Tobi Aminu

Zenith Bank, United Bank for Africa and 9 other deposit money banks in the country paid more to the government in taxes in 2018 compared to what they paid in 2017 as their profits soared at the end of the last financial year. The 2018 financial results of the banks showed that they had paid in N160.67 billion in taxes last year. The amount paid as taxes by the 11 banks, FBN Holdings Plc, Zenith Bank, Ecobank Transnational, Sterling Bank, Wema Bank, Guaranty Trust Bank, First City Monument Bank, Access Bank, Stanbic IBTC, Fidelity Bank and United Bank for Africa, last year was higher than N140.23 billion that had been paid in 2017. Zenith Bank was the highest tax payer last year, putting N34.209 billion into the government coffers followed by ETI, which had paid N33.61 billion as taxes while GTB paid N30.94 billon as income tax in 2018. The tax paid by Zenith Bank had risen by 60.6 per cent from N21.178 billion which it paid out in 2017 while the income tax paid by ETI had gone up by 80.7 per cent from 18.6 billion which it paid in 2017. For GTBank, the amount paid as income tax had risen slightly by 3.9 per cent from N29.77 billion which it paid the previous year. The income tax paid by UBA had also risen slightly from N26.67 billion in 2018 to N28.15 billion in 2018, a 5.5 per cent increase. Stanbic IBTC had also paid N13.71 billion as income tax in 2018 compared to N12.78 billion which it paid in 2017. Meanwhile, ETI contributed the largest portion of the N985.27 billion that was recorded by the 11 banks as profit after taxation. The combined profit of the banks had grown by 9.3 per cent compared to N901.11 billion that they jointly made in 2017. In spite of a 14.5 per cent decline in profit after tax, ETI recorded the largest profit, raking in N249.01 billion at the end of the 2018 financial year compared to N291.26 billion that it made in 2017. It was followed on the profitability scale by Zenith Bank which grew its profit by 11.3 per cent from N173.79 billion made in 2017 to N193.42 billion. GTB also made N184.63 billion profit during the year having grown its profit by 9.95 per cent while Access Bank which recently concluded its merger with Diamond Bank had pulled in a profit after tax of N94.98 billion, a 58 per cent improvement over N60.08 billion which it recorded as profit in 2017. Other major contributors to the profit pool include UBA which made N78.6 billion, Stanbic IBTC which made N74.44 billion and FBN holdings which recorded a profit after tax of N59.74 billion. Total assets of the 11 banks rose to N42.26 trillion as at December 31, 2018 from N34.57 trillion which it was at the end of the 2017 financial year. The top five biggest banks in terms of assets base are ETI which had grown its asset base to N8.22 trillion followed by Zenith Bank and FBN Holdings which has asset base of N5.95 trillion and N5.56 trillion respectively. Access Bank’s asset bans as at December 31, 2018, before its merger with Diamond Bank was the fourth largest at B4.95 trillion followed by UBA with an asset base of N4.86 trillion and GTBank with N3.28 trillion in asset base.   Source: Leadership

The Society of Women in Taxation (SWIT), yesterday, raised concern that 70 per cent of the N5.2 trillion taxes collected in 2018, came from Lagos State alone. The development, which shows a lopsided tax base, is also an indication that the long four-year tax reforms and campaign have less impact in the remaining 35 states given the huge untapped potential. The Pioneer Chairperson of SWIT, Justina Okoror, during the 2019 yearly seminar of the of the group, which forms part of the yearly tax conference of the Chartered Institute of Taxation of Nigeria (CITN), said it is worrisome that 35 states and the FCT contributed a paltry 30 per cent of the total. She mentioned that to broaden the nation’s tax base, there was the need to expand tax collections into the interior parts of Nigeria, to increase the number of people in the tax pool. “For instance, out of the trillions of naira generated by the Federal Inland Revenue Service (FIRS), 70 per cent came from Lagos, which means that 35 states plus FCT contributed only 30 per cent.” “That also means that there are so many states with nearly no productive activities happening, and by implication are not paying tax. If Lagos decides to become a sovereign state, Nigeria will not be able to generate any revenue from tax,” she said. She noted that it’s mostly in the cities that there is a record of organisations paying tax, but in suburbs and local councils, there are no tax collections. Stressing the need to expand the tax base, Okoror said with some states mining gold, diamond, and other natural resources, there is an urgent need for government to go into the hinterland and increase their revenue base, especially from private companies. “Government must take seriously tax revenue generation just like what is being done with crude oil. They should go into these places with natural resources and make it another revenue base,” she said. She however, called on the Federal Government to engage governors on how to make their states viable, to attract investors and create more productive activities that would increase the tax base and revenue generation. Furthermore, the incoming National Chairperson of SWIT, Kudiirat Abdulhamid, queried government’s increased borrowing, when potential revenue generation is lying idly, saying the increasing obligations is tying the nation’s resources to payment and servicing of the loan that is being taken. She maintained that revenue generation through taxation is more sustainable, especially when such resources are judiciously tailored towards development projects that would benefit the people. Stressing that it is the responsibility of government to provide basic amenities for the comfort of the citizens, while the citizens have the responsibility to pay directly or indirectly for it, she said the present situation in the country is not inspiring. “I agree with people complaining over government borrowing, but if citizens pay taxes and it is judiciously utilised for provision of this services, people will be eager to pay more. But when government borrows money without providing infrastructures, citizens would become angry,” she said.   Source: Guardian

Sovereign Trust Insurance Plc said its profit before tax rose by 167 per cent to N540m in 2018 financial period from the N202m in year 2017. A statement from the underwriting firm said that despite the challenging economic environment that characterised operations of most businesses in the country in 2018, the gross premium written in 2018 rise by 23 per cent to N10.5bn from N8.5bn written in 2018. The company’s profit after tax rose by 118 per cent to N344m in the period under review from N157m in 2017. In 2018, it paid N4.2bn claims from a figure of N1.9bn in 2017, while the net claims expense grew to N1.7bn from N1.3bn. This in a way underscored the company’s claims paying ability resulting in a 37 per cent net claims expense, it added. The total assets also grew by five per cent to N11.3bn in 2018 from N10.8bn in 2017. The Managing Director and Chief Executive Officer of the underwriting firm, Mr Olaotan Soyinka, said the development was a very heart-warming one considering the level of work that was done in 2018. He said the management of the company was committed to meeting and surpassing the expectations and aspirations of its shareholders and stakeholders alike. “These performance levels are a confirmation of the management’s determination to effectively and strategically position the company as one of the leading insurance companies in the country while at the same time propel the company to a profitable height for shareholders’ delight,” he stated.   Source: Punch

The Federal Inland Revenue Service is seeking the support of the Central Bank of Nigeria to track payment of Value Added Tax made electronically by foreign entities that are not registered in Nigeria. The agency said this in a document detailing its strategic revenue growth initiatives for 2019 to 2021 which was submitted to the National Assembly. The strategic revenue growth initiatives are measures aimed at boosting revenue through taxation, particularly VAT. There has been an increase in online purchases of goods and services from foreign entities that are not registered in Nigeria. These transactions are subject to VAT payment under the current VAT legislation. The payment of VAT on these transactions is made electronically making huge tax revenue to be lost due to the inability of the FIRS to track and charge VAT on these transactions. To address this loophole, the FIRS according to the document which was submitted to the lawmakers, is urging the Ministry of Finance to work with the apex bank to fashion out modalities of installing software that could track these transactions. The service said the software would perform the task electronically through payment gateways such as Interswitch, Nigerian Interbank Settlement System, Master Card and Visa among others. The service also called on the minister of finance to leverage the provisions of Section 38 of the VAT Act to issue a regulation which would expand the meaning of “goods and services” to include land, buildings and oil wells. In addition, it said the meaning of “services” in the Act should be expanded to include intangibles and digital items such as software. The service said such regulation should be gazetted by the Ministry of Finance. Other strategies to shore up tax revenue are the expansion of Tax Identification Number database to cover federal, states and local governments. This is expected to establish a reliable VAT tax base across the country. There is also a plan to review existing tax laws to close the legal loopholes for taxes by adopting a sectoral, rule-based approach. The service is also considering developing a unified nationwide taxpayer database as well as review collections of surcharge on international ticket purchase at the point of sale.   Source: Punch

For their five-year operation, about 55 life and non-life insurance companies in Nigeria have paid N36.5 billion taxes to the federal government through the Federal Inland Revenue Service (FIRS). Taxes were paid by the companies between 2013 and 2017 financial year end. The underwriters generated N100.4 billion as Profit Before Tax (PBT) and were left with Profit After Tax (PAT) of N63.9 billion, having paid N36.5 billion as taxes to the government. The tax paid translates to about 35 per cent of the profit made within the period by the firms. The data sourced from the Nigerian Insurers Association (NIA) by LEADERSHIP showed that insurance firms made N9.8 billion as PBT which was reduced to N4.9 billion PAT, having paid N4.8 billion as tax in 2013 financial year, while the insurance industry recorded N6.3 billion as PBT in 2014, which went into a negative of -N691 million, after operators paid about N7 billion as tax. In 2015, insurers made N11.3 billion profit, while the profit reduced to N6.1 billion, having paid N5.2 billion as tax in that financial year. in the 2016 financial year, insurance companies paid N11 billion as taxes from a PBT of N29.4 billion declared and were left with PAT of N18.3 billion, even as insurers made a profit before tax of N43.8 billion in 2017 financial year and paid N8.3 billion tax to the federal government, This left them with profit after tax of N35.5 billion. Although, the tax paid to government by insurance companies in 2018 are still sketchy, as underwriting firms are just releasing their accounts, there are indications that it could rise above N10 billion as the government intensifies efforts to generate more revenue locally to finance the 2019 budget. Apart from paying taxes on management expenses, short-term lending, among others, insurers were also mandated to pay tax on claims, which is the core business of underwriting, meaning that, the higher the claims paid by an underwriter, the higher the tax accruing to the government. The federal, state and local governments have embarked on aggressive revenue generation, picking on corporate bodies where insurance firms are among the major source of revenue. The enforcement of these taxes heightened last year with some insurance companies shut down by the FIRS until they cleared their tax arrears. While the situation has negative implications on the books of some struggling insurers, others have their meager profit cut by these taxes, while the big underwriters were not exempted from the impact of these taxes. During the tenure of its former chairman, Mr. Eddie Efekoha, the NIA had complained that the industry was being subjected to multiple taxes that were gradually eroding the profits of insurance companies, thereby, affecting their ability to give good returns on investment to their shareholders as well as stakeholders. Efekoha, however, believes the permanent solution lies in amending the tax code which however takes times to do, noting that it has to be done through the National Assembly. “’Giving returns on investment to shareholders and stakeholders has a lot to do with how much you make as profit but in a scenario like ours, where we are subjected to multiple taxation, it becomes difficult to pay dividends to shareholders. The more tax we pay, the more the returns to our stakeholders diminish. If you are to pay tax on claims and on management expenses, what this means is that you have little or nothing left to pay dividends to shareholders,” he lamented. However, there is an ongoing discussion between NIA and FIRS to address this challenge. Also last year, the general manager, Retail Life, AIICO Insurance Plc, Mr. Sola Ajayi, said that the tax code in Nigeria was too hard on both life and non-life insurance companies as they were not allowed to take advantage of deferred tax, especially, for life business. “We cannot take advantage of those taxed assets because of Section 33 and Section 16 of the tax code. Section 33 stipulate that, we must pay minimum tax, while Section 16 provides that even when you have a tax exempt income, you must still come back and pay something. So, you cannot exempt paying tax on the life business where some are even incurring losses and you cannot fully take advantage of all your reliefs,” he said.   Source: Leadership

The Edo State Internal Revenue Service has commenced aggressive tax enforcement exercise to collect revenue owed the state government. In a statement signed by its Executive Chairman and Chief Executive Officer (CEO), Mr Igbinidu Inneh, the tax agency advised members of the public to take note of the commencement of the exercise and make sure to settle all their tax liabilities to avoid sanctions. According to him, “This is to notify the general public that the Edo State Internal Revenue Service has embarked on an aggressive Tax Enforcement exercise of all Revenue owed Edo State Government, particularly Income Taxes, Consumption Tax as well as Road Taxes.”  “By this notice, the general public is advised to take note and settle all their tax liabilities to avoid sanctions,” he added.   Source: Vanguard