Tobi Aminu – Page 13 – Sunmola David & CO

TAX AUTHORITIES CANNOT IMPOSE ARBITRARY ASSESSMENTS ON A TAXPAYER

UPDATE! Recently, the Tax Appeal Tribunal (TAT) sitting at Enugu held that due process must be followed by tax authorities in demanding payment of taxes from taxpayers. This decision, made in the case of Polaris Bank PLC v Abia State Board of Internal Revenue (ABIR), reassures taxpayers that the tax authorities cannot impose demand notices on them, out of the blue. FACTS In this case, Polaris Bank received a demand notice for Pay As You Earn (PAYE), Witholding Tax, etc. from the ABIR after ABIR completed a tax audit on Polaris for the years 2006 – 2011. Polaris made an objection to the demand notice but later paid a part of the demanded taxes. ABIR later sent Polaris further demand notices and letters, giving Polaris seven (7) days in some instances and 48 hours in other instances, to pay up different taxes. ABIR stated that failure to pay the demanded sums would make the amounts final and binding on Polaris. Source: The tax vile

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Tax authorities warned against scaring foreign investors

TAX SERVICES / Tobi Aminu

Tax authorities in the country have been warned against scaring off foreign investors from the country in their efforts to shore up government revenues. The Managing Consultant, Pedabo Associates Limited, Mr Albert Folorunsho, said the global tax compliance drive would have implications for Foreign Direct Investment in Nigeria. Folorunsho stated this while delivering a keynote paper at the investiture of Dr Titilayo Fowokan as the third state chairperson of the Society of Women in Taxation (Lagos Chapter) on Saturday. “Nigeria is not isolated from the global tax drive to boost revenue and prevent base erosion and shifting of profit from Nigeria to other tax jurisdictions,” he said. He said Nigeria and over 100 countries signed the multilateral instrument on prevention of profit shifting, adding that some measures were adopted by the Federal Inland Revenue Service from the global tax approach. Folorunsho noted that the FIRS had introduced other measures aimed at increasing tax revenue including plans to start charging Value Added Tax on all online transactions and strict enforcement of tax payment by placing lien on taxpayers’ accounts. He said, “Tax-related issues that can affect Foreign Direct Investment in Nigeria negatively are dividend tax; multiplicity of taxation by various organs of government; lack of advance tax rulings on certain issues; ambiguity in tax laws; wrong interpretation and application of the tax laws; uncertain tax regime, and circle of unending tax audits/investigations by tax authorities.” According to him, for Nigeria, FDI will be more affected by the approach of local tax regulators than the global tax drive. “This is because the global approach to tax drive is yet to be enacted into our local laws to make them applicable and effective in our environment,” Folorunsho said. He said the implication of the global tax drive by other jurisdictions for Nigeria might be positive if the country could operate a more friendly tax environment based on the existing tax laws. “However, aggressive tax drive by tax authorities can impact FDI negatively. Unhealthy approach to tax drive will scare investors from Nigerian economy. Though there has not been significant decrease in FDI to Nigeria for some years, tax drive cannot be said to be the factor responsible for the decreased inflow. Uncertain tax regime or hidden taxes will discourage FDI,” he added. According to Folorunsho, as the impact of the current global tax reform takes root, mobilisation of capital across jurisdictions will become fairer and more competitive. “Nigeria cannot achieve her full potential by increasing tax revenue alone. Government, in its effort to increase revenue generation through taxation, should always be mindful of its impact on the economic growth drivers, one of which is foreign direct investment,” he added. The President/Chairman of Council, Chartered Institute of Taxation of Nigeria, Gladys Simplice, said the CITN would continue to collaborate with relevant stakeholders towards sensitising all Nigerians on the need to pay their taxes. She said, “There is no hiding place for tax defaulters any more, in view of the increased collaboration among tax authorities and agencies towards ensuring that all corporate entities and individuals are brought into the tax net. “The recent launch of the taxpayer identification number registration system underscores the seriousness government accords to this.” Source: Punch

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Less than 5% Imo workers pay taxes, says Ihedioha

TAX SERVICES / Tobi Aminu

Imo State governor, Emeka Ihedioha has said that less than five per cent of the state’s workforce of over two million pay taxes, saying that such a situation is unsustainable and unacceptable. Ihedioha, who stated this at the occasion of his 100 days in office, also banned tax payments in cash throughout the state and introduced PayDirect platform with a single account. He explained that the action was part of steps taken by his administration to ensure transparency and accountability in the state’s governance process. He also noted that that the state could not achieve growth without a sustainable revenue generating system, pointing out that his administration had adopted other measures designed to plug leakages and increase the state’s internally generated revenue (IGR). Source: Guardian

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‘New VAT rate to boost budget execution’

TAX SERVICES / Tobi Aminu

The Centre for Social Justice on Thursday said the decision of the Federal Government to increase the Value Added Tax from the current rate of five per cent to 7.2 per cent would increase revenue needed to finance the budget. The Lead Director, CSJ, Eze Onyekpere, said this in a statement issued in Abuja. In the statement, he said as a country having one of the lowest tax to Gross Domestic Product ratio, there was a need to increase the tax rate to generate additional revenue. This, he said, was imperative following claims by the Federal Government that the country was facing fiscal crisis. He said, “Centre for Social Justice welcomes the decision of the Federal Government in the proposal for an increase in VAT from the current rate of five to 7.2 per cent.” He added that the new VAT rate would increase available resources for budget implementation and development across the three tiers of government. Source: Punch

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VAT hike will kill businesses, shrink GDP – Experts

Tax news / Tobi Aminu

Experts and groups such as the Nigeria Employers’ Consultative Association have said the recent increase in the Value Added Tax rate from five per cent to 7.2 per cent will lead to closure of many businesses. The Head of Tax and Corporate Advisory Services at PricewaterhouseCoopers, Taiwo Oyedele, said the new VAT rate would shrink the GDP growth and disposable income of Nigerians. The Director-General of NECA, Mr Timothy Olawale, noted that the timing of the increase in VAT rate was wrong, stressing that the government ought to support businesses in reducing the alarming unemployment rate in the country. Recall that the Minister of Finance, Budget and National Planning, Zainab Ahmed, on Wednesday announced the VAT rate increase at the end of the Federal Executive Council meeting. Olawale, however, argued that the benefits of the recently signed national minimum wage of N30,000 would be neutralised by the proposed increase in the VAT, thus further reducing the purchasing power of the citizens. “If this new VAT rate is implemented, the purchasing power of the citizens would have been reduced, sales of goods and services will reduce and inventories for business will be high and could lead to closure of businesses that ought to be supported by government in reducing unemployment rate that is currently alarming. “Furthermore, the benefits of the recently signed national minimum wage of N30,000 would be neutralised by the proposed increase in the VAT, further reducing the purchasing power of the citizens, leading to increase in prices of goods and services. It will result in upward movement of the inflation rate, and further contraction of the economy.” Olawale who was speaking in Abuja noted that the recently released data of the country’s Gross Domestic Product indicated a contraction in the past two quarters (Q4 2018, 2.38 per cent; Q1 2019, 2.10 per cent and Q2 2019 1.94 per cent). Rather than increase the VAT rate at this point, he said countries should be formulating fiscal policies to stimulate their economies. “Therefore, this suggests that at this period of time, countries should be formulating fiscal measures/policies to stimulate their economies,” he stated. Olawale, who said that in the event that the government must increase VAT rate against the will of the people, it should have been limited to luxury or ostentatious goods. He also urged the government to double its efforts at expanding the tax net, reduce the income gap and improve the economy through more friendly fiscal policies and promote the ease of doing business in Nigeria. Oyedele of the PwC in a statement on Thursday said more people were likely to evade tax payment as businesses would become less competitive. At the current rate of five per cent, the PwC partner explained that the country’s VAT collection of N1.1tn in 2018 amounted to 0.9 per cent of the GDP compared to about 3.8 per cent for commonwealth and ECOWAS countries. While estimating that the government would earn additional N440bn annually from the two per cent increase in VAT rate, he said for Nigerian businesses, it meant a 40 per cent increase in VAT cost. The tax expert noted that because VAT on capital expenditure was not allowed as a credit in Nigeria, the cost of real investments would go up. On the positive side, Oyedele said, “Additional VAT revenue will help reduce budget deficits, reduce government debt and fund social services especially at sub-national level.” To avoid the negative impact of VAT, he argued that VAT should be paid according to individuals’ ability as not everyone could afford a seven per cent VAT rate. He suggested other palliative measures, saying “exempt or zero rate essential consumptions like foods, education and primary health care. The exemption should not be limited to only unprocessed food items. In other words, a VAT increase should not affect the price of bread.” “Create a VAT registration threshold to eliminate VAT compliance burden for small businesses. Allow businesses to account for VAT on cash basis rather than on invoice, which creates a cash-flow problem. Lead by example; ensure that government and all MDAs fully comply by remitting VAT collected from their contractors. Ensure transparent reporting and efficient utilisation of the revenue for public services and infrastructure.” Reacting to the proposed increase, a former Director-General, the Securities and Exchange Commission, Dr Suleyman Ndanusa, said it would affect demand for goods and services. He said companies would suffer if people did not demand for goods and services because of VAT increase. “If people do not demand for goods because of more tax burden, it will affect the companies that produce them. And if the companies that produce them are not making money, it will obviously affect their profitability and income,” he said. Ndanusa, who spoke to the News Agency of Nigeria, also noted that the timing was wrong, considering the challenges in the economy. “The timing is quite wrong. At this point in time, our economy needs to be helped by policies that will ginger more consumption and more disposable income for the masses. The paradigm for me has to change. Are we increasing tax just for the purpose of revenue or managing our fiscal policy taxation for growth? The paradigm has shifted from revenue-driven taxation to growth-driven taxation,” he said. He added that government needed to introduce incentives, reduce interest rates and pump up consumption to help the economy to grow instead of increasing taxes. “The approach must be holistic, obviously at a time like this when there is a seeming recession or coming out of recession. Government needs to pump up consumption; when you begin to tax expenditure just for the purpose of revenue, it will further dampen demand and affect businesses.” Source: Punch

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Why business name registration is necessary–CAC

CAC SERVICES / Tobi Aminu

The Corporate Affairs Commission (CAC) has stated that registration of business names is necessary for both companies and small scale businesses as any enterprises operating without registering with the Commission is liable to be sanctioned. Head of Bauchi State office of the Commission Alhaji Abdullahi Abubakar stated this, Thursday while speaking on the procedure and requirements for registering businesses at Business support clinic program and e-mentoring with mentors and mentees with beneficiaries of digital livelihood training for young women and girls organized by centre for information technology and development (CITAD) with support from equal digital skills fund held in Bauchi. He said it is compulsory for any one using any name for his business enterprises other than his personal name and surname to register it with the Commission adding that offenders risk penalty. According to him, registering the business will also help business men to have monopoly of the business names and get recognition as legal enterprises. The CAC boss noted that the registration costs the sum of ‘only N10, 000’ Also speaking, the representatives of the National Agency for Food and Drugs Administration and Control (NAFDAC) and Standard Organization of Nigeria (SON) Bashir Musa and Mohammed Chinade explained that after registering with CAC, manufacturers of consumable items should register with NAFDAC while SON registers companies producing both consumable and non consumable items to ensure only quality items are sold to Nigerians. Earlier, the Executive Director of the centre for information technology and development (CITAD) Mr Y.Z Ya’u represented by the technical officer of the centre Kamaluddeen Umar said the training was intended to equip young women with practical ICT training and use its tools that would help them in the ICT industry and to start up micro-enterprises. Source: Blue print

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Google to pay €1bn to end French tax probe

Tax news / Tobi Aminu

Google is to pay French authorities almost €1bn (£900m) to end a long-running investigation into its taxes. The settlement includes a €500m fine and additional taxes of €465m, but it is less than the tax bill authorities had accused Google of evading. It rounds off a four year investigation that saw authorities raid Google’s Paris headquarters in 2016. Investigators said Google owed about €1.6bn in unpaid taxes amid a wider crackdown on tax planning of big firms. French authorities had been seeking to establish whether Google, which has its European headquarters in Dublin, failed to declare some of its activities in the country. The search giant, which is part of Alphabet, pays little tax in most European countries because it reports almost all of its sales in Ireland. It is able to do that thanks to a loophole in international tax law. However, that loophole hinges on staff in Dublin concluding all sales contracts. The agreement allows Google “to settle once for all these past disputes,” said Antonin Levy, one of the firm’s lawyers. In March, the EU hit Google with a €1.5bn fine for blocking rival online search advertisers and last year the European Commission levelled a record €4.3bn fine against the firm over its Android mobile operating system. In January, France fined Google €50m a breach of the EU’s data protection rules. Source: BBC

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VAT Recovery in Nigeria’s Oil Service Sector

TAX SERVICES / Tobi Aminu

Value Added Tax (VAT) is a consumption tax levied at each stage of the supply chain and ultimately borne by the consumers. The tax was introduced in Nigeria in 1993 via the Value Added Tax Act (VATA), after a recommendation by a study group that was set up in 1991 to review the Country’s entire tax system. It is worth knowing that before the introduction of VAT, sales tax was in operation in Nigeria. However, VAT is different from sales tax, as it has a broader scope and includes most supplies, professional services and banking transactions. The Tax is managed by the Federal Inland Revenue Service (FIRS) and is charged on the supply of goods and services other than those exempted in the first schedule to the VATA. It operates on a credit mechanism such that each producer along the value chain can claim the tax paid at the previous stage of production, when passing the product of his effort to the consumer at the next stage (provided that the producer and the merchant deal in goods on which the input VAT is claimable). The operation of the credit mechanism, however, stops at the stage where the item is purchased by the final consumer, who bears the full tax burden. In essence, merchants offset the total VAT paid on purchases (called ‘input tax’) in a given period (usually one month), against the total VAT charged on sales (i.e. ‘output tax’) and pay the excess to the FIRS. For companies operating in the oil and gas industry however, the law requires service recipients to withhold the output VAT charged by their vendors and remit it, directly to the FIRS. This requirement of the law has pitched the tax authorities against oil service companies who are legitimately entitled to claim their valid input VAT against the output, before remitting the excess to the Federal Inland Revenue Service (FIRS). In response, the latter has always maintained that the affected companies should file a claim for the refund, for processing and payment. However, there has been some controversies on the process for the recovery of such input VAT, given the provision of the VATA. Thus, this article is focused on breaking the myth of the challenges faced by companies operating in the Nigerian oil and gas sector, in recovering valid input VAT on cost incurred against the output VAT on their supplies. Allowable Input VAT: In 1998, the VAT Act was amended to restrict the scope of allowable input VAT. T through section 6 of the Finance (Miscellaneous Taxation Provisions, Act No. 18, 1998, which introduced section 13(a) (now section 17) of the VAT Act, Laws of the Federation of Nigeria (LFN), 2004). Section 17 of the amended VATA provides that: “………..the input tax to be allowed as a deduction from output tax shall be limited to the tax on goods purchased or imported directly for resale and goods which form the stock-in-trade used for the direct production of any new product on which the output tax is charged”. The provision also excluded the input VAT incurred on overheads, services and general administration of any business from being claimed against a company’s output VAT. Rather, such input VAT should be expended through the company’s profit or loss account. The input VAT on capital items and fixed assets are to be capitalized with the cost of the items. Deduction at Source: VAT charged by a vendor is expected to be paid to it by the service recipient, together with the invoice value for the goods sold or services received. However, section 13(2) of the VATA provides that for companies operating in the oil and gas sector, VAT charged them by their vendors should be deducted at source and remitted directly to the FIRS. This position was further clarified and corroborated by the FIRS via paragraph 13(2) of its information circular . Source: This days

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Govt should give tax holiday to gas companies – Emenike

TAX SERVICES / Tobi Aminu

The Head of Gas Ventures, Neconde Energy Limited, Chichi Emenike, in this interview with ’FEMI ASU, says Nigeria needs to encourage more projects to monetise its huge gas reserves and boost domestic supply What are your thoughts on the Nigerian oil and gas industry? What we have seen with time is that there has been a renewed focus on local content, and we are beginning to see Nigerian businesses that can do better in the oil and gas industry than the international oil companies that we have known over the years. Here at Neconde, I have been given the mandate to drive the gas business; Neconde has huge gas reserves. Part of the immediate mandate is to develop and completely monetise our associated gas. We’ve also got huge reserves of non-associated gas, which we have to develop. It is a well-known fact that the country has huge gas reserves. Just last week, Italian oil major, Eni, announced that it had made a significant gas discovery in the Niger Delta. But there is still gas shortage in the domestic market. What is your view on this? This is something we have always talked about. Most of the gas reserves are still trapped below the ground. We don’t have sufficient gas infrastructure. We have a gas master plan but we haven’t fully optimised it yet. We’ve got an environment that is not clear to investors yet, whether you’re an international or a local investor. We don’t have policies that are completely clear; that is not acceptable. We’ve got a myriad of other issues. These are some of the issues that we are dealing with, and these are some of the things that have held the gas industry down for some years now. There are a couple of LNG projects that have been stalled. Given the growing competition in the global LNG market, do you think there is still prospect for these projects? Those are the projects we need to monetise our gas resources. We should have LNG plants like the one in Bonny in other places in the country. The focus really is not just on gas for export; we also have a lot we can do with the gas internally. You have many industries that need to run on gas. We have issues with power. We need to begin to look at the power sector. There are a lot of regulations regarding the power sector that need to be looked at. This is to encourage investors to develop more gas. There are other investment destinations in Africa. For instance, Ghana does not have as much gas reserves as Nigeria but they’ve done a lot of tidying up. Mozambique is talking of an LNG plant today. Cameroun has delivered its first LNG. So what are we saying? It is time we get our act together. We talk a lot. Our gas policy has a leg in the Petroleum Industry Governance Bill as it is. There are other bills too that are also important that are waiting to be passed. Time is ticking. We need to pass the Petroleum Industry Bill. What role is Neconde playing to ensure adequate supply of gas in the domestic market? What we are working towards now is to eliminate gas flaring. We’ve already commercialised some of the associated gas and we have buyers. The short-term plan is to maximise our associated gas. We are putting in place more gas infrastructure; we currently have a central processing facility. We’re also looking at the non-associated gas because that is where the main focus is; that is where the big business is. What is your company’s current gas production and what are your plans for the future? Neconde is developing Oil Mining Lease 42 currently with its joint venture partners. We have what is called an asset management team. Currently, we’re producing about 40 million standard cubic feet of gas per day. Our plan is to increase our associated gas production to 80 million scf per day, and that requires putting in place more gas infrastructure. We currently have a central processing facility, and that still requires additional infrastructure, probably additional pipelines. We have off-takers who have also indicated interest. They are currently discussing with us. In the long term, we’re looking at the non-associated gas. Neconde is also looking at putting in place Liquefied Petroleum Gas infrastructure. The business plan that we are developing and I’m looking at currently also has consideration for the LPG. We have a lot of the LPG in Nigeria but unfortunately the per-capital usage is small compared to other countries such as Ghana and Senegal. We shouldn’t have that; you know those figures. For a long time, most of the LPG Nigeria uses comes from the Nigerian NLG in Bonny to Lagos. I know the NLNG is committed to deepening the consumption of the LPG in the country; so, they deployed smaller vessels. There are so many things we are doing with our current operations to ensure that we maximise value for our shareholders and our lenders. Source: Punch

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Fowler, Accountants Discuss Improved Revenue Base At ICAN Conference

TAX SERVICES / Tobi Aminu

The Executive Chairman, Federal Inland Revenue Service, (FIRS) Babatunde Fowler has warned the nation’s accountants not to support tax evaders but to assist in building a larger revenue base for the nation. At the 49th Annual Conference of the Institute of Chartered Accountants of Nigeria, ICAN, where Fowler was the keynote speaker at a panel discussion on “FIRS Power of Substitution. Critical Review and Matters Arising”, accountants and lawyers scoffed at Fowler’s admonition, alleging that he was employing strong tactics in getting taxpayers to be tax compliant. They told Fowler to abide, in strict terms, with the processes and stipulations of the FIRS Establishment Act 2007, which the FIRS Chairman maintained, is the source of his powers to place lien on the bank accounts of defaulting taxpayers. Fowler should collect taxes by abiding with the Rule of Law, the accountants charged. At the event chaired by former Executive Chairman, FIRS, Ifueko Omoigui Okauru, Fowler explained the dynamics involved in the Substitution of Accounts, and urged accountants at the conference to partner with FIRS to improve the revenue collection efforts of all tax authorities. “You play a very important role in this cycle. Without you, the chartered accountants, it will be very difficult to ensure that adequate taxes are being paid. Talking about corruption, corruption is not only when you do something wrong. Sometimes, corruption borders on when you do nothing at all. When you review the books that are brought to you, you do your own internal assessment on what your clients should pay, you are truthful, you drop accounts that are not willing to do the right thing”. “We should realise that the revenue collected by the FIRS is distributed among the three tiers of government: the Federal, State and Local Governments. Today, well over 30 states rely on that monthly collection. Without that monthly collection, you can imagine what life would be in those states”. “We are all here for this conference, certain that chartered accountants came from various states across the nation. If in your state, we were not able to support your revenue drive, what level of security would you have in your state? “I went to deliver a speech in one West African country. I was asked to come and encourage tax compliance, and I used a very simple example, an example I had used in Lagos, an example that you and I may not have thought about. Under the Joint Tax Board, JTB I went on a visit to a hospital in Lagos. The nurse complained about the highmortality rate of children under five. And I asked what was the main cause, she said ‘malaria’. And I said, so we have malaria medicine,she said ‘yes’. But I found out on that visit that for children, when malaria gets to a certain stage, it becomes irreversible and almost impossible to save that child. “The cost of that medicine for prevention is N2000. There are people in this country who do not have N2000 to treat malaria. Some pray and hope that the fever will break. But for some, they have no choice and they lose those children. They lose potential presidents. They lose potential political leaders. They lose potential inventors among others. This is endless. But with N2,000 you could save a life. “For those books that you look at, think about this. If you look at those books, you should know that for every additional N1billion or N2 billion that is collected, even if it is shared at the ratio of 52 per cent, your state and your local government will get the balance. N1 billion could build 10 medical facilities in those states. That is the impact and power that you have.” “”I am sure you wont allow those not paying taxes to go scot free “Before FIRS voted for lien on bank accounts of defaulting taxpayers, the Service granted a waiver of penalty and interest for three years (2013-2015), followed by the Voluntary Assets Income Declaration Scheme, VAIDS. It was when millionaire and billionaire taxpayers with turnover of between N11 million and N1 billion did not take the opportunity to pay their taxes, that FIRS decided to place lien on the accounts of defaulting taxpayers “All defaulting taxpayers were considered, provided that such taxpayers came forward to declare their indebtedness, pay at least 25% of the outstanding amount and present a payment plan on the outstanding tax liability that was acceptable to the Service. This window was opened from 5th October to 24th November, 2016. A total of 2,400 companies took advantage of the window, from which FIRS realized about N98.8 billion. “ The last speakers spoke about integrity and vision in public service. You may have the integrity, you may have the vision, but without the revenue, it remains a dream. Most of us here like to complain about what the government has done and what the government has not done, but even with the best vision and leadership, we still require revenue and the revenue certainly will come from taxes. “The Voluntary Assets Declaration Scheme (VAIDS) commenced on 1st July, 2017 to be run for a period of nine months was formally launched on the 29th of June, 2017 by the then Acting President, H.E. Yemi Osinbajo. VAIDS was an initiative designed to encourage voluntary disclosure of previously undisclosed assets and income for the purpose. Source: Inside Business

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