Tobi Aminu

The Alliance for New Nigeria (ANN) has condemned the plan by the Federal Government to increase Value Added Tax (VAT) from the current 5 to 7.5 percent, adding that the proposed increase smacked insensitivity on the part of government to the suffering of Nigerians.      Lanre Oyegbola, Director General, ANN 2019 Presidential Campaign, in a press statement, said, “An additional 2.5 percent of VAT would automatically increase the shelf price of most items from the moment it is implemented and this would create a ripple effect across both the formal and informal sectors of the economy.” The campaign director general noted that the All Progressives Alliance (APC) government is one that gives with one hand and takes it away with the other given the timing of the increase in the VAT.            He said one could not explain the fact that while the President Muhammad Buhari-led government was yet to agree to the minimum wage deal with labour, the same government was at the same time increasing the VAT, adding that it was a show of deception and insensitivity to the plight of Nigerians. Oyegbola called on Nigerians to reject every form of deceit the government might bring to the table. He also called on the people of Nigeria to vote against the APC and the Peoples Democratic Party (PDP) in the February 16 2019 presidential election. Source: Independent 

a. Introduction The Federal Inland Revenue Service (FIRS) has published the Income Tax (Country-by-Country Reporting) Regulations, 2018 (CbCR Regulations). The CbCR Regulations was made public on 19 June 2018 and have an effective date of 1 January 2018. The Country-by-Country reporting is a response to evidence-based research on the direct consequence of harmful tax practices that result in profits being moved away from where they were made to the ultimate benefit of the taxpayer. b. Implications of CbCR The CbCR is one of the three-tiered transfer pricing documentation approach recommended by the Organisation for Economic Cooperation and Development (OECD) in the Action 13 report of the Base Erosion and Profit Shifting (BEPS) project unveiled in October; 2015. The CbCR contain information on the location of revenue, profits, taxes, employees and economic activity within large MNE Groups, based on a standard template. The objective of the CbCR is to allow tax administrations to perform high-level transfer pricing risk assessments and to evaluate other BEPS related risks. In Nigeria, the ultimate parent entity (UPE) of an MNE Group that is resident for tax purposes in Nigeria  would be obliged to file the CbCR, where the consolidated revenue of the Group is N160 billion or above.  As provided in the Regulations, the CbCR must be filed within 12 months following the MNE Group’s accounting year end.  An MNE Group member (Constituent Entity) whose UPE is not tax resident in Nigeria, is required to notify the FIRS of the identity and tax jurisdiction of the entity responsible for filing the CbCR. This notification must be made no later than the last day of the reporting accounting year of the MNE Group. c. Notification and Consequence for Non-Compliance To show commitment to driving compliance with the Regulation, the FIRS has subsequently released guidelines for completing the CbCR template and more recently, a Public Notice reminding MNE Groups operating in Nigeria of their obligation to make the above notification to the FIRS. The public Notice serves as a wake-up call for MNE Groups to comply and avoid stiff administrative penalty imposed by the Regulations for non-compliance. Penalty for late filing of CbCR has been determined at N10,000,000 for the first month of default and N1,000,000 for every month the default continues while penalty for incorrect/false report is N10,000,000. Penalty for failure to notify FIRS of the MNE Group’s UPE, Surrogate Parent Entity or identity & residence of the Group’s reporting entity has been determined at N5,000,000 for the first month of default and N10,000 for every day the default continues.

The Federal Inland Revenue Service, FIRS, made a whooping N300.4 billion in three years, between 2016 and 2018 as the cost of collecting taxes. According to the law setting up the revenue collection agency, FIRS is allowed to deduct four percent as cost of revenue collection from non oil taxes before remitting the remaining to the Federation Account. According to data from the FIRS, a breakdown of the N300.4 billion cost of revenue collection by the FIRS showed that N85.99 billionwas received in 2016, which is about 2.6 per cent of the total actual taxes of N3.30 billion collected in 2016. In 2017, the FIRS received N100.3 billion as the cost of revenue collection out of the N4.02 trillion it generated, while in 2018 fiscal year, the service got N114.1 billion as the cost of revenue collection out of the N5.32 trillion revenue it generated for that year. Source: Vanguard  www.innerkonsult.com      

THE Oluwo of Iwo, Abdulrasheed Akanbi over the weekend underscored the need for people of Osun to pay tax in order for the government to bring about effective development in the state. He made the appeal in Iwo township during the “Thank You” tour of the state governor, Mr Gboyega Oyetola to the people of the community. According to Oba Akanbi, “there is no other way than to pay tax. We cannot continue to rely on funds from the Federation Account if we want to develop this state. What if there is no oil money?” Source: Vanguard 

The federal in land revenue Service (FIRS) is to leverage digital platform sin widening the tax net to meet the N8trillion revenue projection of the government for 2019. In growing the nation’s revenue through taxation to surpass the N5.3tn generated in 2018, the highest revenue generation for the FIRS, there is a need to strengthen legislation on Nigeria’s digital economy. Nigeria digital economy is estimated to worth $88bn by 2021 with a capacity to create about three million jobs. The FIRS in leveraging technology in tax collection, especially Value Added Tax (VAT), is to adopt the DSTV model. Babatunde Fowler, the executive secretary of FIRS said DSTV is one of the first cooperate organisations in Nigeria to implement ‘VAT auto collect’, which has significantly increase on tax collection. “… as you pay your subscription to DSTV, the portion that is VAT is remitted straight to government and that is basically what we are calling on all corporate organisations to do including our state government,” said Fowler. Fowler stated this at the 2019 FIRS stakeholders retreat themed, “Parliamentary Support for Effective Taxation of the Digital Economy” held in Lagos recently. According to Fowler, the FIRS have deployed technology in to tax administration and collection to bridge the burden on tax payers. You can pay your taxes through your phone, on your banking application at no cost. So, in terms of the cost and even all cost of collection has gradually started going down. Basically we have to realise that those who pay taxes are those who make profit and those who earn income,” Fowler stated. Speaking on the revenue generated in 2018 being the highest made by the service, Fowler said “It means it can be done – for the last three years the non oil revenue have exceeded the oil revenue; while the increase in tax payers has doubled within three years and Nigerians now realized the only way to get sustainable economy and get revenue is through taxation”. Data from the FIRS also indicates a rise in taxes collected in comparison of non oil to oil revenue for 2016 – 2018. For non oil revenue, the services collected 64.99; 62.25; and 53.62 percent in 2016, 2017, and 2018 respectively, while oil revenue for the period under review was 35.01; 37.75; and 46.38 percent. Babangida Ibrahim, the chairman House committee on finance said the National Assembly is ready to fast track legislative intervention for a digital economy. “I can assure you that anything that will bring improvement on revenue generation of government will be supported: anything that will assist government in deciding and implementing policy; we will support it,” said Ibrahim. On the implication multiple taxation and burden of widening the tax net to bring in more revenue for government, Ibrahim said “There are many mechanism of widening the tax base; it is only when you widen the tax base that will enable you to collect more tax. Widening the tax base does not mean taxpayers are liable to pay tax – that is what most people do not understand. Source: Punch 

Nigeria’s chances to boost revenue will mainly come from four places: company income taxes (CIT), value added taxes (VAT), independent revenues and customs revenues. But first, just like Nigerians, the FG also needs to pay attention to the small details. Recently, the federal government read a riot act to its independent agencies, which it believes had delivered too little. The FG’s independent revenues from over 400 agencies stood at N295 trillion in 2017. Hence, it is a positive step that the federal government is asking the agencies to submit their budgets through the Budget Office of the Federation and that it would also start reviewing the government’s expenditure patterns on a quarterly basis. However, the biggest help to fix these agencies will come from revamped corporate governance. Most of these agencies are bloated with high levels of inefficiencies, in terms of personnel and overheads. This will require a surgical approach, fiscal discipline, with immense political backing. Maybe then, these agencies can easily provide N600 billion to the federal government. There is also the path through increased VAT. Nigeria has one of the lowest VATs in the world. A flat VAT of 5 per cent does not work and in the non-oil revenue matrix, VAT has seen the highest growth in recent times. It is time that the FG faces the issue and doubles the VAT to 10 per cent, while putting consideration on this for fuel and agriculture-related expenditures. There is a huge political economy to this but Nigeria has to accept that current fiscal practices can help its cause. If the FG increases VAT to 10 per cent, this has the potential of bringing an additional N800 billion into the federation’s coffers. In my view, the 5 per cent VAT should be solely distributed to the federal government. State governments are in more devastating conditions but the challenge is not about giving them more taxes from the current base. It is about encouraging them to be competitive and create incentives for private investments in their states for increased personal income tax (PIT). On the company income tax, I am of the opinion that to spur new capital growth, the current 30 per cent should be reduced to 20 per cent. Nigeria deserves to gain more by doubling its VAT and allowing companies to thrive with tax cuts, and creating more incentives for private investments. There is also the need to ask questions on the warped approach to distributing taxes. Currently, CIT distribution is governed by rules that favour states with large populations. Despite a large financial district in Lagos and increasing investments in the Ogun State corridor, they do not benefit more than other states for such efforts. For example, the company income taxes that Nigerian Breweries pays have no direct linkage to it plants in Lagos or Ibadan, while Kano State (despite its recurrent destruction of beer bottles) benefits more from the distribution of this tax due to its population. How will states benefit from the ease of doing business index without incentivising the corporate income tax? It is appropriate that the FG provides an incentive for states with newly established companies who pay the CIT, as it done with the distribution of VAT. Nigeria can’t run away from the concession of certain institutions to free up government expenditure and end cycles of waste. However, the sustainable way to deepen public sector revenues is to seek the expansion of Nigeria’s private sector, which is too hollow for the size of our GDP. It takes growth in jobs and taxable income to provide opportunity for government… Finding resources for the FG is not easy in a country without a single database of its citizens, weak tax compliance and high level of informal trade. However, with the rise in personnel costs and debt servicing, to reach N5 trillion in the near term, it is only important to ask deep questions. Where are the holes leaking funds that can be plugged? What about maximising funding from existing sources? It will also take long-term approaches backed by an informed leadership. Any sale of asset in joint venture (JV) operations or stolen funds recovered in 2019, should not be considered as a revenue line due to its non-repeatable annual nature. It is a mere short fix to plug the yawning deficit gap. The federal government needs to consider that the revenue angle requires restructuring. There is also need for the consideration of the removal of fuel subsidy. Whatever the FG might be selling to the public, the Nigerian National Petroleum Corporation (NNPC) reports show that as at July 2018, it has charged N427 billion from domestic crude payments in the name of under-recovery or subsidy. Nigeria can’t run away from the concession of certain institutions to free up government expenditure and end cycles of waste. However, the sustainable way to deepen public sector revenues is to seek the expansion of Nigeria’s private sector, which is too hollow for the size of our GDP. It takes growth in jobs and taxable income to provide opportunity for government to receive taxes. Nigeria needs to boldly face its issues, and the post-election era in 2019 is another window for doing the right thing. We cannot keep expanding expenditure without a review of the other side of the equation – revenue. The federal government might not be able to apply a combination of the removal of subsidy, an increase in VAT, reduction of company income tax or driving efficiencies into its revenue agencies at the same time, due to inflationary concerns or the political economy of these decisions. The federal government needs at least N2 trillion in new revenues to be able to meet its recurrent obligations (not capital) without blowing up the deficit. Whatever path the FG chooses in shoring up its revenue, it won’t be painless but would be a courageous way of fixing an emerging dangerous imbalance. Source: Premium Time

In 2017, when the Federal Government signed the Executive Order to commence the Voluntary Assets and Income Declaration Scheme, many people doubted the political will of the administration of President Muhammadu Buhari to fully implement the tax amnesty programme. The tax amnesty programme, which started on July 1, 2017, came to an end on June 30 last year and it offered a 12 -month window of opportunity for taxpayers to regularise their tax liabilities. In exchange for full and honest declaration, the government waived penalties that should have been levied and also waived the interest that should have been paid on overdue tax. Also, those who declared their tax obligation honestly would not be subjected to any investigation or  tax audit. During the period of the implementation of the tax amnesty programmes, the Federal Inland Revenue Services under the leadership of the Executive Chairman, Mr Babatunde Fowler, also implemented reforms aimed at improving the level of voluntary compliance. Before the commencement of the current administration, Nigeria’s tax system was unable to effectively achieve its objective of ensuring voluntary compliance due to lack of robust framework for the taxation of informal sector and high networth individuals, thus limiting the revenue base and creating inequality. In a bid to address these challenges, the FIRS came up with various technology -driven initiatives aimed at increasing the number of taxpayers, and reducing taxpayers’ burden by making tax payment more convenient. Some of these initiatives were the deployment of electronic payment channels for registration, filing, payment, receipt  and tax clearance certificate to facilitate easy remittance of taxes by taxpayers. The service also came up with information exchange for third party databases which was implemented in collaboration with government agencies such as the Nigeria Customs Service, and the Corporate Affairs Commission, among others. Since the implementation of these reform, investigations by our correspondent showed that the number of registered taxpayers had increased from 10 million in 2015 to about 19 million in 2018. Figures obtained from the FIRS showed that within a three-year period covering January 2016 and December 2018, the country earned a total of N12.65tn in tax revenue. An analysis of the tax revenue figures obtained by our correspondent from the FIRS showed that the amount was generated from two major sources of taxes which were oil tax and non-oil tax. The oil tax is made up of Petroleum Profit Tax while the non-oil taxes are Company Income Tax, Gas Income, Capital Gains Tax, Stamp Duty, Value Added Tax, Education Tax, Tax Amnesty and Nigerian Information Technology Development Fund. Under PPT, analysis of the tax revenue figures from the FIRS revealed that the sum of N5.14tn was generated between 2015 and 2018, while the balance of N7.51tn was earned from non-oil tax collection during the three- year period. A breakdown of the N12.65tn revenue collection figure showed that the sum of N3.3tn was generated in 2016. In 2017, the amount rose to N4.02tn before the service recorded its highest revenue collection figure  of N5.32tn in its entire history in 2018. Further breakdown of the PPT of N5.14tn revealed that N1.15tn was collected in 2016, while the tax figure rose in the 2017 and 2018 fiscal years to N1.52tn and N2.47tn respectively. Source: Punch