Tobi Aminu – Page 42 – Sunmola David & CO

How ‘Better Tax’ Walks the Talk for Workable Tax Reforms

Since 1956 when crude oil was discovered in commercial quantity in Nigeria’s Niger Delta region, a flurry of economic experts have continually pitched the benefits of economic diversification to no avail. The immediate fallout of this negligence seesaws between a government perennially starved of funds for capital projects and a citizenry disillusioned by the absence of the social contract they expect from strict compliance with government policies. At present, the federal government is reportedly grappling with a budget deficit of N3.8 billion and debt profile of N2.7 billion in a country that boasts 57 million economically active citizens, among whom only 15,000 are tax compliant. The International Monetary Fund (IMF) reinforced this argument in 2016 when it estimated revenue collected across all tiers of government at 6 percent of GDP (70% from the oil sector) and 30 percent from the non-oil sector (30% of GDP). Small wonder the government has shifted its focus to alternative strategies for revenue generation from the non-oil sector in its 2020 inclusive economic agenda. The Better Tax campaign launched by the Nigeria Economic Summit Group (NESG) in Lagos recently is one such revenue generation initiative. With the benefit of hindsight, the average Nigerian may be understandably sceptical of tax reform. After all, several initiatives launched previously were long on execution but drastically short on sustenance and impact. In 2017, the President Muhammadu Buhari administration sought to include more Nigerians in the tax net with the launch of the Voluntary Assets and Income Declaration Scheme (VAIDS). To facilitate the process, government set up tax clinics to offer free service, consultation and legal representation for defaulting companies wishing to voluntarily file their tax returns. However, analysts argue that the euphoria over N30 billion sourced from the initiative was short-lived because compliance was primarily incentive-based and did not outlast the 11-month lifespan of the project. The Federal Inland Revenue Service (FIRS) has also done its bit by introducing several digital payment platforms such as e-Registration, e-Filing, e-Tax Clearance Certificates and e-Stamp Duty, among others. But it is instructive that of the 4,926,053 taxpayers in the FIRS database, only 13,131 are registered for e-Filing and of that number, only a paltry 3,064 actually use the service. This development calls for a more wide-ranging system that will not only sustain tax compliance but also close knowledge gaps. At the launch of Better Tax recently, the Chairperson of the NESG Fiscal Policy Roundtable Dr. Sarah Alade argued that contrary to general perception, Nigerians are not necessarily averse to paying taxes. In fact, the NESG Citizen Perception Report, which is the product of a tax survey cutting across households and small businesses in the revenue value chain, found that about 70 percent of respondents had no reservations about paying taxes. Rather, they would prefer that the process is sustained by proper education and transparency on the allocation and application of resources by the government. Tax officials, on their part, are constrained by inconsistent tax policies, limited resources, unrealistic targets and inability to influence service delivery from tax proceeds. Source: Pro Share

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Chike-Obi Urges FG To Expand Tax Net, Reduce Rate

TAX SERVICES / Tobi Aminu

Pioneer chief executive of the Asset Management Corporation of Nigeria (AMCON), Mustafa Chike-Obi, on Monday in Lagos reiterated the need for the Federal Government to harness the huge economic potentials inherent in taxation to raise revenue and effectively diversifying the economy from crude oil. This, he said, is possible if the tax net is expanded such that much more people attracted into the tax net, thereby reducing the burden on the few that faithfully pay, a situation he expects will reduce tax rate in the country from the current 30%, the highest in the world today. Chike-Obi, Executive Vice Chairman, Alpha African Advisory, who spoke on the theme: Repositioning Nigerian Economy for Sustainable Growth,” at the Finance Correspondents Association of Nigeria (FICAN) Bi-Monthly Forum, an event meant to set economic agenda for second four-year term of the Muhammadu Buhari administration, while addressing key economic issues, challenged government to discourage multiple taxations, as part of efforts to enhance voluntary compliance. Speaking on the plethora of intervention funds and why adequate infrastructure is needed to stimulate the economy instead, also noted the need for a lower interest rate of between 12 to 15% per annum. For him, “all these intervention funds don’t work… Let me tell you why they don’t work. If you lend to a farmer at 5% you think you are helping him, but everything around him is at 26%. So, he gets a little bit of relief on his financing, but he doesn’t get reliefs on his supplies, diesel, food, employees… So, at the end of the day, those things he gets at 26% invades his 5%.” Chike-Obi said intervention funds also don’t work because “the default rates are as high as default rates of non-intervention funds. So, they don’t work. They are not very efficient”. What Nigeria’s economic managers should do in the new dispensation is to provide capital at reasonable interest rates that work for everyone. “There must be access to capital at a reasonable price. With a 26% interest rate, you cannot do business successfully. So, we must find a way to provide interest rate to everybody at a reasonable rate. We must have an interest rate that will support our economy. And it cannot be much higher to the borrower at 12 to 15%. Every Nigerian should be able to borrow money at between 12 to 15%… So, we must have capital available.” He also spoke on what foreign lenders look out for when lending to developed markets, warning that borrowing in US$ may not be cheaper on the long-run than the Naira as widely believed in some official quarters. For example, he stressed, even the country borrows in US$ at 8%, creditors are concerned with the exchange at the time of repayment, as it is unlikely to remain at N360/$, just as the foreign creditors consider borrowers with a capacity to generate needed funds for repayment of such loans. “The reason why they are lending money at 8%, instead of 16%, is because they know that by the time that money matures, your Naira will not be exchanging at N360/$. This is because the Naira always depreciated by approximately 50% every five years,” Chike-Obi argued. Source: Invest Data

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Taxes Killing Ghanaian Companies As Foreign Businesses Thrive

Tax news / Tobi Aminu

The founder of Perez Chapel International, Bishop Charles Agyinasare, has blamed the collapse of Ghanaian businesses on the immediate tax imposed on them by the government. Preaching at a Sunday service on 2 June 2019 at the Perez Chapel International at the Perez Dome in Accra, Bishop Agyinasare wondered why foreign-owned businesses are given tax exemptions to the detriment of indigenous ones.As a result, he said, the majority of the mega businesses in Ghana are not owned by Ghanaians. Bishop Agyinasare told his congregation that: “Do you know that in Ghana we don’t even have businesses? We like foreign businesses, we don’t have businesses, all our shops are foreign-owned – from Melcom to Shoprite to our restaurants; the Papayes, all the telecom companies, we don’t own any of them, from Vodafone to MTN to [Airtel/]Tigo, we don’t own anything.“We say we do chocolate but Nestle doesn’t belong to us, Unilever Brothers doesn’t belong to us, we don’t own anything.“When a foreign company wants to come and do business in Ghana, we’ll give them a 10 per cent tax exemption for them to settle within the period. A Ghanaian businessman starts the same business and from day one, he has to pay tax and, so, our businesses are collapsing.“When a Ghanaian businessman starts a furniture company today, he has to pay tax, a foreign company starts a furniture company, he claims he’s exporting the thing then they export the thing and it still gets back here and the Ghanaian man who has started is paying taxes and so our businesses don’t succeed”.Last year, the President of the African Centre for Economic Transformation, (ACET), Dr K. Y. Amoako said tax holidays for foreign companies is undermining Africa’s growth.He bemoaned the lack of stringent measures by the government to mobilise taxes from international firms who are investing in African countries.Dr Amoako said this in an interview with the media on the sidelines of the opening session of the 2018 African Transformation Forum held in Accra. Source; Afroinsider

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LIRS to Use Taxpayers’ Bank Verification Numbers for Unique Biometric Identification

Tax news / Tobi Aminu

Summary Recently, the Lagos State Internal Revenue Service (LIRS) issued a Public Notice (PN) disclosing its intention to integrate the LIRS’ Personal Identification Digit (PID) for taxpayers with the national Tax Identification Number (TIN) system using taxpayers’ Bank Verification Numbers (BVN). The PID, which is also known as the Lagos State Government Electronic Banking System (LASG-EBS) Taxpayers Identification Digit, is a unique taxpayer identity code issued by the LIRS to taxpayers in Lagos State while the TIN is a national identification number for individuals or corporate entities for the purpose of tax remittance. According to the PN, the integration will facilitate seamless sharing of taxpayers’ information between tax authorities and other relevant stakeholders. Details The PN provides that the integration is designed to be biometric-based and the LIRS intends to employ the existing BVNs to achieve the planned integration. Furthermore, the PN states that access to the LASG-EBS platform for all transactions such as registration and creation of payer ID for new taxpayers, payments of taxes and validation of taxpayers’ profile etc. will now require taxpayers’ BVN. Accordingly, the PN requires all self-employed individuals to provide their BVNs to the LIRS in order to assist in the creation of their unique PID. Corporate Organizations are also required to ensure that their employees who qualify for tax clearance certificate (TCC) include their BVN in their individual e-TCC forms. The LIRS, in the PN, also assured taxpayers of the safety and security of all data and information in its custody. Implications We expect that the proposed integration of the PID into the TIN would provide the tax authorities with more reliable taxpayers’ information to enable them track down tax defaulters and combat tax evasion. However, it is important that the tax authorities safeguard all data and information of taxpayers, which may be obtained from the integration process to boost taxpayers’ confidence in the system. Thus, taxpayers should engage their tax consultants as soon as possible to obtain professional guidance in complying with the directives under the Notice. Source: Andersen Tax

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ANAN urges improvement in ERGP implementation

Accountancy Services / Tobi Aminu

The new President, Association of National Accountants of Nigeria (ANAN), Prof. Muhammad Mainoma, has urged the Federal Government to improve the pace of implementing the Economic Recovery and Growth Plan (ERGP), as the country’s full recovery from recession rests on this. Mainoma, who said during his inauguration as the11th President and Chairman of Council of ANAN, recently, expressed optimism that with the favourable outlook in 2019, resulting from the rising crude oil price, growth in external reserves, declining inflation, and GDP growth, there is hope that these would translate to sustainable economic development. Using his name as an acronym, the new president said it was with a determination to consolidate on the attainments by Making Accountants in Nigeria Ordinarily More Attractive (MAINOMA). He equally urged ANAN members to exhibit characters of proficiency, respect, objectivity, fairness, education, selflessness, service and integrity, organisation, networking, ability, learning, image, standardisation and methodological, which he termed as Professionalism. Under his watch, Mainoma said the council would work with other professional accounting organisations (PAOs) to form a joint accounting body, as formidable platform for advising the government, noting that the Federal Government’s National Anti-Corruption Strategy (NACS) needs the support of PAOs in Nigeria. “PAOs must work alongside government, regulators, law enforcement and international bodies to combat corruption, tax evasion, money laundering and to strengthen transparency and accountability programmes,” he said. While commending efforts in institutional and governance reforms, he said ANAN would partner with the three tiers of government to enhance fiscal transparency and accountability governance. During the ceremony, a new ANAN logo as well as its training arm, Nigerian College of Accountancy (NCA) Jos, was unveiled. In his valedictory address, the immediate past president, Shehu Ladan, listed some progress made to uplift the association and its members. Source: Guardian

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CAC: Steps to start a small business

CAC SERVICES / Tobi Aminu

Experts say there are steps required to start a successful business. Take one step at a time, and you will be on your way to successful small business ownership. Step 1: Do Your Research Most likely you have already identified a business idea, so now is the time to balance it with a little reality. Does your idea have the potential to succeed? You will need to run your business idea through a validation process before you go any further. A brand strategist Lanre Philips says you don’t go into a business just because you have an idea but because you want to solve a problem. “In order for a small business to be successful, it must solve a problem, fulfill a need or offer something the market wants”. Author of ‘Starting a Successful Business’, Mrs Ekatte Umoh also corroborated this. “Simply find a need and fill it. There is always a gap in the market, recognize that gap and provide a solution.” There are a number of ways you can identify this need, including research and even trial and error. As you explore the market, some of the questions you should answer include: Is there a need for your anticipated products/services? Who needs it? Are there other companies offering similar products/services now? What is the competition like? Step 2: Make a Plan You need a plan in order to make your business idea a reality. A business plan is a blueprint that will guide your business from the start-up phase through establishment and eventually business growth. Experts say a business plan is a must-have for all new businesses. Step 3: Plan Your Finances Starting a small business does not always require a lot of money, but it will involve some initial investment as well as the ability to cover ongoing expenses before you are turning a profit. Anticipate what you will need to keep your business running for at least 12 months, like rent, marketing, supplies, employee salaries, your own salary and so on. Step 4: Choose a Business Structure Your small business can be a sole proprietorship, a partnership, a limited liability company (LLC) or a corporation. The business entity you choose will impact many factors from your business name and to your liability. You may choose an initial business structure, and then re-evaluate and change your structure as your business grows and needs change. Step 5: Pick and Register Your Business Name Your business name plays a role in almost every aspect of your business, so you want it to be a good one. Make sure you think through all of the potential implications as you explore your options and choose a business name. You can register a business name with the Corporate Affairs Commission (CAC) for N5, 000. The federal government reduced the rate from 10,000 to enable small business register their business names. Source: Daily Trust

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Don’t Reappoint Fowler As FIRS Chairman, Staff Tell Buhari

Tax news / Tobi Aminu

Some workers of the Federal Inland Revenue Service (FIRS), have called on President Muhammadu Buhari not to reappoint the Executive Chairman of the service, Mr Babatinde Fowler, for another term of office. The workers, under the aegis of Concerned Staff of FIRS, made this known in a letter to the President, a copy of which our correspondent got on Sunday. In the letter, the workers accused Fowler of being economical with the truth in some of the reports being doled out detailing the activities and achievements of the service. Also, they accused Fowler of setting the service in the reverse gear instead of positioning it for greater height like his predecessors. They alleged that prior to August 2015 when Fowler assumed office, the modernization efforts towards organizational process and structural reforms of FIRS with a view to enhancing effective and efficient tax administration had produced significant verifiable outcomes in many areas. They listed the areas to include developing a tax reform agenda, enactment/amendment of tax laws, National Tax Policy, articulating a clear direction for the Service and the JTB among others. Their grouse against Fowler included recruiting workers in manners shrouded in secrecy and not in conformity with laid down rules. According to them, Fowler’s claim of improved performance was fraught with irregularities. “With fixing of the fundamentals by building a foundational base that would readily enhance tax revenue collections through the implementation of the tax reform, we experienced a steady increase in tax revenues for the government except for the immaterial decrease in tax revenues which of course were attributed to 2007-2009 global credit crunch/financial meltdown, the performance before Mr. Fowler was growing year-on-year. “Contrary to Mr Fowler’s claim that “N5,320 trillion is the highest revenue ever generated by FIRS in history” is misleading and economical with the facts because: “(1). In 2012 the set revenue target was N3,635.5 trillion while N5,007.7 trillion was generated, with 137.74% of collection. But the set revenue target in 2018 is N6,747.0 trillion and actual revenue generated stood at N5,320.0 trillion with 78.85%. “(2). The amount of N5,007.7 trillion in Dollars in 2012 was $32,150 billion while the amount of N5,320.0 trillion in 2018 stood at $17,385.62 billion. This means FIRS under his watch did not meet the set target, its performance was also poor in Dollar terms in 2018. Below is the tax revenue collection performance from 2000-2018 for further clarification. “Our collection should continue to grow year-by-year as shown above and not decreasing as highlighted in red which represents FIRS performance under his watch as Executive Chairman. These clarifications are necessary to dispel the huge media propaganda stupendously sponsored with taxpayers’ money in many conventional (electronic and print) platforms all over the country to boost his personal ego”. “The open secret remains that FIRS has under-performed under his leadership and this could be attributed to its executive incompetence and arrogance in handling tax administration matters”. “It must also be emphasized that in 2010 when the general and transparent recruitment exercise was concluded, the ripple effect of the exercise and other initiatives embarked upon produced huge tax revenues as can be seen from the table above for 2010, 2011 and in 2012 when the tax revenues got to all-time high of N5.01trillion at an exchange rate of N155.76. So, it is no longer news that N5trillion revenue target is achievable provided a competent person is appointed as the Executive Chairman of FIRS. “Dear Mr. President, there are so many disturbing atrocities perpetrated by Mr. Fowler in FIRS which your attention must have been drawn to but we wish to also draw it to you again, sir. There are convincing evidences already presented to you for further action and others that may be presented to you for further investigations and for his possible prosecution. We strongly advise that these atrocities be made known to the VICE PRESIDENT because it is his name that is being used a shield against investigation and prosecution for abusing his office. “It must be emphasized that Mr. Fowler’s era in FIRS has unimaginably taken it back to the old dark period of inefficient and ineffective days. Source: GCFR

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VAT: FG’s Non-oil Revenue Rises by 28.7%

Tax news / Tobi Aminu

The federal government’s non-oil revenue increased by 28.7 per cent to N322.93 billion in April, higher than the N251.01 billion recorded the previous month. But at N322.93 billion or 40.6 per cent of total revenue, the non-oil revenue was below the provisional monthly budget estimate of N466.91 billion by 30.8 per cent. The Central Bank of Nigeria (CBN) disclosed this in its monthly economic report for April 2019, posted on its website. But it explained that the lower collection relative to the provisional monthly budget estimate was due to the shortfalls in corporate tax, VAT, Federal Government of Nigeria Independent Revenue and Education Tax. According to the report, at N795.31 billion, the estimated federally-collected revenue (gross) in April 2019, fell below the provisional monthly budget estimate of N1.107 trillion by 28.2 per cent. However, it exceeded the receipt of N767.90 billion in the preceding month by 3.6 per cent. The decrease, relative to the provisional monthly budget estimate, was attributed to a shortfall in both oil and non-oil revenue. Also, oil receipts, at N472.38 billion or 59.4 per cent of total revenue, was below both the provisional monthly budget estimate and the preceding month’s receipt of N516.88 by 26.2 per cent and 8.6 per cent, respectively. The fall in oil revenue relative to the provisional monthly budget estimate was attributed to the shut-ins and short-downs at some NNPC terminals due to technical issues, leakages and maintenance. “Of the total N616.21 billion retained revenue in the Federation Account, the sums of N88.49 billion, N67.82 billion and N24.72 billion were transferred to the VAT Pool Account, the federal government independent revenue and ‘Others’ respectively, leaving a balance of N435.18 billion for distribution to the three tiers of government,” the report said. Of this amount, the federal government received N208.39 billion, while the state and local governments got N105.70 billion and N81.49 billion, respectively. The balance of N39.59 billion was shared among the oil producing states as 13 per cent Derivation Fund. Similarly, from the N88.49 billion transferred to the VAT Pool Account, the federal government received N13.27 billion, while the state and local governments received N44.25 billion and N30.97 billion, respectively. “The external sector performance remained stable in the review month. The average price of crude oil rose from $68.11 per barrel in March 2019 to US$73.08 per barrel in April 2019 due to OPEC-led supply cuts, geopolitical tensions in Libya and Venezuela, and the US sanctions on Iran. “Notwithstanding, aggregate foreign exchange inflow into the CBN, at $5.25 billion, showed a decline of 32.4 per cent below the level in the preceding period of 2019, but contrasted with the growth of 23.8 per cent at the end of the corresponding period of 2018. The fall in aggregate foreign exchange inflow into the CBN, relative to the preceding month’s level, was attributed, largely, to the decrease in non- oil receipts. “Aggregate outflow of foreign exchange from the Bank fell by 6.7 per cent below the level at the end of the preceding month to $4.90 billion in April 2019. It, however, indicated 42.5 per cent increase over the level at the end of the corresponding period of 2018. The development, relative to end-April 2019, reflected, mainly, the 13.2 per cent decline in ‘Interbank Utilisation,” the report stated. Furthermore, the overall, foreign exchange flows through the Bank in the month of April 2019, resulted in a net inflow of $0.35 billion, compared with $2.51 billion and $0.80 billion in the preceding month and the corresponding period of 2018, respectively. According to the report, at N31.696 trillion, aggregate credit to the domestic economy, on month-on-month basis, grew by 3.9 per cent at the end of the review month, compared with the increase of 6.5 per cent and 0.7 per cent at the end of the preceding month and the corresponding period of 2018, respectively. The development reflected, mainly, the 11.4 per cent rise in net claims on the federal government. Over the level at end- December 2018, net domestic credit grew by 15 per cent at the end of the review period, compared with the growth of 10.7 per cent and 5.3 per cent at the end of the preceding month and the corresponding period of 2018, respectively. The development was due to the increase of 59.1 per cent and 5.5 per cent in net claims on the federal government and claims on the private sector, respectively. “Net claims on the federal government, on month-on-month basis, rose by 21.8 per cent to N7,741.3 billion at end-March 2019, compared with the increase of 11.4 per cent and 7.3 per cent at the end of February 2019 and March 2018, respectively. “The development was due to the increase of 74.0 per cent in the banking systems holding of government securities in the review month. Relative to the level at end- December 2018, net claims on the federal government grew by 59.1 per cent at the end of the review period, compared with the increase of 30.6 per cent and 35.5 per cent at end of February 2019 and March 2018, respectively,” it added. Source: This Day

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LCCI calls for concessionary tax rate for SMEs

Tax news / Tobi Aminu

The Lagos Chamber of Commerce and Industry has called for the concessionary tax rate for the Small and Medium Enterprise sector of the economy. Making the call in a communiqué issued at the end of its council meeting held over the weekend, the LCCI noted that small businesses were more vulnerable to the current challenges in the economy and suffered high mortality rate as a result. In the communiqué signed by the Director-General, LCCI, Mr Muda Yusuf, and made available to our correspondent on Sunday, the chamber also expressed concerns about the persistent delays in the issuance of the Pre-Arrival Assessment Report to importers by the Nigeria Customs Service. It said the situation contributed to cost escalation for many businesses, payment of avoidable demurrage and high interest cost on borrowed funds. “The protracted delays in the issuance of PAAR is a negation of the policy of the government on ease of doing business. The LCCI, therefore, calls on the Comptroller General of the NCS, to urgently intervene.” The investigating activities of anti-graft agencies and regulatory institutions regarding alleged infractions by corporate organisations also occupied the attention of the chamber. It admonished that such investigation, as much as possible, be conducted in a discreet manner devoid of any form of media hype. “This is necessary to avoid unwarranted reputational damage and erosion of investors’ confidence,” it said. The LCCI added, however, that, “This position does not diminish the significance of compliance by corporate organisations with extant laws and the imperative of proportional sanctions for proven cases of infringements of the law. “The LCCI is a leading advocate of sound corporate governance in the country. Meanwhile, it is also important that there should be proper coordination between regulatory institutions and anti-graft agencies in dealing with suspected regulatory infractions to avoid duplication of investigative actions.” Source: Punch

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G20 ministers vow to ‘redouble efforts’ on digital tax

Tax news / Tobi Aminu

G20 policymakers vowed Sunday to “redouble” their bid to reform by the end of next year the international tax system to take account of internet giants such as Facebook and Google. Speaking about international taxation, the G20 finance ministers and central bank governors said in a statement seen by AFP: “We will redouble our efforts for a consensus-based solution with a final report by 2020.” However, here again, the Fukuoka meeting exposed a difference of opinion over what form this reform should take. Frustrated by a lack of global action on the issue, some countries such as Britain and France have already introduced a so-called digital tax, but Mnuchin was blunt in his assessment of these policies. “I would say the US has significant concerns with the two current taxes that are being proposed by France and the UK but let me give them some good credit for proposing them in the sense (that) they have created an urgency to deal with this issue,” US Treasury Secretary Steven Mnuchin said at a public meeting before the formal G20 started. “Although I don’t like them, I do appreciate the impetus for these issues,” added the top US finance official. Appropriately for a meeting held in Japan — which is on track to become the world’s first “super-aged” society in which more than 28 percent of the population is over 65 — the G20 ministers discussed for the first time the “challenges and opportunities” posed by ageing. They suggested getting more women and elderly people into the workforce and “promoting elderly-friendly industries”, as well as reforming the fiscal and banking systems to take into account ageing populations. “You basically have a very large portion of mankind that is ageing and then the workforce is shrinking,” OECD Secretary-General Angel Gurria told AFP in an interview. Solving the issue will require wholesale changes to the way society is organised, added Gurria. Source: Punch

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