Tax news

When taking a fresh look at new technology capabilities and related operating models, chief financial officers (CFOs) may find that they can have it all – a high performing, efficient tax department that’s tightly integrated with finance and the rest of the organisation. By Mark Freer, digital leader for Deloitte Africa Tax & Legal. An unprecedented number of regulatory and tax policy changes are underway around the globe, presenting organisations with significant challenges–and opportunities–for tapping tax earlier and more often when key business decisions have to be made. Failure to modernise may not only leave a company lagging when it comes to compliance, it may also see the organisation outpaced by nimbler, tech-savvy competitors. Yet, many tax professionals tell us their companies are simply not set up for this new reality with finance leaders continuing to respond in predictable ways. They are hiring more people, sourcing temporary help, adding point technology solutions and outsourcing parts of the process. While this has worked in the past, the evolving digital economy is continuously unleashing new competition and innovative business models, both of which can create significant tax planning pressures, but also opportunities. With 50 percent fewer tax accounting graduates and a big chunk of the tax workforce nearing retirement, there aren’t nearly enough experienced tax experts in the market today. Deloitte’s Crunch Time 9: Tax in a Digital World guide shares insights on how new data modelling tools make it possible to deliver valuable tax insights on differing financial scenarios in real time. This essentially means that business leaders will receive the benefits of these insights before they have to make their decisions. Before this can happen however, tax needs to modernise along with the rest of the enterprise. Companies need cognitive tools, bots as well as other technologies (or service providers deploying those solutions) to assist with improving efficiencies in their work and that requires investment that will lead to new ways of working for future relevance. Modernised tax is a move from being mostly a compliance function to a high-value planning and reporting function. Digital tools and talent churn through scores, or even hundreds of scenario models, to determine their after-tax financial implications. This type of data modelling combines the organisation’s own real-time financial information with the latest tax laws and regulations to guide decision-makers through the best options for action. The guide suggests three things that will be visible in an organisation once the shift to a modernised tax department occurs. They are reimagined processes; redefined talent and technology enablers. We see reimagined processes when reconciliations are automated and managed on an exceptions basis. Tax analyses and evaluates the discrepancies while optimising the reconciliation of source data to the general ledger. Touchless automation removes manual reconciliation and accounts payable clerks no longer have to key in tax codes manually or make tax determinations on the fly. Redefined talent leads to tax staff being freed up to focus on tax planning and other high value-add activities. Tax managers generate targeted business insights rather than generic ones, while staff monitor data quality as a key performance indicator. Tax modernisation is also about risk management. In the face of growing complexity, technology enablers such as automation and advanced analytics assist tax teams to efficiently grind through the data and scenarios required for effective tax planning and reporting. Real-time layers of data proactively identify rule exceptions, improving reliability with machine learning. Visualisation and analytics from an integrated tax data warehouse enhance the indirect tax process. The business case for tax modernisation is easy to make for almost any global enterprise. Implemented correctly, it enables better management of the global effective tax rates and with automation, you may be able to effectively apply for tax rebates and reduce cash leakages, such as VAT overpayments. Yet even with a clear business case, your tax department may not push for needed investment as aggressively as other functions might. Tax departments are busier than ever, and many are falling behind, with little bandwidth to consider these improvements. If you’re the CFO, nudge tax along. Even when there’s a great tax leader in place, CFOs need to champion modernisation.   Source: IT Online

Romania announced Tuesday plans to levy a tax on sugary soft drinks to combat obesity, following the lead of other European countries such as France. “This tax is aimed at discouraging consumption (of sugary drinks) and increasing public revenues, which could be spent on health and education,” the finance ministry said in a document made public Tuesday. “The obesity epidemic in the European Union is an enormous burden on health systems,” the document said. The new levy should raise 66 million euros ($74 million) over the rest of 2019 and will come as part of a broader budget review which will also see tax rises on tobacco and budget cuts in certain areas of public spending. The left-wing government is trying to stick a public deficit target of 2.76 per cent this year, but the task has been made harder by increases in pensions and public sector wages brought in in 2018. The centre-right opposition mocked the new tax, pointing out that a similar proposal brought forward by the liberal USR party in April was rejected by the government at the time. Romania’s soft drinks manufacturers’ association condemned the tax as “discriminatory” and said it would damage the sector, which accounts for some 60,000 jobs. According to the KeysFin consultancy, the sweetened drinks market in Romania is worth some 1.2 billion euros.   Source: Punch

The tax exemption benefit given to industrial units inside the economic zones has created disparity between factories outside the industrial enclaves, raising fears of uneven competition among firms producing the same products. The National Board of Revenue in 2015 declared tax benefit on income of businesses inside the economic zones for 10 years based on recommendation from the Bangladesh Economic Zones Authority (Beza) to promote investment and  industrialisation in the country in an organised manner. Tax exemption would be applicable on incomes from all sorts of goods and services to be generated from investment inside the economic zones. Since then, the Beza approved 10 private economic zones apart from developing sites by itself. In the private economic zones, a number of factories churning out edible oil, cement, motorcycles and leather goods has been set up. In government-owned sites, entrepreneurs have shown interest to set up food and agro-processing factories, textile, leather, pharma-ceuticals, steel, ceramic, chemical and paint plants, according to Beza. As the factories inside the economic zones will enjoy tax breaks, especially waiver from paying advance income tax (AIT) and advance tax (AT) during raw material import, they will be at an advantageous position in terms of cost compared with firms outside the zones, said Md Shafiul Ather Taslim, director for finance and operations at TK Group. “Cost to make the same product will be different because of producing in two different premises. It will be tough for small firms to sustain in the competition,” he added. TK, one of the major commodity importers and processors, and some other firms shared their concerns with the NBR last month after two major commodity suppliers — Meghna Group of Industries and City Group of Industries — started processing edible oil by establishing plants in their respective economic zones. Later, the NBR sat in a meeting in the middle of last month.  At the meeting, NBR Chairman Md Mosharraf Hossain Bhuiyan said economic zones are required for industrialisation but because of tax incentives unequal competition has been created within the same industry, according to the meeting minutes. Industry insiders said the difference in tax benefits will not only create uneven competition among firms in the commodity market but also in other sectors. The meeting decided to send the proposal to Beza to change the rule regarding tax incentive to commodities. However, Beza said the tax benefit have been offered to encourage planned industrialisation, encourage compliant and environment-friendly production as well as discourage scattered development of factories. Beza Executive Chairman Paban Chowdhury acknowledged that there are some differences in income tax and without incentives investors will not feel encouraged to set up factories in the zones. “We want all large industries to come to one place. The government will not have to provide gas, electricity and water everywhere to facilitate industrialisation. It will be able to provide all services in a cost-effective, regulated manner.” There is also the issue of establishing effluent treatment plants. “There are some incentives in economic zones and those who will establish industries here, levels of their compliance will be high because of regulation. The issue of compliance is also equally important,” Chowdhury added. Beza said all factories will eventually have to relocate to EZs as per law. Mostafa Kamal, chairman of Meghna Group of Industries (MGI), said his group has cement factory outside the economic zone but it is not questioning the tax benefits enjoyed by Aman Cement Mills set up in the Aman Economic Zone, another private economic zone. The government offers tax benefits to promote industrialisation in regions that are lagging behind. “It is the global norm to give tax holiday when investment is made in underdeveloped areas. None will invest there unless incentives are given.” Kamal said the major steel makers are planning to set up steel mills inside the economic zones.  “What will happen then? Should those who have mills outside say that steel mills cannot be established in economic zones,” he said, adding that no one would go for huge investment unless there are incentives. Chowdhury said there are bound to be some impact with any change. “But ultimately all industries will be benefited,” he said.   Source: The daily

The City of White Rock thinks cities should have that right so it’s looking for support for a proposed motion at the upcoming Union of B.C. Municipalities convention. White Rock is hoping the province will amend the Community Charter to allow municipalities to impose an annual vacancy tax on residential and commercial properties. The City of Vancouver currently has that ability, imposing an annual empty home tax of one per cent of a residential property’s assessed value. Governed by its own charter, Vancouver implemented its vacancy tax a couple of years ago. In a letter to Delta council, White Rock Mayor Darryl Walker noted how Vancouver has already set a precedent through the Vancouver Charter and that similar changes can be implemented for the Community Charter. Municipalities under the Community Charter don’t have the authority to impose taxes or fees beyond basic taxes on property. “We believe that providing local governments this authority is one step closer towards addressing B.C.’s affordable housing crisis,” Walker wrote. He stated larger, expensive homes in his city are sitting empty, reinforcing the need for local governments to address the issue directly. Vancouver’s tax is the first of its kind in Canada and the city estimated it collected $38 million in the first year. Delta finance manager Vivian Koo told the Optimist the city’s finance department currently doesn’t have information on the number of Delta homes that are vacant. “The provincial speculation and vacancy tax is a different tax and targets foreign and domestic speculators and vacant homes in designated taxable regions in B.C. We have asked the province for information on the number of Delta homes that would be subject to this speculation tax but we have not heard back from the province,” Koo said.   Source:  Delta Optimistic

Peter Nwaobi, a tax expert at KPMG, said the proposed 5% VAT on online purchase is not a double tax and there were no initial charges on purchases. Nwaobi explained that for every online transaction, there is always a 5% VAT on every item.  “Before now, for every time you get online, the merchant already charged 5% VAT on it, either you see it on slip or not. it is there.”  He said the fee is what the FIRS is running after as majority of the funds have not been captured in the tax net. “This idea will allow the merchant to remit the 5% they have charged to the bank (acting an agent in this instance).” The government said it is planning to introduce the policy in 2020. The Ministry of Industry, Trade and Investment projected the Nigerian digital sector to generate $88 billion and create 3 million new jobs over the next few years.   Source: Pulse

Withholding tax is an advance payment of income tax – Companies Income Tax (CIT) and Personal Income Tax (PIT). Withholding tax is deducted at source when payments are made to companies or individuals. Tax withheld from payments to a company or an individual is a tax credit or withholding tax credit, which is used to reduce the tax liability of a company or an individual when the final tax liability is determined. Payments to companies exempted from income tax are not liable to withholding tax deductions. Tax withheld from payments to companies not exempted from income tax are paid to the Federal Inland Revenue Service (FIRS). Tax withheld from payments made to individuals or individuals trading as business name, ventures or enterprises – legal firms, accounting firms, partnerships, etc., are paid to the Tax Authority of the State where they reside. Transactions liable to withholding tax deductions include payments for contracts, professional fees, consultancy fee, directors fee, management fee, legal fee, commission, royalty, rent, interest and dividend. The due date for filing withholding tax returns is on or before the 21st day of every month. The penalty for non-compliance is 10% of amount not withheld or not remitted plus interest at the commercial lending rate.   Source: insight

The board of telecommunications giant- MTN Nigeria Communications Plc, on Friday, hinted the Nigerian Stock Exchange (NSE) of its pending “technical disagreement” with the Federal Inland Revenue Service (FIRS) on whether it ought to pay corporate tax on a N330bn (about $1.1bn) fine. The matter, according to a statement by Uto Ukpanah, its company secretary, is now before a Tax Tribunal for adjudication. The tribunal, the brainchild of FIRS Chairman, Babatunde Fowler, and former Minister of Finance, Mrs. Kemi Adeosun, is to determine whether MTNN ought to pay taxes on the 2015 fine imposed by the National Communications Commission (NCC). Notwithstanding the disagreement, MTNN said, “the monies (disputed tax) have been paid to FIRS. Reuters, however, quoted MTN Nigeria’s spokesman as saying however that government cannot access the money, given that the case is “with the tax tribunal the government can’t access the money. “We believe that the fine should be treated as part of the cost of running the business but the FIRS thinks otherwise,” he stressed. MTNN, in the statement to the NSE, assured of its readiness to abide by the decision of the tribunal, assuring of the company’s readiness to continue complying with the Nigerian tax laws, as well as meeting its fiscal responsibilities and contributing to the social and economic development of the country. MTNN recalled that since incorporation in 2001, it has invested over N2tr into the nation’s economy, besides paying over “N1.7tr in taxes, levies, and other regulatory fees.” Recall that the company was originally fined N1.04tr for failing to deactivate more than five million unregistered SIM cards, but this was negotiated downward, clearing its path to list on the Nigerian Stock Exchange earlier this year. The MTN spokesman said the group was waiting for the tribunal’s decision, as it could set a precedent for how penalties are treated by companies registered in Nigeria.   Source: invest data

The Oyo State government has expressed its determination not to increase tax on small and medium scale enterprises (SMEs) in its drive to increase its revenue base. The Chairman, Oyo State Board of Internal Revenue (BIR) John Adeleke, who made the disclosure while speaking with journalists in Ibadan weekend, also said the government would rather look into areas that were not captured in the tax net in the state to improve internally generated revenue (IGR). Adeleke said the plans of the administration of Governor Seyi Makinde is to build and nurture the growth of SMEs in the state and not to burden them with heavy tax that could drive them out of business. According to him, “It is in line with the promise of Governor Seyi Makinde to empower small scale businesses in the state to propel growth in our economy. “As he works assiduously to attract foreign and domestic investments to the state, he is also working to establish and sustain small and medium scale industries in Oyo State. So the idea of tax increment on businesses is not even to be discussed here. We will rather nurture them to grow and be self-sustaining than to overburden them with tax. “The government nonetheless expects all SMEs to comply with all extant tax laws, especially the ones on personal assessment of business proprietors, withholding tax and VAT payable to the state.” Adeleke however enjoined commercial vehicle owners and drivers as well as motorcycle riders and owners to collect necessary documents from approved agencies and tax stations under the state internal revenue services instead of doing same in neighbouring states. “We assure everyone of quick turnaround time of registering or renewing vehicle documents. We also promise all our patrons quick availability of number plates for all categories of vehicles,” he said. Adeleke also called on members of staff of the board to be quick, responsive and work with utmost integrity and professionalism, which he said, was the best way to support the present administration in its drive for improved internally generated revenue.   Source: This days

Individuals and business owners who make profits from businesses, but refuse to pay taxes, are criminals and economic saboteurs, the Chairman of the Federal Inland Revenue Service (FIRS), Tunde Fowler, has said. The FIRS Chairman was reacting to insinuations that the FIRS’ decision to place a lien on peoples’ accounts for refusing to take advantage of the amnesty window provided by the Voluntary Assets and Income Assessment Scheme (VAIDS) was highhanded. Mr Fowler disagreed with those holding the view, saying the FIRS did not apply the full provision of the law on the issue. What the law provides “What the law actually says is that the agency should put a lien on the account and based on the amount the FIRS has specified, it should be credited straight to the government’s account at the Central Bank Nigeria.  “The FIRS did not even follow that all through. It just said: put a lien and leave the money in their accounts. When they come and show us their records, we now know how much they are owing. “If they want to pay in installments, they will draw up an installment payment account. So, it’s not being highhanded at all,” he said. According to him, since the lien was placed of defaulters’ accounts, between 2,500 and 2,600 corporate and individual accounts have paid about N72 billion within 75 days, with over 40,000 still left “If N72 billion is shared among the 36 states of the federation, plus the FCT, and ask them to buy the Sunday-Sunday malaria medicine (Daraprim) for N2,000 for their hospitals, it will cure every child between one and five years of malaria fever. If you allow children to die of malaria, because of people who refuse to pay taxes and there were no such money to buy the drugs, that is a crime against society. “For people to operate within the society, make money from the services they provide to us through their businesses and they refuse to pay tax, is criminal. It’s not highhanded. These people are criminals,” Mr Fowler said. Strategies to boost revenue generation On what the agency is doing to boost revenue generation and bring every eligible taxpayer into the tax net, Mr Fowler said the lien on people’s accounts began with accounts with about N1 billion balance and above. He said later, the figure was lowered to N100 million and above, which realised about 7,793 accounts initially. According to him, 418 people reached an agreement with FIRS by coming forward to make some payments of about N31.7 billion. Also, those with N100 million to N1 billion were 34,943, with a total of 2,148 paying N40.8 billion in the last two and a half months, he said. On suggestions for the prosecution of those who failed to take advantage of the VAIDS window regularise their tax status, Mr Fowler said he did not consider that a viable strategy ”than the one they are currently adopting”. “How many cases can the FIRS have in court? How many prisons can we have? We are looking at close to 40,000 business accounts that are not doing the right thing. You take them to court? “But, how many cases can the FIRS go to court over from the 40,000? Without any attempt to talk negatively about our legal system, if you go to court, you can be there for one year or more. “But, within 75 days, we have collected over N72 billion, without going to court, by closing their accounts. If we decided to go to court, I am sure even the courts can’t handle up to 20,000 cases of this nature,” he said.   Source: Premium time