Tax news

The Federation Accounts Allocation Committee (FAAC) has queried revenue shortfall of about N26.7 billion cby the Federal Inland Revenue Service (FIRS). The amount is in variance to the balance in the Central Bank of Nigeria (CBN’s) coffers. The difference in the figure spread across revenue channels under the purview of FIRS. These include the Petroleum Profit Tax (PPT), Value Added Tax (VAT) and Company Income Tax (CIT). The difference in figure remitted to the federation account was traced between December 2018 and January 2019. Piqued by the difference in FIRS revenue record and the balance in the federation account with the Central Bank, FAAC mandated CBN and FIRS to meet and reconcile the figure . The development, New Telegraph learnt, was intensely discussed by FAAC members at the last meeting. A subcommittee was raised with a mandate to look at it and revert to FAAC with its findings. “The sub-committee observed that FIRS reported N199.16 billion as total PPT and VAT collections in January 2019 while CBN’s component statement indicated N199.07 billion, thus showing a shortfall of N90.88 million. “In the same disposition, FIRS reported N321.23 billion as total PPT and CIT collections for December 2018 federation account, while CBN component statement indicated N294.62 billion, revealing shortfall of N26.61 billion,” FAAC document noted. This was as FAAC confirmed payment and receipt of $40.7 million by Nigerian National Petroleum Corporation/Nigerian Petroleum Development Company (NNPC/NPDC) in January 2019, thus ending a protracted drag in respect of crude oil allocation. A presentation by FAAC sub-committee to the Forum noted that: “Members may recall that NNPC/NPDC made a commitment to use a combination of cash payments and direct monthly allocation of crude cargo to offset the outstanding of $1.74 billion SPDC goods and valuable consideration indebtedness to the federation account. “Department of Petroleum Resources (DPR) has confirmed the receipt of $40.7 million from January 2019 crude oil allocation of 670,000 barrels for that purpose. The said amount has already been credited to the designated account meant to settle NPDC indebtedness,” FAAC noted. It requested NNPC/NPDC to provide prevailing crude oil price in their subsequent report to it. However, to deal with other contending unresolved issues between FAAC and NNPC, including its subsidiary, NPDC, an ad hoc committee was set up. “The ad hoc committee comprises NNPC, DPR, FIRS and post-mortem consultant. The committee is expected to complete its assignment before sub-committee’s next meeting,” FAAC stated. FAAC, a forum for representatives of three tiers of government, meets monthly for consideration and allocation of revenue to the three tiers – Federal Government, states and 774 local government councils in line with approved revenue formula. Over time, remittances of revenue into federation purse had been characterised by arguments. The NNPC, unarguably a major source of revenue for federation account, had been allegedly accused on several occasions of revenue short-change by FAAC. The NNPC/FAAC’s perennial controversy got to head last year. In 2018 alone, FAAC suffered more than six abrupt cancellations at the height of stalemate over non-compliance to full revenue disclosure and remittances by the state-owned oil firm. FAAC was displeased with indiscriminate high deductions by NNPC to offset Joint Venture Cash Call (JVCC) obligations. It took the intervention by President Muhammadu Buhari who ordered a special committee to come up with a new and transparent template for remittance.   Source: New Telegraph

Stakeholders in the telecommunication industry are calling on the Federal Government to give an executive order that will stop state and local governments from imposing multiple and punitive levies on infrastructure. They said the issue of multiple taxes had defied all level of engagements held with the state governments, lingered for too long and limiting the ubiquitous deployment of broadband infrastructure across the country. They spoke at the maiden edition of the Nigerian Telecom Leadership Summit 2019 hosted by the Nigerian Communications Commission on Thursday. A former Minister of Communications and Technology, Dr Omobola Johnson, in her keynote address, noted that engagement with state governments on multiple taxation had lasted for too long. According to her, the best way to address the perennial challenge is to advocate for an executive order from the Federal Government. “I am so disappointed that I left the government in 2015 and in May 2019, we are still talking about multiple taxes, it doesn’t make any sense. Before I came into government, we talked about multiple taxes. To me, it shows that we haven’t understood the importance of getting these taxes out of the way. An executive order will do this thing. Just tell the state governors they can’t charge the infrastructure,” Johnson said. “I think what the NCC needs to start doing is to really begin to engage and be more forceful and unless we get these issues out of the way, we cannot build infrastructure for a digital economy.”   Source: Investors King 

Stakeholders have rejected plans by the Federal Inland Revenue Service (FIRS) to tax online transactions, saying it will amount to double taxation. Chairman of FIRS, Mr Babatunde Fowler, yesterday, while speaking in New York, told the News Agency of Nigeria (NAN) that the agency will soon begin collection of Value Added Tax (VAT) on online transactions. Fowler said: “Soon, we will ask banks to impose VAT on online transactions for purchases of goods and services. Not that it is something new; it actually should be in existence.  “We will certainly follow up to make sure that every VAT that is due to be collected is collected.” He explained that the move was part of measures by FIRS to meet its N8 trillion revenue target for 2019. Fowler said the agency had started taking action against companies and businesses that refused to embrace Federal Government’s tax amnesty programme. According to him, FIRS hopes to generate between N750 billion and N1 trillion from the clampdown, which includes closure of defaulters’ bank accounts. “We are going after everybody. I am sure you have heard that we have placed lien on some accounts of defaulters that have a billion naira turnover annually. “So, certainly, we are not leaving anyone out of the tax net,” he said. Officially known as the Voluntary Asset and Income Declaration Scheme, the tax amnesty programme was launched in 2017. It gave tax defaulters a one-year period of grace to declare and settle their unpaid taxes. There have been complaints by some taxpayers of being wrongly targeted by FIRS in the clampdown. Asked to comment on that, Fowler admitted, blaming it on “administrative error,” arising from the huge number of accounts involved. “Well, there is certainly one or two instances where we made administrative error, but when you are looking at over 50,000 accounts, there is a tendency that sometimes an error might be made. “For those that we made errors on, I wrote them personally apologising and of course, we lifted the lien on their accounts.” However, reacting to the development, head of Tax and Corporate Advisory Services at PwC Nigeria, Taiwo Oyedele, said the Federal Internal Revenue Service does not have the capacity to tax online transactions, which are not already being taxed in the country. Commenting on the statement by the head of the FIRS, that the service will commence imposition of Value Added Tax (VAT) on online transactions in the country, Oyedele, “I don’t know whether they needed to say it. “The reality is that if you go online to make transactions on Jumia or any of these platforms, there is already VAT.  If you book a hotel online in Nigeria, there is already VAT on it, so the online businesses and transactions that are owned by entities in Nigeria, already pay the VAT. The FIRS does not have to impose the VAT on them, it is already being paid. “To book a flight online, you pay VAT. Now, where the difficulty is, is when you do the online service by a provider outside Nigeria, for example if you go on Amazon and you order a product, because Amazon is not a Nigerian company, then there is no Nigerian VAT. “So, the way that is done is that you pay them the full amount and they ship to you in Nigeria, by the time it gets to customs, if the amount is below the threshold where you don’t have to pay, you don’t pay anything. So, the question is how the FIRS would be able to impose VAT. If you want to watch a movie on Netflix, you just go to Netflix to subscribe, you pay and then watch a movie. The ones where they can impose, VAT are already being imposed. The ones where VAT is not currently being charged, the FIRS has no mechanism to be able to do that so it will be interesting to know exactly what they have in mind. “It is not just about Nigeria, it is a global problem that is why we have the global committee on the digital economy and they are trying to fix it because it is not a problem that one country can solve. It is a problem that requires the whole world to come together.” Mr Razack Olaegbe, deputy managing director, eMaginations Limited, advised the FIRS to engage the e-commerce and online companies before carrying out any clampdown action, stating that many of the e-commerce firms are yet to break even. “Clamping down on the companies should not be the first step, FIRS needs to engage them to understand their business model, find out if they are making money. Jumia and Konga, are they profitable? E-commerce is yet to thrive in this country. We shouldn’t use threats of clampdowns arbitrarily as it scares away foreign investors,” he said.   Source: Leadership

The Federal Inland Revenue Service has said that it will soon begin the collection of Value Added Tax on online transactions. The Chairman of the agency, Mr Babatunde Fowler, made the disclosure in an interview with the News Agency of Nigeria in New York on Saturday. Fowler said, “Soon, we will ask banks to impose VAT on online transactions for purchases of goods and services. “Not that it is something new; it actually should be in existence. “We will certainly follow up to make sure that every VAT that is due to be collected is collected.” He explained that the move was part of measures by FIRS to meet its N8 trillion revenue target for 2019. Fowler said the agency had started taking action against companies and businesses that refused to embrace the Federal Government’s tax amnesty programme. According to him, FIRS hopes to generate between N750 billion and N1 trillion from the clampdown, which includes closure of defaulters’ bank accounts. “We are going after everybody. I am sure you have heard that we have placed lien on some accounts of defaulters that have a billion naira turnover annually. “So certainly, we are not leaving anyone out of the tax net,” he said. Officially known as the Voluntary Asset and Income Declaration Scheme, the tax amnesty programme was launched in 2017. It gave tax defaulters a one-year period of grace to declare and settle their unpaid taxes.   Source: Punch

The European Union on Friday removed the British overseas territory of Bermuda, the Dutch Caribbean Island of Aruba and Barbados from the bloc’s blacklist of tax havens. The three islands were added to the list in March as they had failed for months to change their tax rules, which the EU deemed at risk of facilitating tax evasion in other countries. But now Aruba has been removed because it has changed its legislation to make it compliant with EU requirements, an EU statement said in Brussels. The statement said Bermuda and Barbados had committed to addressing EU concerns and have therefore been moved to a so-called grey list of countries still under EU scrutiny for their tax practices. The removal means no EU territory is on the list. The blacklist has now shrunk to 12 jurisdictions, among which are the United Arab Emirates, Oman and the three US territories of American Samoa, Guam, and the US Virgin Islands. Other jurisdictions on the list are Belize, Fiji, the Marshall Islands, Vanuatu, Dominica, Samoa and Trinidad and Tobago. Blacklisted states face reputational damage and stricter controls on transactions with the EU. The EU set up the blacklist in December 2017 after revelations of widespread tax avoidance schemes used by corporations and wealthy individuals to lower their tax bills. The list initially comprised 17 jurisdictions, but it is subject to regular reviews. Countries with legal shortfalls are added if they do not amend their rules by set deadlines.   Source: Punch

Nigerian airlines have called on the federal government to review its tax policy for the sector as well as the cost of aviation fuel, in order to reduce cost of flight operations and ensure they remain in business. The operators said many airlines that went under in the last few years were due to high cost of operation, including high taxes and high cost of aviation fuel. The airlines said cost of flight tickets would also reduce if they pay less taxes and spend less on aviation fuel, which is known as Jet A1, so that more Nigerians can travel by air, especially now road travel is fraught with insecurity. In addition, the operators said they spend huge resources on aviation fuel because of its arbitrary costs, which according to them does not reflect the cost of crude oil, but negatively affect long-term planning by the airlines. Speaking on behalf of the airlines, the CEO of Aero Contractors, Captain Ado Sanusi, said there was need for government to review its policy on aviation fuel, noting that although supply was deregulated, the government could take actions to ensure that supply is regular and prices lower than what obtains currently. “The first government intervention to reduce cost of operation should be in the supply of fuel, which over the years government has been striving to bring the prices down. “This is critical because about 40 per cent of the cost of operation is almost on fuel, Jet A1. So we can look at it and ensure that the fluctuation in the prices is not much. “Look at the situation now. The prices go from N198 to 220 per litre. So if we can have a constant supply of Jet A1 at constant price, airlines will know how to plan their budget and how they can bring down the cost of ticket based on the lower cost of aviation fuel,” Sanusi said. He noted that in most countries the price of Jet A1 is, “very dependent on the price of crude oil but in Nigeria it is dependent on the landing cost of imported product.” The Aero CEO said crude oil price could be steady for the next six months, but Jet A1 price would be fluctuating, stressing the need to streamline prices. He said although Jet A1 had been deregulated, the government could persuade the importers to ensure constant supply of the product or government could be importing the product and selling to marketers. Another factor that has influenced the high price of tickets, the airlines said, was the high taxes operators pay, so they urged government to tackle the problem of multiple taxation. “Government has done very well in the area of taxes by reducing some and looking at removing VAT. I hope it has done that already. But the most important thing government should tackle is multiple taxation. “The federal government should look at it. The last time they reviewed taxes in aviation was a very long time ago and I think they should look at it and reflect the reality on ground. “This is because if they continue to heavily tax the airlines it will continue to impact on their finances and you see that some of them are dying. There is something definitely wrong somewhere. “High taxation is one of the root causes of the reason our airlines are dying; so government can help to save the airlines by reviewing downwards the taxation levied on them.” Another factor he said that has effect on the cost of flight operation was bird strike and non-clearing of runways, which gives rise to incidents that lead to high maintenance cost. He pointed out that frequent bird strikes destroy aircraft engine and when the runway is not swept regularly objects destroy aircraft tyres. According to him, replacing these engines and tyres cost a lot of money to the airlines, which means they have to increase price of tickets in order to generate money to pay for spares replacement and general maintenance. “If, for example, the runway is not swept regularly and the birds are not controlled and the aircraft suffer from bird strike and objects on the runway destroy the aircraft wheels, these will increase maintenance cost and eventually affect the price of the tickets “This is because the moment I have increased my cost I have to increase my revenue. Otherwise, the airline’s finances will be affected. So the airport management company has to sweep the tarmac and the runway, chase the birds away so that the aircraft wheels do not suffer damage and the engine does not pick birds. “These are the things that will lower the airline’s cost. When the cost of operation is lowered, the airline will definitely lower the cost of its tickets,” Sanusi added.   Source: This days

The Executive Chairman, Federal Inland Revenue Services, FIRS, Mr Babatunde Fowler, has blamed ignorance of taxation rules for the incessant controversies between taxpayers and government. Fowler, expressed this view at the KPMG Tax Breakfast Seminar in Lagos, with theme, ‘Tax Controversy and Dispute Resolution’. He counselled taxpayers to consult experts in tax issues to avoid over-payment, noting, however, that FIRS does tax refund when necessary. Fowler stated: “The cause of incessant tax controversies between the government and taxpayers are majorly as a result of ignorance of tax administration on the side of taxpayers. Corporate bodies need to take advantage of tax education which FIRS is embarking on across the country using different communications media. “Taxpayers need to query the source and any observed errors or omissions in tax letters/statements from tax authority. No one has the right to bully any taxpayers in any circumstance. “We have our Joint Tax Board, JTB, across states whose rectification with any organization is binding by other JTB across the federation. So to avoid multiplicity of tax charges, you must know the law permitting such tax; you are even free to decline an invitation for Joint Tax Audit. Still, it is better you even go to Tax Appeal Tribunal (TAT) where necessary.” In his remark, KPMG Partner and Head, Tax, Regulatory and People Service, Mr. Wole Abayomi, said: “The constantly changing economic landscape requires governments at all levels to develop frameworks that will provide a competitive tax landscape for business, effectively accelerate tax revenues, proactively curb tax evasion and create opportunities for the country’s teeming population. “A situation where the last time Companies Income Tax Act (CITA) and Value Added Tax (VAT) Act were reviewed was 12 years ago leaves much to be desired, thus, there is an urgent need for government to reform our outdated tax laws to reflect current economic realities. “An efficient way of doing this is to return to the practice of enacting a Finance Act soon after the passage of the annual federal budget through which our tax laws can be constantly reviewed in accordance with global best practices.”   Source: Vanguard