May 27, 2019

The Executive Chairman, Federal Inland Revenue Service (FIRS) Mr. Tunde Folwer, has stated that revenues generated through taxation and borrowing would play a key role in supporting State Governments to finance their expenditure infrastructure and social services. Fowler, who disclosed this yesterday in Lagos at the Maiden Edition of the Nigeria Corporate Services with theme: ‘Building A Sustainable Economic Growth Through Quality Corporate Services Delivery,” noted that taxation is deemed preferable to borrowing as debt has to be repaid usually with interest and other debt servicing obligations which can sometimes create additional burden on government. He also stated that tax as a major enabler of generating revenue, adding that in an ideal environment, voluntary compliance by the tax payer would ensure that revenue is made available for improving on the provision of social amenities and services. Fowler, who delivered a paper titled: ‘Due Diligence, Best Practices in Revenue Generation’ explained that taxation as a social contract between government and taxpayers, stating that taxation enhances accountability on government, because taxpayers have a greater stake in governance. He added that when citizens play a significant role in raising revenue, government would similarly have a strong motivation to account for revenues collected and their utilization. Fowler, who was represented at the event by Mr. Abolade Kehinde, warned that it is important that in actualizing its mandate, revenue authorities must ensure that every effort is made to ensure that tax administration helps and does not hamper the valid interests of all stakeholders. In building relationship between corporate governance and public sector best practice, Fowler advised that government is expected to determine tax rates and tax laws, while being very careful about simply increasing tax rates and making it difficult for taxpayers to comply. According to him, “While it is true that higher tax rates trigger higher tax evasion behaviour, there is also evidence that stronger tax enforcement that reduces tax evasion can also result in greater shareholder value. This is because those companies that are more compliant are more transparent and therefore, more attractive for investment. “A country’s corporate governance system affects the degree to which tax changes affect the growth (or not) of tax revenue. So, when it is easy to divert income to avoid tax or when share ownership concentration is too unbalanced, an increase in the tax rate can reduce tax revenues.” “By contrast, in a good corporate governance environment, controlling shareholders will have too little incentive to divert income to avoid tax especially when they are accountable to other investors. This is because they take the personal risk of enforcement by tax authorities but benefits very little from it in terms of shareholder value. In another keynote address titled: “Ethics, the backbone of quality corporate services for economic growth,” the Director General, Lagos Chamber of Commerce and Industry (LCCI) Mr. Muda Yusuf, said services are increasingly important for their direct contribution to Gross Domestic Product (GDP), exports and employment, maintaining that with the change in the structure of the economy from a real sector dominated system to services led economy- “services sector has become the largest sector in the economy, with its share of GDP 52.62% in 2018, in addition to the sector also contributing the largest proportion of employment at 57.4%.” According to him, “Nigeria has made significant progress in its services sector, becoming one of the leading corporate service providers in the continent of Africa- our banks have registered their footprint in many Africa countries, we have a robust Business Process Outsourcing (BPO) and others, providing diverse services to businesses and governments. These are immense economic opportunities we must optimize and unleash for tangible sustainable economic deliverables.”   Source: This Days

With the price of oil tumbling drastically to $48.86 per barrel in October 2015, after which it slid further to $44.82 the following month and $37.80 in the last month of the year, the signs were bold that Nigeria was facing a major economic crisis. The implication of the slump in revenue derivable from oil, the major source of funding for country’s infrastructural and human development aspirations, was that the then new administration of President Muhammadu Buhari had flown into the most inclement weather possible. Public expectations of a national boom time were sky-high, but were almost immediately shattered, as government at all levels was hamstrung in the discharge of its responsibilities and obligations. At the state level, government, with the exception of a handful of states, for example, was unable to pay civil servants’ salaries and pensions to retirees let alone develop ideas for life-altering infrastructure projects and human development initiatives. Earlier in August that year, with the Federal Government left with no option than to look internally for revenue, especially from previously neglected sources, President Buhari appointed Mr. Tunde Fowler as chairman of the Federal Inland Revenue Service (FIRS). Fowler’s appointment was widely well received because he had been a consistently vocal voice against the country’s heavy reliance on oil revenue and, more crucially, on account of his headship of the Lagos State Internal Revenue Service (LIRS), during which the internally generated revenue (IGR) rose from a monthly average of N3.6 billion in 2006 to over N20 billion between 2006 and 2015. He met Lagos as a state unable to generate sufficient revenue from the vastness of its economic activities, and reformed revenue collection and administration processes to make Lagos the model of the genre. Yet, there was the question of whether or not he was capable of reprising what he did in Lagos State at the national level. That question, the figures show, has been answered with a resounding “Yes” in four years, a period during which the country slipped into recession. A little over a week ago, it was announced that the country’s taxable population figure was approaching a record 45 million. In 2015, the figure was 10 million, rose to 14 million in 2017, and 19 million in 2018. Last year, the FIRS collected N5.32 trillion, the highest ever in the history of the federal revenue agency. The preceding year, the agency collected N4.02 trillion and, in 2016, N3.3 trillion. The revenue growth, in spite of the country’s economic challenges, has been attributed to a variety of reform initiatives conceived to expand the tax net, block leakages and make tax collection methods more efficient. It has also been helped by enhanced collaboration with other stakeholders such as the Joint Tax Board (JTB) and other government agencies and a virile enforcement strategy, resulting in improved taxpayer compliance and collection of huge tax debts from defaulters, review of the National Tax Policy, amendment of tax laws and use of technology. The use of technology, which has resulted in the ease of tax payment and blocking of leakages, is evidenced by the introduction of e-Registration, e-Filing, e-Payment, e-Receipt, e-TCC (Electronic Tax Certificate), e-Stamp Duty, Auto VAT Collect, Integrated Tax Administration System (ITAS) and Government Information Financial Management Information System (GIFMIS). Among steps taken to expand the tax roll was the launch of the Voluntarily Assets and Income Declaration Scheme (VAIDS), which provided an opportunity for individuals and corporate entities with tax liabilities to regularize their tax affairs in exchange for freedom from prosecution, penalties and tax audits. Through VAIDS, a total of N17 billion was collected in unpaid taxes within the first six months of the scheme’s implementation. The use of various e-payment channels has ensured that taxpayers can pay their taxes from anywhere in the world, at any time, as well as making it possible for taxpayers to download their receipts. Taxpayers can also apply for and receive their tax clearance certificates online immediately. A major shift in focus to non-oil revenue has seen collection grow from N2.149 trillion in 2016 to N2.852 trillion in 2018. Oil tax revenue also increased from N1.15 trillion in 2016 to N1.52 trillion in 2017 and N2.52 trillion in 2018. Value Added Tax (VAT) collection in 2018 went above N1 trillion. In the preceding year, VAT yielded N972 billion and, in 2016, N828 billion collection. The rise in VAT revenue has largely been occasioned by the automation of the process, which allows for automatic collection. The new auto collection scheme resulted in 31 per cent VAT increase over the N25 billion collected in 2017. The FIRS was able to collect N13 billion as a result of the automated deductions at source and remittance of VAT and Withholding Tax from state governments. The automation scheme has also facilitated information exchange between the FIRS and third-party databases and other government agencies. Automation has equally impacted the Stamp Duty collection process, which in 2016 was N5.6 billion, N10.9 billion in 2017 and N15.66 billion in 2018. The FIRS has also upped the tempo of its enforcement by initiating audits through which under-remittances were discovered. These yielded N12 billion previously unpaid by taxpayers. As part of its diligence, the agency discovered 6,000 businesses with an annual banking turnover in excess of N1 billion but that were unregistered for tax and made no payments. Through enforcement of relevant tax legislations, the agency recovered N21.75 billion from such companies, which have continued paying the balance in installments. Similarly found were 45,361 businesses with banking turnovers of between N100 million and N999 million, many of which were found to be non-compliant with tax laws. Through another diligence initiative, the FIRS generated N1.33 billion in 2017 and N2.88 billion in 2018 from Lagos and Abuja-based property-owning corporate organizations that were not in the tax net. The various initiatives have been implemented alongside continuous tax education/enlightenment programmers’, which have seen the agency interacting robustly with taxpayers to sensitize them to their obligations.       Source: The Sun

The Federal High Court sitting in Lagos, on Tuesday, 21st May 2019, has for the umpteenth time held that only members of the CITN can practice taxation in Nigeria pursuant to the relevant provisions of the CITN Act.  This was the outcome of the suit instituted in 2018 by five members of ICAN by way of originating summons challenging the authority of FIRS to recognize the power of CITN to regulate the tax profession in Nigeria in all its ramifications. The Court further held that Regulation 5 of the Tax Administration (Self-Assessment) Regulations, 2011, which purports to allow members of ICAN, ANAN, and CITN to co-jointly file tax returns on behalf of taxpayers, where taxpayers opt to hire tax agents for reward, was in conflict with the extant provisions of the CITN Act. Consequently, the Court dismissed the suit of the plaintiffs and awarded cost of N200,000 in favor of the defendants. This decision is a re-affirmation of the decisions of the Lagos State High Court in 2007 and the Court of Appeal, Lagos Division, in 2013, re-stating that only CITN can regulate taxation, and only its members can practice taxation in Nigeria. FIRS, therefore, acted legally vide its letter to the CITN of 23rd April 2018, which stated that only  CITN stamp and seal will be recognized by FIRS, with effect from 2nd January 2019,  for the purpose of filing tax returns in FIRS. The Institute will issue further releases after its legal team obtains the certified true copy of the judgment. This decision has in no way encumbered the about 10,000 ICAN members in CITN from practicing taxation. Its only result is that those ICAN members, who are not members of the CITN, cannot practice taxation or file tax returns until they become chartered CITN members.   Source: Brand spur