October 16, 2019

FG denies Guinness, Dangote, 13 others tax relief

The Nigerian Investment Promotion Commission has rejected the application of 15 companies seeking pioneer status under the Industrial Development Income Tax Act. The pioneer status is an incentive from the Federal Government which exempts companies from income tax. It is also known as tax holiday and generally regarded as industrial investment device. This means the companies with pioneer status do not have to pay tax for a certain period of time, allowing the companies to get established. This tax exemption can be full or partial. The products or companies suitable for pioneer status are industries or products that do not already exist in the country. An analysis of the second quarter Pioneer Status Incentive report obtained from the NIPC showed that while 15 companies had their applications rejected, approval in principle was given to 10 firms. The report stated that two firms had their applications extended while 181 other applications were still pending. It put the number of firms currently benefiting from the tax incentive scheme at 32 while 104 companies had abandoned their applications with the NIPC. The 15 companies whose applications were rejected are Umugini Asset Company, Aristocrats Industries Ltd, Guinness Nigeria Limited, StrongPack Limited, Grit System Ltd, Scott Industries Limited and Flexipack Ltd. Others are Ultimus Constructions Ltd, NG Clearing Ltd, Dangote Ibese Lines 3 and 4, Dangote Cement Obajana Line 4, Promasidor Nigeria Ltd, Daraju Industries Ltd, West African Packaging Ltd and Flour Mills of Nigeria Plc. Providing reasons for the rejection, the commission in the report stated that the requests from two out of the 15 firms were time barred, while the activities of 10 other firms were not covered under the pioneer status-incentive list. For the other three companies, it explained that their applications were rejected because their expansion projects were not eligible under the Industrial Development Income Tax Relief Act. The NIPC in the report also stated that 10 companies got approval in principle for tax incentives. The companies are Amarava Agro Processors Ltd, Solis Agro Ltd, Indigo Feeds Nigeria Ltd, Polar Petrochemicals Ltd, Royal Pacific Group Ltd, Wacot Rice Ltd, Olam Hatcheries Ltd, Crown Flour Mills Ltd, Gowus Nigeria Ltd and Harvestfield Industries Ltd.   Source: Punch

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Accountants to FG: Don’t increase VAT

The federal government shouldn’t increase Value Added Tax (VAT) just because Nigeria has the lowest VAT rate in the world as its economic conditions are not the same with countries with high VAT, the Association of National Accountants of Nigeria (ANAN) has said. The president of ANAN Prof. Muhammad Akaro Mainoma who spoke at the ANAN 24th annual conference which began in Abuja yesterday also said what the federal government should focus on is to expand the tax nets to capture those presently not paying taxes.  He also said if the FG must increase VAT, it should be on luxury goods only. The two-day conference has the theme “nation building and sustainable growth: challenges and prospects.” “Nation building is not about competition or copying from other countries. Our circumstances are different. We must understand that we cannot just increase VAT rate because our own is the lowest. We can increase receipt from VAT by doing other things,” he cautioned. According to him, “if we learn properly, we can adjust the vatable goods, we can differentiate the rates and charge higher rates for luxury items. The process requires a lot of learning. The countries with higher rate have different economic conditions and living standard. We must appreciate that” he noted. Speaking on the theme of the conference, the ANAN president said the task of nation building involves everyone. He noted that the “easiest way to build the nation and sustain it is through Learning, Entrepreneurship, Goal Congruence, Accountability, Collaboration and Youth Development (LEGACY). He also said the Accountant is not only expected to create value for the present but to ensure the sustenance of the value. We do not only prepare historical statements but prepare projections. We must not produce to the extent that we destroy the system that others after us cannot make use of it. Prof. Mainoma also told the gathering that the Association is working hard to improve on it’s professionalism and reposition the institution. “We have secured a 5-storey building ‘ANAN House’ as permanent Head office in Abuja. This would enhance closer collaboration with key stakeholders” “We are currently upgrading the Nigerian College of Accountancy to ‘ANAN University of Accountancy’ to critically contribute to the advancement of the various fields of Accountancy and research.” “ANAN has commissioned her Education and Training Committee to conduct a maturity assessment to receive feedback from members on sixteen Key Success Areas (KSAs) across four broad characteristics: Sustainability, Relevance, Professionalism and Member Value to support ANAN strategic envisioning at 40 years.” “ANAN has improved her advocacy in public policy” among others. The Minister of Finance, Budget and National Planning, Mrs. Zainab Shamsuna Ahmed, who who declared the conference open also called on the Accountants to partner the government and offer useful suggestions on how to grow the economy. The Minister who was represented by the permanent secretary, special duties in the ministry, Dr. Mohammed Dikwa also said the professional advise from ANAN is particularly critical now that the federal government has constituted an economic Advisory team. The Federal Inland Revenue Service Chairman, Mr. Babatunde Fowler who delivered the keynote address faulted ANAN on the call for VAT not to be increased at this time. Mr. Fowler who was represented by Mr. Abiodun Aina, the Coordinating Director, FIRS, said both the VAT increase and expanding the tax net need to happen concurrently as the government need funds to execute capital projects. He said what ANAN and others should be concerned about is holding government to judiciously use the funds so generated from VAT increase. He said taxes serve as the major sources of revenue to the government of Nigeria. He noted that the taxes collected over the years have contributed to nation building and sustainable growth and development. However, he said tax administration in Nigeria faces a number of challenges which inhibit the provision of an efficient, professional and courteous tax service to the taxpayers. “I therefore call on you in your capacities as professional accountants to partner with FIRS to drive domestic resource mobilisation towards funding of SDGs in Nigeria” Mr. Fowler said.   Source: Daily trust

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Tax vacant houses, UN Rapporteur urges FG

Ms Leilana Fartha, UN Special Rapporteur on the Rights to Adequate Housing, on Monday urged the Federal Government to impose vacant home taxes with a view to addressing housing challenges in the country. Fartha at a news conference in Abuja expressed concern over the human rights crisis presented by poor living conditions in Nigeria’s informal settlements. According to her, the informal settlements house about 69 per cent of the urban population. She said, “Most residents in Nigeria’s ballooning informal settlements live without access to even the most basic services, like running water.  “And they lack any security of tenure, forcing them to live in constant fear of being evicted. “My 10 days fact-findings visit to Nigeria has presented an economic inequality in the country, which has reached an extreme level and is playing itself out clearly in the housing sector. “There is an estimated housing shortage of 22 million units. “At the same time, newly built luxury dwellings are springing up throughout cities and made possible often through the forced eviction of poor communities. “These units do not fulfil any housing need, with many remaining vacant as vehicles for money laundering or investment,’’ she said. While urging the Federal Government to take urgent measures to address homelessness and poverty, Fartha advocated for a declaration of a nation-wide moratorium on forced evictions. “Government must address the grossly inadequate housing conditions with the urgency and rigour befitting a human rights crisis of this scale. “Apart from establishing a national commission to investigate gross human rights violations in the context of forced evictions, government should provide basic services to all informal settlements. “And must increase the number of shelters for persons in situations of vulnerability,’’ Fartha said. She further expressed worry that the Bill for an Act to provide rent control failed in the National Assembly. According to her, when the bill for rent control first hit the National Assembly, it wasn’t ripe “It is unfortunate that the bill died in NASS. “The idea of controlling rent caps is hotly debated in many countries. “New York just tried to have rent control laws passed; Barcelona is close to getting rent-free as rent is actually frozen for some period of five to seven years. “So, in many jurisdictions, they have started to impose a vacant home tax. “I support that kind of move from human rights point of view only where that money from the tax is directly put into the creation of affordable housing. “In the case of Nigeria it could be used as fund to upgrade informal settlements.”   Source: Punch

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No Going Back on Aggressive Tax Drive, FG Insists

The Minister of Industry, Trade and Investment, Mr. Niyi Adebayo, has said there is no going back on the federal government’s determination to increase public revenue through intensified tax collection. This is coming as the Tax Leader, PwC, Mr. Taiwo Oyedele, has raised the alarm that Nigeria’s  tax system contains 354 different taxes, stressing that these multiple taxations do not allow businesses to thrive. Speaking during the Lagos Chamber of Commerce (LCCI) 2019 Presidential Policy Dialogue on the Economy, held in Lagos at the weekend, Adebayo, said those expecting the government to reduce taxes and at the same time increase revenue to meet its responsibilities to the country should come and show the government how to perform the magic. He said: “You want us not to increase tax but you want us to increase revenue. May be, you will come and advise us on how to do it because I think that will require some serious magic. But one thing I can assure you is that I don’t think government has any plan to reduce tax at this point in time. “What we are doing is that government has embarked on aggressive tax collection and is doing everything possible to increase the tax bracket so that all the money the government has not been able to get in the past will be collected to improve our revenue generation.” The minister said he was at the Presidential Policy Dialogue to hear concerns of the private sector operators and transmit them to the government for favourable policy formulation.  “I believe that there are certain things that should be done by the private sector. That is why we are here. It is for you to tell government how to make it easie for you to achieve these things. “If you tell us, and advise us on how government can assist to make it easier for you to promote your businesses, then we will do our best to make things easier for you. I am here to listen to your problems,” Adebayo said. The minister’s statement came after the President of LCCI, Mr. Babatunde Paul Ruwase, spoke the minds of the organised private sector in the opening in which he decried the crippling effects of taxation on businesses. Ruwase said: “Multiple taxations are still issues with many companies. There are also issues of multiple levies and fees by government agencies at the federal, state and local government levels. While we were grappling with this, we heard the announcement of an increase in VAT from five percent to 7.5 percent. “This will no doubt put additional pressure on businesses because consumer purchasing power is already weak.” He noted that these are not the best of time for the Nigerian economy, saying the short-term outlook of the key economic indicators was not looking bright. He also called for policies that would transform the economy and end the countries reliance on oil, which was the major trigger of the economic downturn in Nigeria because of the volatility in oil price. “This time calls for reforms in the economy. We need the right mix of policies that will achieve the desired outcomes.  I am aware that some policy choices have been made by the present administration to promote economic diversification, stabilise the foreign exchange market and promote small businesses.  Evidently, there are still some works to be done.  “There is need for regular engagements and communication on policy issues to ensure quality feedback that will enrich the policy making process. “This should cover macroeconomic policies, sectorial policies. These will include foreign exchange policy, trade policy, tax policy, energy policy, transport policy, industrial policy, agricultural policy, ICT policy, among others.  Some of these are cross cutting, while others are sector specific. “The message is that regular engagement with relevant stakeholders in the various sectors will bring a lot of value.  The regulatory environment needs to align with this vision as well.  This policy dialogue is our contribution to this process,” Ruwase said. In another  development, the Tax Leader, PwC, Mr. Taiwo Oyedele, has advised that government should create policies that would enable businesses to grow, rather than over-burdening businesses with taxes in an era when governments elsewhere were reducing taxes to encourage businesses. Oyedele, who spoke at the 2019 Annual Conference of the Finance Correspondents Association of Nigeria (FICAN) in Lagos at the weekend, said Nigeria’s tax system was a serious disincentive to businesses because the government did not seem to appreciate that firms needed to be prosperous to be able to pay tax. The theme of the conference was “Unlocking Opportunities in Nigeria’s Non-Oil Sector.” According to him, all the tiers could collect as much revenue as they are doing currently from just five taxes against the 354 different taxes that currently exist in Nigeria presently. “Nigeria has a tax system that does not allow businesses to thrive whether they are small or big. There is a provision in the Nigerian tax law that taxes a holding company twice. “The company tax rate in Nigeria is one of the highest in the world. We are the top 10 in the world for highest income tax rate. About 40 percent company tax. “It does not make sense. Government has to remove tax disincentives. The business community should ask government to remove disincentives that do not allow them to do business rather than begging for incentives,” Oyedele said. He also stressed that the government was over burdening the informal sector with taxes. “A business earning as low as N5,000 is expected to file  for VAT while in Ghana a business making less than N1 million equivalent is not expected to file for VAT. “In Kenya, it is N17 million equivalents. South Africa is N33 million. All these three economies are smaller than Nigeria. Why is Nigeria different?” he asked He added: “I look at personal income tax, in Ghana if you do not make about N500,000 you will not pay personal income tax at all. It is more than

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FIRS Releases The Income Tax (Common Reporting Standard) Regulations 2019

The Federal Inland Revenue Service (FIRS) recently released the Income Tax (Common Reporting Standard) Regulations (The Regulations). The Regulations seek to give effect to various international conventions, treaties and guidelines between Nigeria and other contracting States with respect to mutual administrative assistance, automatic exchange of financial account information and compliance with common reporting standards and the relevant provisions of the FIRS (Establishment) Act and Companies Income Tax Act relating to FIRS’ power to call for returns and access taxpayer’s records. The Regulations apply primarily to all Nigerian Financial Institutions, excluding government entities, international organisations, central banks and any other entity that presents a low risk of being used to evade tax and is defined in the domestic law as a Non-reporting Financial Institution. Pursuant to the Regulations, the affected Nigerian Financial Institutions (referred to as Reporting Financial Institutions – RFIs) are required to: Establish, maintain and document due diligence framework in line with Sections II-VII of the Common Reporting Standards (CRS) to enable them classify, determine the extent of background information requirements and reporting obligations of “Reportable Accounts” maintained by the institutions. Reportable Account is an account held by an individual or entity (including partnerships) that is tax resident in any country other than Nigeria or United States of America. Prepare annual information return relating to Reportable Accounts, in a specific format with effect from 2019 calendar year. Submit the returns electronically using a technology provided or approved by FIRS no later than 31 May of the year following the calendar year which the returns relate. In essence, the first return is due to be submitted on or before 31 May 2020. RFIs are mandated to submit “Nil” returns, where no “Reportable Accounts” have been identified. Store records relating to the returns, for at least 6 calendar years from the last year in which the records were relevant. The Regulations also contain anti-avoidance mechanisms to ensure that RFIs do not avoid any obligation imposed under the Regulations by engaging in arrangements and/or compromises with a purpose of avoiding such obligation. Furthermore, there are stiff penalties for non-compliance with obligations under the Regulations as described below: It is pertinent to note that FIRS has the discretion to exempt RFIs from the imposition of any of the above penalties where there is a reasonable excuse for the non–compliance or default. Exemption due to reasonable excuse shall remain valid even after the excuse has ceased provided that the failure was remedied within a “reasonable time”. However, failure as a result of fund insufficiency or reliance on another party, will not be considered a reasonable excuse. With the release of the Regulations, Nigeria joins other countries in striving towards a more transparent and global approach to taxation. Nonetheless, the impending implementation of the Regulations raises concerns such as:  Possible breach of confidentiality and safeguard of data at operational level. Subjectivity in interpreting what constitutes “reasonable excuse” for the purpose of granting for exemption from the administrative penalties. Overall, all Nigerian Financial Institutions are urged to review the Regulations in detail, to ascertain applicability and compliance obligations.   Source: Mondaq

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