only investors in the air transportation sector pay VAT in Nigeria today as all other forms of shared transportation do not pay VAT including marine, road and rail transporters. “Our prayer is for the minister to please use his office to fast track the issuance of a white paper so that the removal of VAT will be a law and air travel volume can be encouraged just like Ghana did and we can all see the results today in that country,” he added. Source: The Sun News

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Stakeholders Oppose FIRS Bid To Tax Online Transactions

Tax news / Tobi Aminu

Stakeholders have rejected plans by the Federal Inland Revenue Service (FIRS) to tax online transactions, saying it will amount to double taxation. Chairman of FIRS, Mr Babatunde Fowler, yesterday, while speaking in New York, told the News Agency of Nigeria (NAN) that the agency will soon begin collection of Value Added Tax (VAT) on online transactions. Fowler said: “Soon, we will ask banks to impose VAT on online transactions for purchases of goods and services. Not that it is something new; it actually should be in existence. “We will certainly follow up to make sure that every VAT that is due to be collected is collected.” He explained that the move was part of measures by FIRS to meet its N8 trillion revenue target for 2019. Fowler said the agency had started taking action against companies and businesses that refused to embrace Federal Government’s tax amnesty programme. According to him, FIRS hopes to generate between N750 billion and N1 trillion from the clampdown, which includes closure of defaulters’ bank accounts. “We are going after everybody. I am sure you have heard that we have placed lien on some accounts of defaulters that have a billion naira turnover annually. “So, certainly, we are not leaving anyone out of the tax net,” he said. Officially known as the Voluntary Asset and Income Declaration Scheme, the tax amnesty programme was launched in 2017. It gave tax defaulters a one-year period of grace to declare and settle their unpaid taxes. There have been complaints by some taxpayers of being wrongly targeted by FIRS in the clampdown. Asked to comment on that, Fowler admitted, blaming it on “administrative error,” arising from the huge number of accounts involved. “Well, there is certainly one or two instances where we made administrative error, but when you are looking at over 50,000 accounts, there is a tendency that sometimes an error might be made. “For those that we made errors on, I wrote them personally apologising and of course, we lifted the lien on their accounts.” However, reacting to the development, head of Tax and Corporate Advisory Services at PwC Nigeria, Taiwo Oyedele, said the Federal Internal Revenue Service does not have the capacity to tax online transactions, which are not already being taxed in the country. Commenting on the statement by the head of the FIRS, that the service will commence imposition of Value Added Tax (VAT) on online transactions in the country, Oyedele, “I don’t know whether they needed to say it. “The reality is that if you go online to make transactions on Jumia or any of these platforms, there is already VAT. If you book a hotel online in Nigeria, there is already VAT on it, so the online businesses and transactions that are owned by entities in Nigeria, already pay the VAT. The FIRS does not have to impose the VAT on them, it is already being paid. “To book a flight online, you pay VAT. Now, where the difficulty is, is when you do the online service by a provider outside Nigeria, for example if you go on Amazon and you order a product, because Amazon is not a Nigerian company, then there is no Nigerian VAT. “So, the way that is done is that you pay them the full amount and they ship to you in Nigeria, by the time it gets to customs, if the amount is below the threshold where you don’t have to pay, you don’t pay anything. So, the question is how the FIRS would be able to impose VAT. If you want to watch a movie on Netflix, you just go to Netflix to subscribe, you pay and then watch a movie. The ones where they can impose, VAT are already being imposed. The ones where VAT is not currently being charged, the FIRS has no mechanism to be able to do that so it will be interesting to know exactly what they have in mind. “It is not just about Nigeria, it is a global problem that is why we have the global committee on the digital economy and they are trying to fix it because it is not a problem that one country can solve. It is a problem that requires the whole world to come together.” Mr Razack Olaegbe, deputy managing director, eMaginations Limited, advised the FIRS to engage the e-commerce and online companies before carrying out any clampdown action, stating that many of the e-commerce firms are yet to break even. “Clamping down on the companies should not be the first step, FIRS needs to engage them to understand their business model, find out if they are making money. Jumia and Konga, are they profitable? E-commerce is yet to thrive in this country. We shouldn’t use threats of clampdowns arbitrarily as it scares away foreign investors,” he said. Source: Leadership

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CITN begins distribution of stamp, seals for tax returns to members

Accountancy Services / Tobi Aminu

The Chartered Institute of Taxation of Nigeria (CITN) has begun the distribution of its stamp and seal to its certified members, just few months after it emerged that tax returns without the institute’s authentications would be rejected. The presentation marks the full kick off of the implementation of the new directive that all tax returns to the Federal Inland Revenue Service must bear the stamp and seal of the institute, showing that declarations have been certified by a professional tax practitioner. The President of CITN, Chief Cyril Ede, in an interview with The Guardian, said the stamp and seal presented to deserving members stand as an appointment, acknowledgement and authority of the institute to practice taxation in the country. They will use it to certify all the tax jobs they have done, as well as part of efforts to contain quackery, because the seal cannot be given to people who are not certified by the institute. Noting that FIRS is deeply interested in effective taxation in the country, he pointed out that the move has the support of FIRS, although the agency is mainly for tax administration, while CITN is for tax practice. “They know that CITN is their body. The Chairman of the board of the FIRS knows that CITN is the body of tax administrators and practitioners and they respect what we are doing. “They send their people here for training and certifications, help us organise our conferences and for the government. It has been established that it is only the seal of CITN that actually should be used in tax returns, although some people are still contesting it. “This institute is the only one certified by law and to control taxation profession in all its ramifications. So, we are battling it with the people who are protesting, who think that we shouldn’t be given that alone. In England, the practice of taxation derives authority from the institute of taxation. We have been doing our best to let everyone know. “We look forward to seeing genuine tax professionals and those who represent the institute and they will also be recognised because tax is taking a very wide dimension in Nigeria, Africa and the world at large. “The government has also realised that taxation is the backbone of the nation. No matter what it gets from oil, none of them can be steady as taxation and it can never be replaced by anything because from time immemorial tax was there. “What we are doing is to refine the system and the process and to make sure that taxation is done in a civilized way and that people understand because once you know that tax is a must, the best thing for you is to learn it and do it very well,” he said. While the institute’s yearly tax conference has come and gone, the tax expert said the body is now pressing the government to ensure that tax issues are appropriately stated in the nation’s fiscal plans. “We have difficulties because tax laws are not reviewed for years. In fact, since the return to civil rule, only two times have the tax laws been adjusted. So, we want tax to be reviewed and tax to be included in a proper budget process so that each year, everybody will know what is on the table for tax and the government itself. “Tax is law and you cannot impose any tax without passing a law on it. So the best way we suggested is to include it n the annual budget so that once you pass the budget, you pass the tax law that will reign for that year. “Because tax is very dynamic, it cannot be left to last for a very long time, as taxation goes with the prevailing economic environment. So, if you are doing it on a yearly basis, you will be capturing the environment and the economic situation of the country and then you will be able to ensure that the tax is effective,” he added. Source: Guardian

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FIRS posts N1.5tn revenue in Q1 of 2019, Fowler says

Tax news / Tobi Aminu

The Federal Inland Revenue Service generated N1.5 trillion revenue in the first quarter of 2019, according to its Chairman, Mr Babatunde Fowler. Fowler disclosed this to the News Agency of Nigeria in New York at the weekend. He said the amount included revenue from non-oil taxes that were 11 per cent higher than what the agency realised from that sector in Q1 of 2018. “In the first quarter (of 2019), what I will say is that in the non-oil sector, we generated 11 per cent higher than what we generated in 2018. “Basically, we have generated about N1.5 trillion,” Fowler told NAN on the sidelines of a high-level meeting on illicit financial flows hosted by the United Nations General Assembly. The 2019 amount is N330 billion or 28 per cent higher than the N1.17 trillion reported by FIRS in the same period of 2018. NAN reports that the Q1 figure also represents 18.7 per cent of the agency’s total revenue target of N8 trillion for 2019. Fowler said the target, described by economy watchers as quite ambitious, was realistic with the cooperation of taxpayers, among other factors. He said, “It is quite realistic as long as we have the cooperation of taxpayers in addition to deployment of technology. “We have already started the enforcement of over 50,000 accounts that have banking turnover of 100 billion and above that have not filed their returns.” The FIRS boss also spoke of plans by the agency to surpass the over N1 trillion it realised from Valued Added Tax in 2018. “We will get more people into the tax net and deploy more technology. “We have what we call Auto VAT Collect, and that basically assists tax payers at the point of transaction, and the VAT portion is sent straight into the federation account. “So, we know that there is more room for growth in the VAT sector,” he explained. Source: Punch

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FIRS to begin collection of VAT on online transactions —Fowler

Tax news / Tobi Aminu

The Federal Inland Revenue Service has said that it will soon begin the collection of Value Added Tax on online transactions. The Chairman of the agency, Mr Babatunde Fowler, made the disclosure in an interview with the News Agency of Nigeria in New York on Saturday. Fowler said, “Soon, we will ask banks to impose VAT on online transactions for purchases of goods and services. “Not that it is something new; it actually should be in existence. “We will certainly follow up to make sure that every VAT that is due to be collected is collected.” He explained that the move was part of measures by FIRS to meet its N8 trillion revenue target for 2019. Fowler said the agency had started taking action against companies and businesses that refused to embrace the Federal Government’s tax amnesty programme. According to him, FIRS hopes to generate between N750 billion and N1 trillion from the clampdown, which includes closure of defaulters’ bank accounts. “We are going after everybody. I am sure you have heard that we have placed lien on some accounts of defaulters that have a billion naira turnover annually. “So certainly, we are not leaving anyone out of the tax net,” he said. Officially known as the Voluntary Asset and Income Declaration Scheme, the tax amnesty programme was launched in 2017. It gave tax defaulters a one-year period of grace to declare and settle their unpaid taxes. Source: Punch

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